Many people living overseas own property in the U.K. And
not only British people either - although Brits of course make up the majority. After all,
we are the highest per capita homeowners in the world.
What some of these property owners are unaware of is the fact that they
are legally obliged to report income derived from property rentals, and to pay tax on this
to the U.K. Inland Revenue Department.
And this applies to anyone who owns property in the U.K., not just British
citizens.
Thais, for example, can buy as much land and as many properties in the
U.K. as their little hearts desire - (provided they have the means to pay; and in the U.K.
the banks can foreclose on the property if the mortgage payments aren’t met!) - even
though we farangs are not able to own a house or one square centimetre of land here under
current laws (unless you go through the torturous route of setting up a company with 7
Thai partners, who sign over their proxies to you, and the company then buys the property.
But even that convoluted and expensive route has a number of risks attached to it. But
that’s another story for another day.)
Letting parents live free
If your U.K. property is rented out through an
agent, the agent normally deducts your tax liability and pays it for you. You hope.
Because at the end of the day (or financial year, rather), it’s your liability to
ensure it’s paid to the IRD, and if your property agent neglects or forgets to do so,
you’re the one held liable for back taxes, interest and penalties! So be warned, and
check.
Another pitfall which many are unaware of is letting aging parents live in
the house for free while you’re overseas.
You may see this as doing a kindness to the poor old dears who may be just
scraping by on a meagre pension, but it can put you in serious jeopardy with the tax man.
The reason is if you have neglected to get your parents to sign a lease,
whereby they pay you a nominal rent for occupying your house.
If such a document is not in place, the IRD can and will take the view
that the house is available at all times for your occupancy with your parents simply
living there as your guests.
Thus, therefore and thereby, you are held liable under U.K. regulations to
pay tax on your worldwide income just as if you had remained onshore.
(It’s surprising how many Brits I’ve met professionally who
weren’t aware of this point, which the tax man will gleefully confirm for you, and at
the same time take down your particulars while he has the opportunity...)
On the other hand, if your parents sign a simple lease agreement with you,
they are now the official occupants of the property.
This means that if you happen to return to U.K. for a visit and stay with
them as their guests in the house they’re renting from you, that’s okay with the
tax man, and you’re liable for tax only on the rent you collect from them (less your
allowances, so effectively zero.)
And it’s okay to give them some money to help out with the rent. But
make sure they pay this nominal amount into your bank account, preferably by standing
order from their bank, so you’ve got a clear paper-trail on record if the IRD ever
decides to get difficult.
Onshore & offshore bank accounts
Many British people who opened a bank account in the
U.K. before they moved overseas have kept this going, not realising that they may be
paying more tax than they really should.
"Oh no," you say smugly, "I arranged to get my bank to pay
me gross interest without any deductions for tax!"
Of course you did. But if you’re also receiving either a U.K. pension
or rental income, you’re only allowed to deduct your personal allowances from the
total, and pay tax on the rest. Thus, I repeat, you may be paying more tax than you really
need to.
For instance, if you are non-U.K. resident and receiving a U.K. taxable
pension (or rental income) of £7,000 a year, and in the tax year to 5th April 1998 also
received interest on U.K. bank deposits of £1,500 without deduction of tax at source,
your personal allowance of £4,045 offset against this total income of £8,500 means
you’re liable for £901 tax on the balance of £4,455.
However, if you’d done the smart thing and moved your onshore bank
account offshore, say to the Isle of Man or the Channel Islands (where some banks are
offering higher rates of interest on deposits than onshore banks anyway), the interest
earned would have been not just tax free but completely outside the tax net.
By just this simple move, your U.K. tax liability in the case example
would have reduced to only £310 in this tax year - and in all subsequent years the
interest would be non-taxable income also.
Simple to save money, isn’t it?
Another little point that’s sometimes neglected is a U.K.
resident’s liability to declare and pay tax on interest earned from offshore bank
accounts.
So, if you’ve moved your bank account offshore, but your spouse is
returning to or remaining in the U.K., it is important that the offshore bank account
should be held solely in the non-resident spouse’s name.
