In this bonus episode, taken from the Plan First Wealth & Friends series, Richard Taylor is joined by Richard Bradstock to examine the complexities of cross-border financial management for expats. Richard shares insights on the property market's current trends, noting the investment prospects amid changing interest rates and market dynamics. The discussion includes a look at:
Always an Expat is affiliated with Plan First Wealth LLC, an SEC registered investment advisor. The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Plan First Wealth.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Plan First Wealth does not provide any tax and/or legal advice and strongly recommends that listeners seek their own advice in these areas.
In this bonus episode, taken from the Plan First Wealth & Friends series, Richard Taylor is joined by Richard Bradstock to examine the complexities of cross-border financial management for expats. Richard shares insights on the property market's current trends, noting the investment prospects amid changing interest rates and market dynamics. The discussion includes a look at:
Always an Expat is affiliated with Plan First Wealth LLC, an SEC registered investment advisor. The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Plan First Wealth.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Plan First Wealth does not provide any tax and/or legal advice and strongly recommends that listeners seek their own advice in these areas.
Alrightyy, we
Richard Taylor:are live back again. It's that moment everyone's been waiting for. It's our monthly Q Plan First Wealth and optimizes monthly q and a. Super quick, let's get started here. Regular agenda. It's ourselves. Plan First Wealth uk. US Financial Planners. It's Simon Chevi uk. us tax advisors and we have special guests flying in his private helicopter here. No, it's a car. Here's our friend Richard Bradstock, who is an international property maestro.
James Boyle:I think I've christened you that now, right? International property. Yeah. Thank you. You're welcome. You're welcome. Yeah. We like to big people up
Richard Taylor:here. So we're gonna, we're gonna, how things go today is we're going to get Richard to give us a quick update on property, international property in general as an investment or it's going, what he's been doing, what he thinks the future holds near term update on a specific projects particularly Berlin. I'm interested to hear what's going on there and then we'll kick him out. And Simon and I will we will unpack UK pensions as a U. S. resident. Plus, of course, we will take questions and queries throughout as they arise. So don't be shy to to tap away and let us know what you're thinking.
James Boyle:James, do the fun stuff. Yes, our disclaimer, Plan First Wealth is a registered investment advisor. The information presented today is for educational purposes only. Plant First Wealth does not provide any tax and or legal advice and strongly recommends that clients seek their own advice in these areas. As Richard mentioned, whether you're watching this on YouTube, LinkedIn or Facebook group, please feel free to comment any questions. We're happy to stop down and address them as we go here.
Richard Taylor:Wunderbar. Wunderbar. Thank you. So as I said, Ricardo for those who don't. Who didn't tune in last time. Where were you? What are you doing? We had Richard on and he told everyone about his background, but also how his background in, in international property as an investment in general, but also specific projects we were talking about. This was. Mid last year, right? So we're in rising interest rates. There's blood everywhere. Yeah.
James Boyle:Everyone was terrified.
Richard Bradstock:This is it. And a lot it's a lot's changed actually. I was laughing with my like the guys in the office today, this time 12 months ago. And I suppose actually just to take it back a step for those of you that didn't hear the last one who might be watching. We specialize as a business in UK and European property, predominantly, particularly. And what's but what's quite interesting is that even, yeah, when we spoke, it would have been July, probably last year. And It was a very different mood in the air, the Bank of England had been raising rates month on month, I think they had 14 straight raises from August 22 all the way through to July August 23, so we had a very uncertain mortgage market. There were head, if you read the headlines, you'd have been forgiven for never wanting ever to buy UK property again or European property again, because, the, even the deputy governor bank of England in the end of 22 had said 25 percent decreases in values over 2023. Yeah. I'm very pleased to say that the mood today. Is, has, whilst clearly we're not out the woods, if you'd like, in terms of, interest rates remain quite high. They haven't gone up since the summer last year. So the base rate has stayed the same since August last year. Inflation rates have come Down dramatically. So I think the last published rates in December were at 3. 9%, which, in, I think probably June, July, they were still at double digits last year. We're in a much more positive place and consequently. We've now got banks fighting a mortgage war battle, trying to, chip away at their margins to offer cheaper rates. And so suddenly, at the beginning of 2024, we've seen a slew of very positive headlines. The Times, you might have seen this, Simon, The Times last week, there was a headline saying 5 percent increase in property values in 2024. It feels a little bit bullish to me, but at the same time it, I think it's indicative of the general sentiment, given what the Times was reporting even three or four months ago.
