Carlie: Hello there, it’s Carlie with another episode of the Expat Focus podcast. We cover all aspects of life abroad on this show, so if there’s a topic you’d love to hear about, you can let us know on social media – we’re ‘Expat Focus’ – or use the contact details on our website, which is expatfocus.com.
If you’re scrolling through our past episodes, here are some recommendations:
- Emma O’Neill Sandham, who talks through the process of applying for an Australian partner visa – it’s not for the faint-hearted
- There’s the episode with Mario Cacciotolo, who shares his tips for enjoying expat life in Malta
- And if Portugal is on your moving list, then tune in to my chat with James Cave, who goes through 7 things that expats should know before moving there
Tax expert Oliver Heslop from Global Expatriate Tax Services is back today, and he’s going to give us an update on UK and EU pension rights after Brexit. It’s very good news for the million plus Brits living in EU countries and the more than 3 million EU citizens who call the UK home.
Oliver is also going to touch on what you should keep in mind this tax season if you have relocated, and the potential tax implications of everyone working from home – and possibly from a different country – in 2020.
Last time we spoke, Oliver, we were approaching the end of 2020. Brexit was looming. Brits with their hearts set on moving to the EU were deciding whether to make a last-minute dash amid the ongoing pandemic stress and border closures. Now that we’re in 2021, give me a status update, Oliver, on all things Brexit – post-Brexit, I should say.
Oliver: You’re not going to do that to me. No, Brexit-wise, we’re finding that we’re doing things on a case-by-case basis. British people are calling up from Italy and Spain, and we’re just having to work it out as we go, because the countries don’t know. What I mean by that is, I’ve got British people trying to go out to Spain at the moment, and we just don’t know what some of the laws are. So, we’re sorting it all out, but it’s still very new.
Carlie: Now, the Government did sign an 11th hour agreement with the EU, which provided answers to a lot of questions—
Oliver: You wouldn’t notice it if you weren’t in the tax industry, but we were really worried. During the autumn and winter, we thought, how on earth are they going to sort out all the social security and pension stuff? And it’s not very interesting to read about in the newspaper, but if you’re at retirement age, this is absolutely critical. And they sorted lots of it out – did it all at Christmas, before the Brexit deadline. Yeah.
Carlie: You were saying to me, just before we started recording, that you’re actually quite impressed with how grown-up both parties have been and how good the pension deal is. So, tell me a little bit about what the deal is with pensions for Brits who are living in Europe, now that the UK is not part of the European Union.
Oliver: Sure, sure. What’s interesting about it … Remember we talked about the big rush, before Christmas, for people to get out there? And they were doing that. Brits were moving to Spain and France and other places to guarantee rights as EU citizens, because we all believed that post January wouldn’t be the same, that there wouldn’t be protections, that there’d be all sorts of immigration and pension problems.
That drove the rush, and we’re here now. And a deal was struck on Christmas Eve that protected the, what I call, the new people. You know, the people who are moving from now on, [they] have got generous pension rights. In an absolute nutshell, this means that, if you retire abroad in the EU, you can get a UK state pension, and it’ll keep going up with inflation.
And that’s amazing, because that was by no means guaranteed. They’ve really come together and come up with a sense of an agreement.
Carlie: Does it go the other way, too, Oliver, if you’re a European citizen retiring in the UK?
Oliver: It does. Yes. We’ve got that as well. And I think, probably, it’s easier for us to do. We’re just one nation, aren’t we? So, we couldn’t say yes or no. We were so worried, I think, that the 27 EU countries would not approve it or accept it. But yes, sorry, to answer your question [about] a European settling here…
There are a few complexities to it, but the long and short of it is that an EU citizen retiring in the UK can have a UK state pension and also draw their state pension from their home country. That’s where it gets complicated. But the headline takeaway is that the EU and the UK have respected each other’s rights and come to a good accommodation.
Carlie: So, what about younger expats, such as myself in my mid-thirties, or those a little bit older, that have moved to a European country and are still actively working in that system? For example, say you’ve built up some pension rights in the UK, but now you are resident in Spain, working in Spain, where you’re under Spanish social security as you work. What happens to you at retirement?
Oliver: Great question. If we were talking three months ago, I would have said that you’re very well looked after and that you can work out a pension. And now, in 2021, under the new rules, it’s just the same.
So, the exact thing you just gave me was that you would build up some, I’m going to say, points – they’re actually called contribution years. You pay a few years in the UK, and that counts towards a UK state pension, potentially. And then you do some years in Spain, and that counts, as well. And then you have to sit down and look at the national laws.