Similarly, if you plan to return to U.K., make sure you remember to close
your offshore bank accounts before returning there.
This is to enable you to take all of the interest built up whilst you were
overseas and non-resident, and therefore exempt from liability for U.K. tax on overseas
interest.
Failing to do this would mean that all subsequent interest payments would
be taxable even though some of it would have accrued while you were still non-resident for
tax purposes.
Onshore savings plans
Many British people will have started savings
schemes in the U.K. before moving overseas, or have contributed into a pension scheme
through their former employers.
Contributions into a tax-advantageous onshore pension plan (which
effectively will have been subsidized by the U.K. Government through revenue it will have
‘lost’ by allowing you tax relief on it) cannot be continued once you move
offshore and become non-resident for tax purposes.
But you shouldn’t try to unravel it and move it offshore, because
although this is theoretically possible, formal permission to do so must first be obtained
from the IRD. This can take a very long time, and is fraught with problems. It’s far
simpler just to leave it alone, and draw down from it upon your eventual retirement.
Similarly, onshore plans like Tessa’s and PEP’s which carry tax
relief cannot be contributed into once you move overseas.
Again, it’s best to leave them alone and enjoy the benefits if &
when you return to U.K., or upon your retirement if you decide to remain non-resident
abroad.
Unity-linked investments
Some people wonder why many financial advisors
recommend British expats to buy a ‘unit-linked insurance policy’, which seems to
be a pure investment vehicle with no significant life insurance benefit attached to it,
rather than some straightforward unit trusts.
Why have this extra layer of administrative fuddle? Surely it increases
the costs, doesn’t it?
Some cynics may say it’s because the advisors earn more commission
from these insurance policies than from unit trusts.
In some cases this may be marginally true, but that’s not why
client-orientated professional advisors recommend this type of investment vehicle.
The principal reason is tax-efficiency. (Although there are several other
reasons why these vehicles can be advantageous to some clients in some circumstances.)
Because of the peculiarity of certain U.K. tax laws (and those of some
other countries such as Germany and France as well), insurance policies are given
beneficial tax treatment when drawn down in the U.K. which unit trusts are not.
That’s one reason why the large British insurance firms have come to
dominate the offshore investment industry.
(Another is because the laws governing insurance companies in strictly
regulated environments like the Channel Islands and the Isle of Man provide a very high
degree of security to clients’ investments.)
In most cases, such a ‘unit linked’ insurance policy is indeed a
pure investment vehicle. The fact that it’s technically a life insurance policy is
incidental - except that it’s important for tax planning.
For example, in the U.K. you could draw down 5% of your original
investment from a single-premium insurance bond (which is simply a lump-sum investment
accessing a range of underlying funds similar to unit trusts) each year, and defer tax for
20 years.
Defer, mind you, not avoid.
But you’d then be paying tax at the prevailing rate in 2018 not 1998,
when personal allowances are likely to be higher (by all historical indications), and have
use of the money without having paid any tax on it in the meantime.
Clustering
Another widely misunderstood feature which can
provide beneficial tax treatment for those expats planning eventually to return to the
U.K. is known as ‘clustering’.
Applied both to single-premium ‘insurance bonds’ and unit-linked
savings plans (which as noted above are respectively lump-sum investments or regular
savings plans offered by the offshore British insurance companies), ‘clustering’
simply means that instead of issuing you with one policy for your investment, the
institution issues you with a ‘cluster’ of sub-policies.
Basically, under U.K. tax laws, different rules are applied to encashing a
whole sub-policy than if partially encashing a single policy. This is clearly demonstrated
in the following example:-
Case A: Fred sets up an offshore insurance bond with £50,000, clustered
into 10 sub-policies.
Two years later his policy is worth £55,000, but he needs £11,000
towards a house purchase. He therefore encashes two of his sub-policies, each worth
(happily) £5,500.
His taxable gain is £11,000 (proceeds) minus £10,000 (allocated premium)
= £1,000.