Richard Taylor:It's amazing how quickly, it's amazing, we're not humans, we're so We just don't want anything to do with it, don't we? We're so fickle.
James Boyle:It's one reason why we've all got jobs, right? Because it's managing that kind of human
Richard Taylor:nature, which isn't going to change. But we're so fickle. We should just also just reiterate to people. So you're, you guys are a property business. You help people you source and help people buy and then manage in the rental property is an investment, right? So predominantly around the UK and Europe. So that's why you're here. And you should also just say, tell me Richard, the reason he reaches in this massive vehicle that you see, is it a helicopter? Is it a car? Is it a train? Is cause it's dad life, wife still. Kids have got rubby practice, so Richard is very kindly fitting his kid up from rubby practice. That's why
James Boyle:that's why you're looking at that vista.
Richard Bradstock:I don't, yeah, I don't do all my business from the car.
Richard Taylor:The Lincoln lawyer.
Richard Bradstock:Yeah, no, exactly. I just, it's just as you say, the fickle nature of it is astonishing, but I think what's really interesting, and it's the same for Germany we, we do, we do European property, but we do have a particular focus from a Euro perspective on Germany. And in both markets, the UK and Germany, we're in this position where supply is at an all time low. So there's no properties coming to market because developers have mothballed projects. There's, they're not buying sites. There's, they're not putting planning applications in because they're worried about the exit. And that's been going on for 18 months. We've got record rents because people are being forced to rent because they haven't been able to buy. So you've got all this pent up demand. And so if you're, as you say Richard we help. international buyers buy into these markets and try and make it as easy as it possibly can be for them. But if you're a dollar based investor, like we're obviously I'm sitting in the Middle East here, we're pegged to the dollar. You obviously, you guys are in the States with the dollar, you're a dollar based investor to buy, to use the cheap pound, which whilst it's strengthened a little bit recently, it's still historically cheap, right? Yeah. Let's use that cheap pound to take advantage of what are You know, prices which have come off a little bit, average prices fell 1. 8 percent last year. So nowhere near the 25 percent that the deputy governor said. And shows the resilience and strength of the UK market. And, if you could, if you've got a bit of cash and you can actually take advantage of these prices and, this sort of time where it's a great time to be a landlord because so many people are being forced to rent. There's actually, it's a very compelling story to actually, I think, to buy now. So there's a, I think there's a six to nine month window. Where there's an opportunity to buy and take advantage of these prices because as soon as we see interest rates hit, start coming down into the fours and possibly into the threes and we're already there was a, one of the domestic lenders came out with a rate of 3. 84 percent last week. I forget which bank it was, but the point being is that there's so much pent up demand in the domestic market in both somewhere like Berlin and London or Manchester or wherever it might be that, as soon as these rates come down, which they probably will by the end of this year, the local market is going to come flooding back in. And with this sort of finite supply of property, we'll see prices rise and we'll see them rise quite quickly, I think. I think there's an opportunity now, and I've been if you look back at my LinkedIn post, I've been arguing this for the last two or three months, I think there's a, an opportunity to do something now, if you are, in that sort of lucky position of having some spare cash in dollars or whatever it might be, to, to take advantage of it.
James Boyle:You, you apply that same logic to Europe? Berlin as well. Yeah.
Richard Bradstock:So Berlin is really interesting market because it's in actual fact, like Germany has handled the inflationary crisis better than the UK, their inflation rates are dropped quicker and lower than the UK has have. And Berlin particularly as the capital city is quite an interesting market because historically because obviously the Berlin wall and all those things that happened before that, it's actually quite a new market in many ways. And there are other major German cities which are more expensive than Berlin. So you've got Hamburg and Stuttgart and Munich and Frankfurt, all of which are more expensive. So it's a bit like having Manchester more expensive than London. Berlin's the biggest city, the most it's the seat of the government. It's the, it's where everything happens. And, but because of its history 30 years ago, no one wants to live there, but now everyone wants to live there. But because of this sort of because of this history, the prices are lower. And and, as well as on, on top of that, we've had a sort of a year or so of prices just sliding off a little bit. So now there's an opportunity to get into Berlin, exactly the same argument, just to, take an opportunity to take a position and There is such a shortage of property there that, rents, there's, I saw a prediction yesterday in one of the German papers, 63 percent rent rises over the next five years. In, in new build property, it's extraordinary, so it's actually, to be honest, a bit of a problem if you're German living in Berlin. But if you're a, if you're an overseas investor who wants to take advantage of and gain some income, some passive income it's a good
James Boyle:story.