You would add those two together, and you may end up with a mixture of a British and a Spanish pension. You may just get one in one country. But both blocks are respecting each other and saying, ‘We will sit down when this person is 60, and we’ll recognise where payments were made in both places.’ So that’s great. It’s a long way off, isn’t it, for a 30-year-old? But it’ll be really important in 20 years’ time.
Carlie: Yep, for sure. And I’m wondering, Oliver … You said that this agreement turned out better than expected and everything looks pretty rosy, but are there any elements of Brit’s and EU citizen’s rights in their respective countries, post-Brexit, that are still being nutted out?
Oliver: There are some glitches at the moment, because we don’t know what forms to use. And I know that’s a funny thing to say, but if that’s your bread and butter … The laws are agreed and okay, but we don’t know how to do it yet. That’s the thing. But for a client, it’s fine, because we’ll sort it out. We’re tax professionals; we’re still trying to sort it out. But things are moving very rapidly, and every week people have new ideas and processes.
So, it’s moving fast, and it’ll be fine. It’ll be fine. Clearly, there is another challenge in our jobs at the moment, in terms of pensions. I keep on thinking it’s a Brexit thing, but it’s not, it’s a Covid-19 thing. And when we are dealing with the UK authorities – HMRC, the pensions team, [etc.] – they are completely flat out. They haven’t got enough staff, and it’s causing real problems at the moment.
And I refuse to criticize the HMRC staff, because they’re a good, hardworking team, but it’s just disastrous to get anything done. And it’s a real problem. It’s a real problem. So, that’s really a staffing in Covid problem – that’s the problem, there.
Carlie: What is the pressure they’re feeling right now? Because I know, for example, anyone that has a business selling goods and services between the UK and the EU has really been hit for six with the new VAT rules from 1st January.
And I know there is a bit of confusion with HMRC and other tax offices about [things like] when to pay customs charges and when not to. But what else are they dealing with?
Oliver: I think, with the HMRC people, there just aren’t enough of them. It’s funny, really. In the big public PLCs, I think they’re keeping much more of a workforce working. I don’t know how they’re organising it – lots of working from home – but when you speak to HMRC people, they’re on shorter hours, generally. And I think that they are more cautious, and they send more people off and protect them.
They call it shielding, don’t they – that’s the UK phrase – whereby people aren’t allowed to work. They have to protect themselves. And they are just short of people, I think. But then, in terms of what they’re struggling with technically and process wise, there is a problem with VAT.
And there’s a huge problem with Northern Ireland, because Northern Ireland is treated as still in the EU for certain trading purposes. And I think that territory is struggling. It’s bound to be at the moment, because they’ve got the open border with the South, and yet they’ve got different laws there. So yeah, it’s a ‘work yourself through.’
Carlie: Definitely. You need to be nice to your HMRC person if you’re talking to them on the phone.
Oliver: Yes. I can’t stay on the podcast what tricks I use, but yes, I’m definitely very nice. It makes such a difference.
Carlie: You’re sending them chocolates, aren’t you, Oliver?
Oliver: Yeah. Well, some people, some clients, tell me, ‘I’ve just rung the revenue and told them what I thought of them.’ But then, of course, why would you help somebody like that, when you’re stressed out and understaffed? So yeah, it really pays to just be open, really. Anyway, if anybody is out there calling the revenue this week, just be polite and patient. It really works.
Carlie: Oliver, it is tax season at the moment, and I know there’s going to be a lot of expats that are sorting out their residency right now in their new country, and closing down affairs in the UK or in the European country that they’ve moved from. So, is there anything to keep in mind when you’re doing declarations this year and trying to tie up a few life loose ends?
Oliver: Well, the types of questions that we’re now asking have changed a bit. So, I had a few people, actually, around December, who said, ‘Oliver, I don’t want you to do all the tax returns and all the disclosures. Can you just send me a crib sheet?’ That’s a really good thing to do. Approach a tax advisor like me or somebody else, and just say, ‘What are the hot topics? What are the new things at the moment?’
Yeah, the focus has changed slightly. The rules on immigration in Italy, for example, have changed slightly, and Brits who are over there – who are very established and can be settled as EU nationals – are restricted in terms of travel under the new 2021 rules.