Case B: Joe sets up a similar £50,000 offshore insurance bond, which is
not clustered.
Two years later his policy is also worth £55,000, from which he withdraws
£11,000 towards a similar house purchase.
Joe can apply his 5% p.a. allowances to reduce his tax liability, so 5% of
£50,000 = £2,500 x 2 (two policy years) = £5,000 allowance against £11,000 withdrawal
= £6,000 of taxable income.
Thus although the two cases are identical in all respects other than the
clustered structuring of the respective bonds, the potential tax liability differs
greatly.
Joe has a potential tax liability on £6,000 versus Fred’s potential
liability on only £1,000...
This beneficial feature will generally cost you nothing more than a tick
in the right place on the application form. But ensuring that your single-premium
insurance bonds are written as ‘clustered’ policies can minimise future tax
liability should you eventually find yourself back in the U.K.
Qualifying savings plans
What if you are currently non-resident for U.K. tax
purposes, but think you may eventually want to return to U.K. Is there any investment
vehicle available to offshore residents which is not just tax-efficient, but could be
entirely tax-free if drawn down in U.K.?
Well, the good news is: "Yes, there is."
The best known is the so-called "qualifying" savings plan.
This is simply an offshore savings plan which is so structured that if it
were later substituted for an equivalent onshore plan, any withdrawals after maturity
would qualify under current tax regulations to be taken entirely tax-free.
But as this is a whole topic in itself, we’ll look at it in detail
next week.
If you have any comments or queries on this article, or about other
topics concerning investment matters, write to Leslie Wright, c/o Family Money, Pattaya
Mail, or fax him directly on (038) 232522 or e-mail him at [email protected]. Further details and back
articles can be accessed on his firm’s website on www.westminsterthailand.com.
By Harry Flashman
One of the main reasons for the popularity of photography
is the ability to record sights and events that other people may have never seen. Sounds
obvious, I know, but never forget that the things you get to regard as commonplace may be
items of wonder for someone else.
So what does your stay in Thailand present to you that the "folks
back home" don’t have? Lots of spectacular sights, sounds and smells that’s
what. The latter couple you can’t record on film, but the first you can.
Candles inside the Wat.
Today’s wondrous sight and the subject of Harry Flashman’s
photographic investigation is that symbol of Thailand and its heritage - the local Wat.
Now there’s not too many of those in downtown Drearyville or Doncaster is there?
OK, how do you take the definitive "Wat" picture? Simple answer
is that there isn’t one! ONE is the word to remember. You cannot show the life and
times of the local Wat with just one photograph, even if your name is Anthony
Armstrong-Jones. To show someone the life and times of a Wat requires a series.
Here’s how Harry would do it. First item to remember is that the Wat
is a place of religious significance, so be quiet and respectful.
The next thing to do is to plan your shoot. This may even need a
"recce" the day before. You see, to record the architecture and sculptures on
the Wat building needs the sun to come across it at an angle. At 10 a.m. it may be fully
in shadow, or at 2 p.m. it may be blasted by bright sunshine. The day before visit will
give you an indication of the best times. To show detail, you need both sunlight and some
shadow - or otherwise it looks flat and featureless.
Another feature of the Wat building is the intricate inlay work. Ceramics,
broken pieces of mirror glass, painted plasterwork - it’s all there. Plan to take
some close-up shots to show the patience and craft that has gone into the overall imagery
of the Wat.
Now Wats are inhabited by Monks, teachers, nuns, novitiates, school
children, street-side sellers and tourists. A very mixed bag. Try to take shots to show
just why these people are there in the Wat and its compound. Here’s where a
"long lens" (135 mm upwards) can be a help. You can get the image you want
without having to intrude into the person’s personal space. However, remember that if
there is any doubt as to whether your subject would really want that photo taken - then
ask permission first. It is my experience that the vast majority of people will happily
accede to your request. Even when there is no common language, a smile and a wave of the
camera in their direction is generally all that is necessary.