Richard Taylor:Yeah, I'd never thought about that. It logically makes sense, but imagine if London was cheaper than Manchester.
James Boyle:You'd be flying in tomorrow, wouldn't
Richard Taylor:you? Completely. And Berlin. Everyone's talking about Berlin right now. Everyone. It's
James Boyle:a cool,
Richard Taylor:it's a cool city. It really is. Yeah. Yeah. And these unique conditions that meant that 30 years ago, no one wanted to touch it. Yeah. Yeah, absolutely.
James Boyle:Over the next 30 years, that will unwind. Yeah.
Richard Bradstock:Yeah. It will there's a kind of an ongoing reversion to normal where you would expect the capital city of the country. You'd expect New York to be more expensive than Chicago, wouldn't you? It's yeah it's that sort of thing.
James Boyle:Yeah.
Richard Taylor:Okay. The message is buy property. That
James Boyle:is
Richard Bradstock:my job, but yeah,
James Boyle:I think there is an argument to do yeah. Yeah. No I hear you.
Richard Taylor:It makes a lot of sense, makes a lot of logical sense. And it's remarkable just how
James Boyle:different it is from our last conversation. Yeah, I can't things change for us as well. Good. Yeah,
Richard Taylor:just the economy. I everyone when we last spoke, I think we were still wondering when's it gonna fall off a cliff, right? And it hasn't. In fact, the opposite has happened. I don't know what the future what the net what this year holds. But if nothing else, it reaffirmed
James Boyle:the the belief that no one has a clue. So no one has a short
Richard Taylor:term, no one has a clue what's going to happen. So what you've
James Boyle:got to do, you've got to focus on what's always worked. What's always worked is real assets, real companies,
Richard Taylor:real properties, real businesses, and tune out the noise. And that's, we're all in that game.
James Boyle:We're in that business. And don't panic,
Richard Bradstock:right? Don't panic. That's the other
James Boyle:thing. Yeah
Richard Bradstock:we, we had people 12 months ago saying I need to sell like, Yeah, no, the last thing you should be doing right now is selling, it hold it'll be fine and it was and it is, so
James Boyle:I mean
Richard Taylor:look if people think nothing from this keep buying real assets Don't panic. Yeah, we call it keep the faith. Don't keep buying real assets, whatever they are real tangible assets And keep the faith Yeah. All right. Look, Richard, we're going to let you out early. I
James Boyle:think unless you got anything to add, I think that was, that's,
Richard Bradstock:that was great. No, absolutely. I thank you very much for your time and apologies. I had to do it from the car, but No.
James Boyle:Richard, before you jump in, just in case someone's watching and has more questions, what's the best place to find you at?
Richard Bradstock:I'm on LinkedIn under Richard Bradstock, and the website is www rpa group llc.com. So yeah, I'd love to have a chat with anybody that has questions. Perfect.
Richard Taylor:Let's do this, let's do this
James Boyle:regularly. Rich, let's get you on. Yeah. Brilliant. We'll see what different locations we can get you from.
Simon Misiewicz:Before you go, Richard, do remember, obviously, we have our conference call soon. We do. We want you to be starting to look at US properties, because US properties are going to be booming as well. Yeah I Richard, that seed for you.
Richard Bradstock:Historically, I've done quite a lot in the US, so I don't see why not. Yeah,
Simon Misiewicz:Florida is definitely a place to be, if you haven't already gotten
Richard Taylor:onto it. Yeah. Yeah. Rich is, I bear in mind we're live right now, so is this on the
James Boyle:cards? Are we, are
Richard Taylor:you America?