So, for anything like that, about residence, immigration or tax, I’d just find somebody like me. And you can say, ‘Oliver, I’m not hiring you to do the whole thing, but please tell me, what are the headlines? And what are the hot topics?’ Because every country has got them at the moment.
Carlie: Yeah, absolutely. And I imagine there are going to be a lot of expats in a situation where the country they’re normally domiciled in, where they’re registered for tax purposes, may not be where they’ve been working from for, possibly, the majority of the past tax year.
Oliver: Yeah. That’s been a really big row, hasn’t it? Because countries are trying to get their share of it. The big case in the USA is Massachusetts versus New Hampshire, where people are saying, ‘Hang on a second, you were sitting in New Hampshire all day working. We know your employer is in the other state, but New Hampshire wants the tax, because you’re sitting here and working.’
It’s a big to-do. I think it’s going to the Supreme Court. So, it’s exactly what you say, Carlie. A lot of people are dislocated in different places at the moment.
Carlie: I was going to ask if tax authorities are being a little bit lenient about that, considering we’re in the middle of a global pandemic, but if you mentioned that they’re going to court over it, then possibly not.
Oliver: That’s just New Hampshire for you. Perhaps they’re a bit more litigious. No, I think HMRC are fairly good. They’ve introduced some really good Covid-19-related stuff. Just very briefly, for people who’ve been stuck in the UK and spent more days there than they’d hoped, there are concessions for that. It’s called exceptional circumstances. So, they introduced that and a number of other Covid-19-friendly rules.
Yes. So, they’ve definitely tried. Because Covid-19 has gone on for so long, people are still getting caught and bitten for tax, but none of us knew, did we? We didn’t know that it would run for a year or two.
Carlie: It’s more positive now that we have a vaccine happening, and it looks like we’re at the end of the tunnel.
Oliver: I feel really positive about it, but it will have a big effect on the 2020 taxes. I rang a few people, and I was asking about 2019, because it’s such a time lag. And people have said, ‘Oh, I’ve done nothing. Life is terrible.’ But they were talking about the wrong year.
So, it’s only as we get into summertime that we’ll all start looking back at 2020, which will be that very strange year, when people have been stuck at home or stuck in another country. I had a client that went to Costa Rica and got stuck there for four or five months. It is a holiday place. It’s a long time if you’re a London-based IT worker or city worker. It’s highly inconvenient.
Carlie: Oliver, we’re seeing a lot of companies changing their work policies to remote working. More and more job advertisements say, ‘You can be in the UK anywhere. You can be remote.’ What implications does that sort of thing have?
Oliver: Massive implications. It’s a really tricky one, because if you’re an HR team, you’re doing your absolute best to update your policies to accommodate new working arrangements, but you won’t mention tax enough, because it’s the person’s responsibility.
So, I would say, that’s a real potential banana skin. That’s really tricky. If anybody’s listening, if you are working in another place, it really impacts your tax. If you’ve suddenly become a home-worker.
Wasn’t it HSBC that have just said that 25% of workforce are now working from home? They have cancelled their commercial office lettings and people are at home? Well, yeah, that could really affect things. If you are suddenly in a new country or a new city, you’re going to be taxed their way for doing the work. Yeah. And people will not expect that.
Carlie: I do read sometimes, on Expat Focus forums and Facebook groups, of people that don’t really realise there is a tax implication to being somewhere other than where you’re registered.
Oliver: I totally agree. I would say that every person who writes to me through Expat focus has got a really strong grip on what the rules are. But things like that … It’s not higher level; it’s just extra detail. Unless you are in the business, you just don’t know things like that.
Carlie: Oliver, as always, you’re here to help. How do people get in touch with you, if they have anything they need clarification on, be it taxes or pensions…?
Oliver: They could email me through Expat Focus or email me through my personal website, through my company, GETS. But Expat Focus is best, please. I’ve got a tax page there, and my phone number is there as well. As an example, over the last fortnight, I’ve had loads of people just picking my brains. They haven’t signed up as clients or committed to me for one or two years. We’re not doing that stuff. We are definitely a talking shop for these challenges in the current times.
Carlie: Always very generous with your time, Oliver. Thank you.
Oliver: Thank you. Thank you. Really enjoyed it. It was pensions, and I really enjoyed it. So, there you go!
Carlie: Something new every day!
Oliver: Exactly, exactly.
Carlie: That’s it for today. You can continue the conversation in our Expat Focus Facebook groups and follow or subscribe to this podcast on your listening app of choice, so you never miss an episode. I’ll catch you next time!