Taking pictures inside a Wat is difficult. The light levels are very low
and there is the feeling that you are intruding in someone else’s religious
practices. Taking a flash photograph really is an intrusion in my view. This is where the
tripod is great. Set the camera up on the tripod, compose the shot, set it on Time
Exposure and quietly get that shot of a lifetime. You will probably need around 10 - 20
seconds at f5.6, but that is just a guide and you should experiment.
By now you should have taken almost one complete roll of film on your
local Wat. Verticals, horizontals, close-ups and wide angle shots. Do not be afraid to
shoot film. It is the only way to improve and the only way to get great shots. See you at
the Wat!
Presented by Bangkok-Pattaya Hospital
by Dr. Iain Corness
There has been some publicity recently about the
"dangers" of plane travel and the likelihood of getting blood clots in the legs
which then produce gangrene or strokes.
Some newspapers have even tried making sensational "news" from
some "anecdotal" medical details released by some hospital in London.
Let me assure you that this is not "news". Formation of blood
clots has always been a problem associated with any extended period of inactivity. That
can be just lying in bed after a surgical operation, falling asleep in awkward positions
or sitting for long periods in cars, busses or planes. That tendency to produce clots
("thrombosis") can also depend on ones general health, nationality, smoking
habit, drinking habits and age.
So how does this clotting process occur? Firstly, you have to understand
that your blood circulates through a network of arteries, getting to the extremities, and
then coming back to the heart via a system of veins. Your blood is merely water (called
"serum") carrying lots of blood cells (red and white) around your body. Clotting
occurs after a very complex process which includes the application of many factors to the
liquid blood. One of these can be "stasis" our fancy name for slowing of the
blood stream.
Now you can see how long periods of sitting can slow down the blood
circulation. Sitting with your knees bent up folds your veins at acute angles and makes it
hard for the blood to flow. Imagine too, if the blood is "thicker" than usual -
this will make it clot quicker. You can make the blood thicker by becoming dehydrated. So
the blood cells are clumped together much more than usual. This type of dehydration can
happen if you do not drink enough water - or if you drink too much alcohol! Yes, alcohol
dehydrates you.
Going back to plane travel, you have several of the ways to produce clots.
Sitting for long periods, knees bent at acute angles, lots of free alcohol and not enough
water. Add to those - do you smoke? Smokers have "stickier" blood than
non-smokers, so there is even more of a tendency to produce clotting.
So what can you do about it, next time you do a twelve plus hour plane
trip? Well, lots actually. The first thing is to take half an aspirin a day, starting a
week before (unless you have stomach ulcers!) and continuing through for a week after your
return. This stops the blood cells "sticking" together as much. The next item is
the inactivity. Get up every hour, religiously, and walk right around the plane. Now the
seating position. Do not sit upright, even if you are reading. Recline the seat as much as
possible, so that you can stretch the legs as much as you can. Finally, drink at least two
glasses of water every hour, plus another one for every alcoholic drink you have had
during that hour.
Do those simple things and your chances of getting catastrophic clots are
minimal!
Dear Hillary,
I have a problem. I’m a 25 year old male surfing
teacher. Pattaya is a great place to learn windsurfing. I’m learning from a Thai
buddy of mine who I taught wave surfing in Hawaii. He’s great and I generally have a
good time.
I do get lonely for female companionship though. My problem is when I go
out to a bar, the girls there pounce on me like a duck on a June bug. I don’t find
many of them that attractive, and there seems to be a ‘pecking order’. All the
older (some close to my mother’s age!) ‘girls’ seem to have first
‘dibs’ on me. I know the Thai people have great respect for age, but this is
frightening. I’ve done modeling for national surfing magazines and am OK looking. But
isn’t the customer allowed to chose the girls in the bars? Sometimes the older and
younger girls even get in fist fights.
After sorting all this out, I usually end up with the companion I want.
But they always say, ‘You very handsome. For you, FREE!’