Richard Bradstock:Not to be honest, not in the short term, just to be completely honest, but I, historically, I've been involved in property in Chicago, in Miami, in the in New York in Seattle. But I haven't, obviously, one of the, one of the key things with property if we're going to, as a business, sell someone the property, what we need to do is make absolutely sure we know everything about it, that we know all the DD is done, and we are still a small business, and so it's slightly a bandwidth issue at the moment, but absolutely, the, yeah, we've moved into Germany, and the next, the next thing we get asked all the time for dollar based properties. And so logically, that means the states, of course. And so at some point, probably not in the next few months, but certainly it's, it's very much on the in my thought processes as it were, but not in the very short term.
Richard Taylor:We know
James Boyle:you, I know you're a good human. So I know
Richard Taylor:that if you're putting out properties and you're offering to manage them and facilitate mortgages and all this good stuff, I know it's legit. Obviously Simon's part of this triangle of trust now. So between us, I think we can offer a compelling solution to expats who may not just Europe, but who've got an eye on the U S as well. So let's,
James Boyle:yeah. We all know, we know about bandwidth problems, right? We're a as well, but let's work towards this. Let's support
Richard Taylor:each other in this endeavor.
James Boyle:Sounds
Simon Misiewicz:good. Sorry Richard, I didn't mean to push you into this a few months ago, but, so
Richard Bradstock:No. Not at all. Not at all.
James Boyle:All good. Alright guys. Thanks very much. In touch. See you soon, mate. Cheers. Cheers. Bye bye. Bye Tara. He's a good guy.
Richard Taylor:He's a good guy. Really good guy. Anyone got anything to add to that? Or should we just jump straight into UK pensions? Simon, let me put you on the spot. Is there any difference? An American Sorry, a
James Boyle:person in America, U. S. person could be a Brit, could be an American, could be a British expat now in America,
Richard Taylor:whatever, but an American taxpayer. Is there any benefit to holding U. S. rental
James Boyle:property over, say, British rental property or downside or is there a tax break
Richard Taylor:or is there any opportunity there or
Simon Misiewicz:risk? Personally I think there is greater benefit of holding U. S. real estate than UK.
Richard Taylor:Is that from a tech perspective? Is that from a currency perspective? Is that from an opportunity perspective?
Simon Misiewicz:I think land is very expensive in the UK compared to the US. So I think accessibility to property in the US, given that it's so big, you can put the UK into Texas quite easily. It just tells you the expansion of the U. S. right. The fact from a tax perspective, one clearing obvious thing to differentiate the U. S. and U. K. is depreciation. You're allowed to have depreciation against U. S. real estate property, but you cannot for UK property. And the taxation on UK property is very high if you get it wrong. So U. S. is a, I always take the view of you could get away with investing in real estate property in the U. S. and pay very little tax. You cannot say that about UK
Richard Taylor:property right now. Simon note, could a, if a U. S. tax person, a U. S. taxpayer. Invests in British real estate, can the U. S. taxpayer benefit from depreciation on that?
Simon Misiewicz:Yes, so that's a great question. So they will benefit from depreciation in the U. S. tax return, but not the U. K. tax return. So it's treated
Richard Taylor:very differently. They're liable for tax in the U. K., aren't they, when they sell it? Yeah. Yeah, all right. And it's taxed first.
Simon Misiewicz:It's taxed first wherever the asset is, so a British person investing in US property would be taxed first in the US, and vice versa if an American who is based in the US owns UK property, it would be taxed first in the UK.
Richard Taylor:Yeah,
James Boyle:I've
Richard Taylor:known clients who have gone back as US citizens, not really appreciating the challenge of being a US citizen abroad. They've UK and they've had to rent a real estate in the US that they're depreciating. And then they find that they can't do it in the UK and they get walloped with
James Boyle:tax. Yeah.
