UK tax resident investing for retirement in EU

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Topic Author
pierre.x.l
Posts: 9
Joined: Sat Sep 02, 2017 10:09 pm

UK tax resident investing for retirement in EU

Post by pierre.x.l »

I'm considering a move back to UK and trying to understand how as a UK tax-resident I should invest for a retirement in EU, likely France (my home country). Ideally I think I need a Euro-denominated offshore fund that is "HMRC reporting" for efficient tax investing while in UK. Does such a fund (Euros & HMRC reporting) even exist? Do I need to set this up via an Interactive Brokers account so I can continue to manage the portfolio from France? I'm really not sure about the overall approach though, what should my strategy be?

From UK departure perspective, I'd plan to leave SIPP with the fund administrators and worry about taxes on distributions when that time comes. What should I expect regarding ISA's?

I've searched the forum and elsewhere but not finding much information. Any ideas/pointers much appreciated.

Thanks.
-P
TedSwippet
Posts: 3176
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UK tax resident investing for retirement in EU

Post by TedSwippet »

pierre.x.l wrote: Sun Sep 20, 2020 7:30 pm I'm considering a move back to UK and trying to understand how as a UK tax-resident I should invest for a retirement in EU, likely France (my home country). Ideally I think I need a Euro-denominated offshore fund that is "HMRC reporting" for efficient tax investing while in UK. Does such a fund (Euros & HMRC reporting) even exist? Do I need to set this up via an Interactive Brokers account so I can continue to manage the portfolio from France? I'm really not sure about the overall approach though, what should my strategy be?
The denomination currency of your funds or ETFs doesn't affect your long term returns. It is the currency of the assets in the fund or ETF that matters. More in this wiki page:

Non-US investors and ETF currencies - Bogleheads

Standard wisdom is that unhedged currency funds are best for stocks, and hedged for bonds. In you case then, probably a standard all-world ETF for stocks, IWDA or VWRL say, and maybe something hedged to EUR for bonds, for example DBZB, AGGH or VAGE. Again, more in the wiki:

EU investing - Bogleheads

Anything UCITS is automatically HMRC reporting, so you can choose any of these safely.
pierre.x.l wrote: Sun Sep 20, 2020 7:30 pm From UK departure perspective, I'd plan to leave SIPP with the fund administrators and worry about taxes on distributions when that time comes. What should I expect regarding ISA's?
For SIPPs, the UK/France tax treaty tells you what will happen. For SIPPs, Article 18, by the look of things.

For ISAs, no mention in the treaty that I could find, so standard French tax law applies. I don't know it, but based on experience it's highly unlikely that France will recognise a UK ISA as a tax shelter for French tax purposes, so it probably becomes as if an unwrapped trading account when you move back to France. In that case, unless you plan to return to the UK it is probably simplest just to cash it out.

Also, many UK ISA providers will no longer allow you to maintain an ISA if not a UK resident. There is no law or regulatory reason why you cannot, it's just a commercial decision by UK providers who do not want to tangle with all the anti money-laundering, know your customer, and country-by-country tax reporting rules currently circulating the planet.
Topic Author
pierre.x.l
Posts: 9
Joined: Sat Sep 02, 2017 10:09 pm

Re: UK tax resident investing for retirement in EU

Post by pierre.x.l »

Thanks TedSwippet,

Touch wood, this sounds then like it might be quite straightforward then (ignoring any Brexit complications): pensions taxed at source, ISA's unwrapped and no crazy exit taxes. After moving to France I can continue with same EUR currency portfolio.

What is my best approach regarding broker? I expect a UK broker would convert my GBP to EUR at some not-cheap rate before purchasing assets. Is there a way to switch a portfolio with UK broker to a French broker without cashing out/re-purchasing? If from the beginning, I used a French broker then I could fund account using EUR directly via TransferWise's cheap rates. Do Interactive Brokers services help my situation at all?
TedSwippet
Posts: 3176
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: UK tax resident investing for retirement in EU

Post by TedSwippet »

pierre.x.l wrote: Mon Sep 21, 2020 10:16 am Touch wood, this sounds then like it might be quite straightforward then (ignoring any Brexit complications): pensions taxed at source, ISA's unwrapped and no crazy exit taxes. After moving to France I can continue with same EUR currency portfolio.
Seems so. Though "pensions taxed at source" looks wrong to me; from treaty article 18 it looks like a UK pension paid to a French resident is taxable only to France -- "pensions ... paid ... to a resident of a Contracting State {France} shall be taxable only in that State {again, France}." That said, treaties can be slippery things, so no guarantee I'm right on that. It looks that way, though.
pierre.x.l wrote: Mon Sep 21, 2020 10:16 am What is my best approach regarding broker? I expect a UK broker would convert my GBP to EUR at some not-cheap rate before purchasing assets. Is there a way to switch a portfolio with UK broker to a French broker without cashing out/re-purchasing? If from the beginning, I used a French broker then I could fund account using EUR directly via TransferWise's cheap rates. Do Interactive Brokers services help my situation at all?
For unwrapped accounts, I'd look to Interactive Brokers first. Not only should they be able to cope with your moving country without forcing account closure or anything else nasty, but they also reportedly have excellent forex rates (that may well beat Transferwise). I doubt a purely French broker would want a UK resident as a customer any more than a purely UK broker would want a French resident customer. You could always ask, of course, and it is sometimes possible to move assets between brokers in different countries without cashing in, but my guess is that a specialist international broker will produce a more seamless experience. No direct experience; I moved to the UK from the US, and the US's financial system is heavily Balkanised.

For an ISA, you will have to use a UK broker. If you buy EUR denominated and EUR hedged ETFs then there will probably be some GBP/EUR forex slippage in there somewhere, but it's unavoidable. In any case, you'll probably want to cash in your ISAs (and perhaps replace with equivalent investments in unwrapped account) once you have left the UK anyway.

For SIPPs, you're stuck with these until age 57 (probably). The treaty doesn't explicitly say that France cannot tax the gains in them annually, rather than just withdrawals, so maybe check that. Given the closeness of the countries, I wouldn't have thought that France would tax gains in foreign pensions annually, but something to investigate a bit more closely, maybe.
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