Hillary, I’m not looking for ‘freebies’ and it’s also
very bad business. The problem always increases the next day. I wake up and the girl is
gone. But in the afternoon, she shows up again with all her belongings in a truck and
thinks she’s moving in with me.
This is very disturbing and after three identical experiences, I’ve
stopped going to bars.
Is there anything I can do to remedy the situation? I do need female
companionship from time to time.
I feel,
Preyed Upon
Dear Prey,
Believe me, I know how you feel. Thai society is very ‘looks’
oriented. I also think you might be being a bit modest about your looks. You are what, in
the past, women would call a ‘good catch’. There was very handsome 27 year old
English night club singer I knew in Bangkok. This happened to him constantly. He became
very fed up with this and asked me why people wanted him only for his body. I told him
that now he knew how women felt.
There are ways of solving your problem, although they are not very
appetizing.
First, you could disfigure yourself but that would be going to extremes.
Second, you could gain 50 pounds. That would not be so good either, as it
would affect your windsurfing prowess and you also get any modeling jobs.
I guarantee that both these methods would solve your problems, though.
The girls would not pounce and they would try to charge you a healthy
amount.
By Dr. Iain Corness
Had a chat the other day with Jack Levy from Northern Thai
Insurance and gleaned all sorts of interesting snippets. Motor vehicle insurance in this
country is somewhat different from the types of insurance many of us are used to in other
countries. Like all things Thai, there are subtle differences between what happens here
and what happens in the rest of the automotive world.
First, let’s talk about Class of Insurance you are going to need.
Make no mistake, you will need Class 1 insurance. This is the top voluntary policy over
and above the compulsory standard insurance. Anything less and you are taking too much of
a risk and will come unstuck after any accident.
MGB Twin Cam.
Class 1 insurance gives you around the following benefits (changes from
company to company) around 1,000,000 Baht personal injury cover, 5,000,000 Baht 3rd party
damages cover and 200,000 Baht in bail bond. While all that seems large numbers - in the
right accident you could need all of it! Remember that in this country, if the disability
from injury in an accident lasts more than 21 days then the case becomes a criminal
investigation and you can be locked up until the case is heard. And that could be quite
some time away! That’s where you need some bail bond insurance - fast!
Another difference between here and over yonder is that the insurance you
take out covers the nominated vehicle only - it does not cover you driving other vehicles.
It is also interesting to note that in Thai law the driver of your vehicle must have a
valid driving license or else the insurance is null and void. In other words, make sure
anyone who drives your car does indeed have a license or else you (as the owner) could be
facing bills something akin to the national debt of Pakistan!
Another point to ponder - any claim during the year will cause you to lose
your No-Claim bonus. That even goes for a windscreen! It may be financially more sound to
pay for minor scrapes or windscreens yourself and keep the No-Claim deductions.
So how much does it cost to insure your average vehicle? Jack tells me
that with a good quality company you could expect premiums in the following vicinities -
for a Mira valued at B250,000 the policy should be around B18,000 per annum; for a cheap
Honda at around B600,000 you can expect to pay B32,000 and for a Honda VTE worth around
one million your policy will set you back B46,000. All those are quoted as new policies
without any No-Claim being applied.
Considering that personal injuries can amount to much more than the annual
policy cost, you would have to be stark raving cuckoo to drive here without insurance.
Check your policy today. Is it Class 1? And is it current? You have been warned.
Autotrivia
Most enthusiasts have heard of the MGA Twin Cams.
The factory built around 1000 of these sports cars that are now very much collectors
items. The Twin Cams are quickly identifiable by the fact that they had drilled disc
wheels instead of the wire wheels of the period. They also had rear disc brakes to cope
with the extra grunt from the 1600 c.c. twin overhead cam engine.
The cars did not enjoy a good reputation in their day, being very
susceptible to engine blow ups. This was not totally MG’s fault. The hemispherical
combustion chamber and high domed pistons required high octane fuel to stop detonation.
Unfortunately, in those days the fuel octane rating was very variable and poor fuels
killed many of the engines.
Now for some real trivia. Did you know that there was an MGB Twin Cam?