Simon Misiewicz:And I'm going to put something else out here for a second because it's property related, but it's also. Tax related. I see a lot of Americans who have been advised correctly. So I don't want to be shot down on LinkedIn. They've been advised correctly to invest in real estate property in an LLC to minimize the liability. And there's not much of a tax advantage from the U. S., but when they move to the U. K., Brits and HMRC do not recognize LLCs, and therefore it's slammed into your U. K. personal self assessment tax term. We have this issue of something called Section 24. Which basically means that you are not allowed to offset mortgage interest against your property So the tax difference is two three hundred percent more in the uk than the u. s
James Boyle:That's the case for you getting good advice before you move if ever
Simon Misiewicz:we've seen this a lot Unfortunately where people do have been advised correctly cpas eas in the u. s They will advise you correctly in the US, but they do not have an angle of international taxation.
Richard Taylor:It's funny. So we're going off on a complete tangent here, but it's interesting. And it's just something I get all the time. So I met with someone yesterday going back as a US citizen to the UK, had no, no idea of complications, difficulties, challenges. So first thing I brought up for attention said, look, I'm not even sure we're the right people to help you
James Boyle:right now. I think baseline one, you need a
Richard Taylor:tax advisor. And I sent him a list of cross
James Boyle:border tax advisors, UK, US. I said, it's going to be super important that you need someone in the UK, someone in the US, and someone who understands both, right? The interaction, the tax treaty.
Richard Taylor:And he came back to me with a comment that I get all the time, because all these tax advisors are in the UK, right? Because like you there's a big American contingent in the UK. These are people, they understand the UK, and they understand the US, and they understand the interaction. That makes logical sense when you think about it, because why would someone in the U. S. understand the U. K. and the interaction between the two, right? And he came back and he said, Oh, this is great, but I noticed you're all in the U. K. Do you know any in the U. S.? And the answer is no, because even when in the U S every expat specialist I found is just generic international, but that's too generic. You need to understand the UK specifically and then put that into
Simon Misiewicz:context, Richard, trying to find a U S U K tax specialist in the United States, bearing in mind how big it is near remain possible. If you find you, but you've got quite a few us, UK tax specialists qualified in both jurisdictions in the United Kingdom, but not in the United
Richard Taylor:States, 100%. But everyone just thinks, cause they're in the UK, they're in the U S they want to talk to us in the U S and the, and I haven't, it makes perfect logical sense that the actual UK, US specialists are in the UK, not the U S but people don't. I don't know why they just want someone in the U. S. even though, they don't have that level of expertise and you need it. It's no good just saying, oh, I know how, I know about, I know the international stuff. No. You need to know the U. K. intricacies. You need to know the treaty. So if you're gonna deal with someone in Portugal, you need to be a Portugal expert and have that cross border and the treaty. It's not, so anyway I get that all the time. All right, property. We'll do this with Richard regularly. So on our docket today is UK pensions for US residents, so Let's just talk about this. See what comes out. I'm going to start with a couple of
James Boyle:observations
Richard Taylor:First of all, the number of people who we meet who have been here for 20 odd
James Boyle:years and done nothing with their UK pensions So first of all, they move here They can't, they, they think they'll deal with these UK
Richard Taylor:pensions later on. They can't find anyone to help them with, there's no information out there. There is more now, but there wasn't. They go and see a UK, a US advisor and it's just a tumbleweed moment
James Boyle:where they don't even, they don't know what to do with them. They don't know how it works. They
Richard Taylor:don't want to touch it. So these pensions just languish for 20 years. And then they, we come across us and we start having a conversation and we explain there's options and we can help them sort it out. And that's great, but there's an opportunity cost. Those pensions have been languishing for 20 years. Sometimes it's fine. Sometimes you can immediately see it could have been a lot better. It could be expensive. It could be poorly invested, whatever. There's usually some sort of opportunity cost. So the first thing is, if this is you, there's options. Don't leave it 20 years. That's the first thing. Second thing, as far as I'm aware, and I think I'm pretty aware,
James Boyle:it's short of fully surrendering them. You cannot
Richard Taylor:bring a UK pension into the US. You cannot move a UK pension into a US pension. You cannot move a
James Boyle:UK pension into a 401k or an
Richard Taylor:IRA. It's just not an option. You can move it into a vehicle. That
James Boyle:allows currency conversion into dollars and investment options in dollars and
Richard Taylor:withdrawal options in dollars. So it looks and feels like it's in America almost, right? It's in dollars, you value it in dollars, you draw down in dollars, you invest it in dollars, but it's still in the UK. Because we call that an international SIP. You can't, but don't, one, don't let them language for 20 years, and two I'm sorry, someone just messaged me, I've lost my train of thought. Two, yeah, you can't bring them into the
James Boyle:US. You want to get, you can get them, you can get as close to close to the U S as possible, but you can't get them into the U S. All right. What else are we off? UK
Richard Taylor:pension wise? Anyone got any thoughts?
