Brexit and UK Citizens Living in Ireland

Marc

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I thought it might be helpful to post a summary of my Brexit plans as, according to the last census in Ireland, around 120,000 Irish Residents are UK Citizens.

I will use a redacted version of my personal finances to set out a framework and hopefully other people might find it useful.

Background

Me UK Citizen and UK Domiciled (see definitions at the end) Irish Resident 10 years (more than 5 so liable to Irish CAT)

Spouse Irish Citizen, Irish Resident and Irish Domiciled

Let's say we are 50 which is bang in the middle of the age distribution so there should be something for everyone here.

2 children Irish Citizens, Irish Resident both born in the Rotunda and learning Irish but UK Domiciled because minor children take the domicile of their Father.

Employment

We are both employed in Ireland and pay Irish tax on our Irish source income.

Private Pensions
We both have Irish pensions to offset against the Irish income tax and most people are familiar with the contribution rules, €2m cap etc.
I also have UK pensions which have an additional £1M lifetime cap which is in addition to the €2m Irish Lifetime cap.
This applies even if the UK pension is transferred to Ireland via a QROPS.

I was also able to claim UK income tax relief for 5 consecutive tax years on contributions to my UK Private pension even though I wasn't UK resident.

State Pensions
Equally, I have paid National Insurance Contributions and so can elect to top up my UK State Pension with voluntary National Insurance Contributions and also claim an Irish State Pension based on my Irish PRSI contributions. I am eligible for both UK and Irish State Pensions I don't have to choose either or.

Land and Property

Lets say I have a house in the North of England worth €250,000 ( a three-bed wing in a grade 2 listed Georgian House) which is rented out and we have an equivalent valued Property in Dublin, ( 1 bed cupboard under the stairs with shared bathroom) as our a Principle Private Residence.

Investments

Lets say we have €1M the bank we just won on Prize Bonds (since much of this is made up no harm in pretending that could happen!

Issues

So, a lot of this turns on the issue of Domicle.
My family are in the UK and my wife's family are in Ireland.
Although I am Irish Resident, I am UK Domiciled. We plan to live in Ireland while we educate our children (4 and 9) so we will be here for a while, but our retirement plans are much more flexible. Its quite probable that we would move to the UK to retire.

Implications.


I'm subject to UK Inheritance Tax on my worldwide assets. Ireland will tax my Irish situs assets, that's land and property in Ireland. But the UK retains the right to tax ME on my house in the UK and any other assets.

If we look at my personal balance sheet
I own the house in the UK
My UK Pension
My Irish Pension
Half the cash in the bank
Half the PPR

Some of these assets are Irish situs and some are in the UK so, as things stand at this stage, maybe not too much to be concerned about.

Whilst transfers between spouses on death are free from inheritance tax and most people leave all their assets to their spouse or civil partner on 1st death.

There is a specific risk that applies in instances where we have a family with both UK and Irish Nationals, my wife isn't a UK citizen so the UK doesn't have the right to tax her estate. So, HMRC restrict the amount I can leave her tax free. It used to be just the Nil Rate band plus £55,000. This is now twice the Nil Rate Band or currently £650,000. Everything above this is taxed at 40%.

The recent changes to UK Inheritance Tax exempting the Family Home for most people doesn’t help either as our PPR is in Ireland and subject to CAT not IHT.

Action required

I need to review my Will in Ireland and make a Will in the UK to deal with my UK assets to take account of these issues.

Rental Property

The UK changed the rules recently about non-residents owning UK investment property.
I am now subject to UK capital gains tax on any gains in the value of the property.

Domicile and Remittance Planning


If we invest the cash in my sole name outside of Ireland, then as a non-domicile, I am not subject to Irish tax (income tax or capital gains tax) on income or gains that I don't remit to Ireland.

As the original source of the capital is prize bond winnings, I am free to bring this into Ireland as I wish without liability to tax since I am not taxed spending my own money.

Since I can have tax-free income and gains on investments outside of Ireland it clearly makes sense to sell the UK property which is now subject to UK Capital Gains tax.

There are some anti-avoidance provisions to trip up the unwary which allow revenue to tax the remitted capital as income so great care needs to be taken on this point.

Brexit

So, the logical course of action is for me to hold the investments in my sole name in my UK investment account and leave the income and gains in the UK or spend them in any other country other than Ireland. Note that since I'm not UK resident, I'm not subject to UK Income tax or Capital Gains tax either.

The catch here as I have shown is that overweights the family assets to me and in the event of my death we have to be careful not to subject my wife to UK Inheritance Tax.

This is all manageable but none of this is a DIY financial plan.

How will Brexit impact this? I honestly have no idea. It has to be one of the least considered policy agendas in history and I'm so glad I put this down before the result

I will evolve this as I think of more issues for consideration and as we get closer to March.

To schedule a quick call on any of these points in my diary




Future possible sections

UK Passports

https://www.newstalk.com/Spike-in-British-people-becoming-naturalized-Irish-citizens


UK Bank Accounts


Definitions

"Domicile" The country that a person treats as their permanent home, or lives in and has a substantial connection with.

Domicile of Origin - where your Father was born
Domicile of choice - where you have chosen to call home
 
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