Most pundits will try and tell you that the factory never made a "B" T/C, but
this is not quite so. The factory raced an MGB Twin Cam in 1971 in Australia. This was a
"factory" entry run by British Leyland in their team called "The Young
Lions".
Before you begin to dispute this, let me assure you that this is totally
factual. I should know - I was there, I drove it, I was involved in building it and I was
(once) a "Young Lion"!
The engine was built from all MG parts and involved "grafting"
an MGA Twin Cam head on to an MGB block. The technical side was handled by Australian
engineer (and Aussie Hill Climb multiple champion) Ivan Tighe who carried out the design
and machining to get the "A" head on the five bearing "B" block. This
was not an easy task as the Twin Cam head was a ten stud, while the MGB bottom end was an
eleven stud block. The front of the block had to be drilled into as well to get into the
oil galleries to lubricate the chain for the overhead cams. There were all sorts of other
technical problems too - the MGB oil pump turns the opposite way to that of a twin cam,
for example.
This particular MGB Twin Cam engine was taken out to an 85 m.m. bore to
make it just under 2 litres in capacity (as opposed to the 1798 c.c. standard MGB or the
1600 c.c. of the MGA).
It was a very powerful engine (for its day) and systematically broke
everything from the flywheel bolts backwards! It was also chronically unreliable so the
MGB Twin Cam had a racing season in 1971 where we set new lap records on every circuit
(some that stood for almost ten years) but had a finishing record of less than 50%.
Autotrivia Quiz
While still on the MGA theme - the Twin Cam engine the factory selected
was actually one of two different designs that were trialled in the MGA chassis. They
looked very similar, although the rocker covers were more rounded in the rejected design.
The question for this week is - who built the "other" MGA T/C engine? Fax or
email your entries to the Editorial office. First correct entry wins the Automania FREE
beer of the week! Good luck!
By David Garred,
Club Manager Dusit Resort Sports Club
G’day Pattaya. Fitness tips will take a different path
over the next two weeks. I believe that an individual’s Health & Fitness is not
of the body alone, it affects every aspect of our lives and is affected by everything
around us.
I received this message as an e-mail from a friend during a very difficult
period recently and it helped me to come back from the dark place I was in. The message is
so good and so thought provoking I had to share it with you.
What I want to do is to split this message into 2 parts and share them
with you.
Here is part 1:
Simple Friends And Real Friends
Anyone can stand by you when you are right, but a
friend will stand by you even when you are wrong...
A simple friend identifies himself when he calls. A real friend
doesn’t have to.
A simple friend opens a conversation with a full news bulletin on his
life. A real friend says, "What’s new with you?"
A simple friend thinks the problems you whine about are recent. A real
friend says, "You’ve been whining about the same thing for 14 years. Get off
your duff and do something about it."
A simple friend has never seen you cry. A real friend has shoulders soggy
from your tears.
A simple friend doesn’t know your parents’ first names. A real
friend has their phone numbers in his address book.
A simple friend brings a bottle of wine to your party. A real friend comes
early to help you cook and stays late to help you clean.
A simple friend hates it when you call after he has gone to bed. A real
friend asks you why you took so long to call.
A simple friend seeks to talk with you about your problems. A real friend
seeks to help you with your problems.
A simple friend, when visiting, acts like a guest. A real friend opens
your refrigerator and helps himself.
A simple friend thinks the friendship is over when you have an argument. A
real friend knows that it’s not a friendship until after you’ve had a fight.
A simple friend expects you to always be there for them. A real friend
expects to always be there for you!
Think about it!
Carpe’ diem
Richard took up
weight lifting as a schoolboy. He was competing in field events and discus throwing and
found that he was better suited to weight lifting. He competed in eight international
tournaments between 1981 and 1983, in west and east Europe and Brazil. Although he broke
17 British U/18 Junior and U/23 records, he then retired from competition as he
"...realized realistically I would never compete successfully at world level, and it
would be putting in 100% effort into a sport for limited satisfaction."