James Boyle:Reporting right is the big one. Oh yeah. Reporting. Simon, that's your bag. Yes.
Simon Misiewicz:And I've just picked up a client, funny enough, who has gone through this same issue. 35 twenties. No one's
Richard Taylor:doing
Simon Misiewicz:them. Not this particular person is an American move over to the UK, come back to America, has some investments, beneficiary of a trust that has pensions of all the things, transferred a pension to their name. And that's a UK pension and they're obviously in America doing American reporting and the whole suite of reports that go with that, and he's not done it for six, seven years.
Richard Taylor:Wait, so wait, we're talking F bar,
James Boyle:8938,
Richard Taylor:3520, 3520A. He wasn't doing any of them. No. Why not aware of, was he doing NF bar for anything
Simon Misiewicz:or just no 89, 38, so I think it was done, but not 25, 28, not, let's not forget you've got 35, 20, which is for the beneficiary 35, 20 a for the trustees to do. But none of them would been
Richard Taylor:done. But Simon, was it, did you have other assets that you, was it just a pension that was missed off or was it not? No, no
James Boyle:Other assets as well. Because sometimes we have people
Richard Taylor:say they'll be declaring their bank accounts on the F bar in 1838, but not the pensions. They think, oh, it's just bank accounts. You have to say, no, it's not. It's all foreign accounts, including pensions. But so there's, so how are you going to resolve that?
Simon Misiewicz:We just have them to go through, ultimately you can go back two years to do the tax returns, but it's just been open and just saying a lot of it is just reporting issues. And to be honest, as long as we do it right way, I don't think that this will be, the IRS can fine you with these 10, 000 fines. I think the more those fines, as if they catch you, we've had a client where we've literally declared everything to them and they haven't slammed the client at all. On But even lack of reporting the income wasn't it's a rolling income anyway So they're going to be caught up when they eventually liquidate liquidates Or they take money out of this investment, but there's no real tax consequences It's just a reporting and the iris haven't said anything at all
Richard Taylor:But are you gonna do you try and do it through like the one of the approved IRS delinquent programs or delinquent DI delinquent international
Simon Misiewicz:or the delinquent side of things because it's too isn't it? There's the delinquents and there's the foreign delinquents as well. But we will do it through the one most pathways all the time. And the IRS. monsters, unless you carry on bearing your head and thinking it's going to go away.'cause that's when it doesn't.
James Boyle:Yeah. Yeah.
Richard Taylor:Or you make it worse.'cause once you know about it when you don't know about it. You're non
James Boyle:willful and you're hopefully legally. Yeah, I'm not the adjudicator of that, but,
Richard Taylor:Non, non willful. If the IRS believe you're non willful
James Boyle:and you're non
Richard Taylor:compliance, you have many good options,
James Boyle:but if they believe
Richard Taylor:you're willful and if you continue that behavior, once you are, have been informed that you are delinquent in some way or non compliant in some way, then arguably you're willful. And then
James Boyle:you lose all the good, I always say you lose all the good options. And that's not a good place to be. Before
Simon Misiewicz:you Richard, actually, you mentioned about investments, whether it's pensions or investments, and it's a British person moving to the United States, it will be good for someone who is. It may be in that position again myself in two years time but whereby they don't do anything with the pensions What is the worst thing that could happen and i'm talking about all types of not just i'm not talking about necessarily Tax reporting, none of those things, but from an investment perspective, what's doomsday look like if they don't do anything with their UK investments?
Richard Taylor:It's not a doomsday unless, someone went into cash and then forgot about it for 20 years. That's a horrendous outcome. It's still an opportunity costs rather than anything particularly drastic, but really the worst case now is just bar fraud or something, which can theoretically happen, but let's, barring these. Events, it is just opportunity cost. It is, it's getting less and less now, but we still pick up accounts from the eighties and these accounts can have really high charges can be in really bad funds with profits funds. I know with profits is getting rehabilitated to a certain extent nowadays, but some of the old stuff is really crap. Like I say, less and less now we're picking up more stakeholder stuff, which is, yeah, it's. It's all fine, but I still think most clients could have done a lot better. The fees could have been lower. They could have got it into the currency at a time of their choosing into dollars and it could have been better invested. But again, that it's not life or death.
