Financial Planning Post Brexit
by Thomas Marron
06 14 24 61 29
The dust has settled a little on the UK’s referendum and we are getting used to the idea that the UK will no longer be an EU member.
There has been much speculation among British expatriates about how this will affect them, but unfortunately we do not have much more concrete information today than we had back in June. Prime Minister Theresa May has now confirmed that the UK will invoke Article 50 of the Lisbon Treaty by the end of March 2017, but it could still be some time before we get clarity on how the new relationship between the UK and EU will evolve.
In the meantime we can take a look at how Brexit could affect your tax and estate planning in France, as well as your investments.
Savings and investments
Many British investors tend to favour UK assets in their portfolio, even when living in France. They prefer to own shares listed on a FTSE index or corporate bonds issued by UK companies. Indeed UK advisers often structure their clients’ portfolios this way, but that may not be the right balance for you.
Diversification is more important than ever before. You need to review your portfolio to see if you are overexposed to UK assets and consider how to improve diversification over different assets classes, countries, companies, sectors etc.
For peace of mind you should also ensure that your portfolio is suitable for you and your appetite for risk. Your adviser should obtain a clear and objective assessment of your risk profile before making recommendations, and employ the services of carefully chosen investment managers who use a range of different strategies across all the geographical regions and asset classes.
British expatriate investors are also concerned about the Sterling exchange rate. Note that you do not have to invest in euros, even if you are investing in an EU investment arrangement; if your capital is in Sterling, you can invest in Sterling.
What you need is an investment structure that has a multi-currency facility. This would allow you, for example, to invest in Sterling now and then switch to Euros (if you wish) at a later date. It would also give you flexibility in how you take withdrawals.
This currency issue is important right now, so ensure you have suitable currency diversification and flexibility.
Tax and estate planning
If you live in France and have UK source income, or vice versa, the tax treatment is determined by the UK/France double tax treaty. This is a bilateral agreement between the two countries and independent of the EU, so unaffected by Brexit.
There are, however, a couple of circumstances where taxation may be affected. For example, UK bonds would become non-EU bonds and so will not qualify for the beneficial tax treatment given to EU assurance-vie and capital redemption bonds. You should seek professional advice here too to review your position.
If you leave France to return to live in the UK after Brexit, exit tax would also be affected since the rules are different if you move to a non-EU country.
Brexit itself should not affect your estate planning. Although Brussels IV – the EU regulation that allows UK nationals living in France to opt for UK succession law instead of French succession law – is an EU regulation, it applies to third party countries as well as EU ones, so there is no change for British expatriates in France.
Finally, it is advisable to use the services of a financial adviser who lives here and is experienced in advising British expatriates in France. Many expatriates continue using their UK financial adviser, with the result that their financial planning is often more suitable for a UK resident than a French one, often with undesirable consequences.