Simon Misiewicz:But it is a loss of investments though, isn't it?
Richard Taylor:Oh,
Simon Misiewicz:what's your view of defined benefits so any employee that was lucky To be in a defined benefit because they don't exist anymore really but if someone's in defined benefit, would you just say leave it
Richard Taylor:there? So great question. So this is where I was actually going a second ago. So we talked about don't leave it to the opportunity cost. Can't bring it to the U S but you can move it into an international sip and it feels like the U S great. So now what, now you look at what sort of pensions you have, if you have a. Just a pot of money, defined contribution, just a pot of money, IRA 401k style pot of
James Boyle:money, or if you have
Richard Taylor:a final salary, defined benefit pension. If you have a, if you have a pot of money defined benefit, money purchase pension, it's a relatively straightforward decision,
James Boyle:right? You're swapping, you're just moving pot of
Richard Taylor:pounds from here to here,
James Boyle:from an older style vehicle with
Richard Taylor:fewer options to a newer style vehicle with more options. It's occasionally there's some bells and whistles you have to be aware of occasionally. But generally it's a fairly straightforward decision. Defined benefit, to your point though, final salary is a different beast altogether. Now in the low interest rate environment, this was a very popular move. Because you define benefit, final salary, defined benefit pensions. For
James Boyle:those who don't know, I'm sure most people know, but it's,
Richard Taylor:They just pay you. An income each year, inflation linked income each year, you can
James Boyle:swap that
Richard Taylor:through a tortuous process for a look for a pot of money.
James Boyle:That's yours to do what you want
Richard Taylor:with it within the pension environment, but there's a real big question whether you should or you shouldn't, An inflation linked pot of money, sorry, an inflation linked income is hugely valuable. I used to I often say to people like
James Boyle:right now. You, your
Richard Taylor:pension provider, your, whoever your employer is, they're just going to pay you this, and they're going to increase with inflation. It's their problem. You can swap this for a pot of money and move it into a SIP or something, and then it becomes your problem. And there's benefits to both of these things. Like it's, it'd be great to get 20, 000 pounds a year and
James Boyle:not have to worry about it, not to think about it and beat someone else's
Richard Taylor:problem. But also if someone said here's a million quid, that's a nice problem to have, right? If someone said that it's 1. 5 million, that's a really nice problem to have. But if someone said it's half a million pounds, you have to swap that 20 million pounds maybe I wouldn't do that, right? And those
James Boyle:figures
Simon Misiewicz:It's worth negotiating though, isn't it? Because I am sure That some of those employers who have got this ticking time bomb, and it is genuinely a ticking time bomb for many employers, as they found out 10 years ago, that if you approach them and say tell me how much I can get out of it, I'm sure there's a negotiation to be had to say give me a more of a pot of put some of them than it's actually worth.
Richard Taylor:I've actually never known. I've never known it'd be negotiable. I've known, I've seen enhanced transfer values
James Boyle:because of that. They basically want people out of the scheme. I've seen transfers
Richard Taylor:be very enhanced because of the interest rate environment. Because we're in a higher interest rate environment, so transfer
James Boyle:values have gone down,
Richard Taylor:making it less popular. But I've never, I don't know how real, I don't know if that's even a thing. We haven't done one in a while because interest rates have gone up. They've made it much less compelling to move away. There are still very compelling reasons to move away, but, 5 percent
James Boyle:interest rate world than they were in a half a percent interest rate
Richard Taylor:world. And the regulatory, regime has changed dramatically, making it even harder and more torturous for people to do. It's still an option. It's still worth exploring, but it's going to come down to the value the amount you are offered. And you're right, it is a ticking time bomb. The amount that you're offered and your personal circumstances. Some people do not want to take on. Burden, that problem I mentioned, some people really do. If you said to me 50 grand a year or a million pounds, I'd take a million pounds. Cause I know what I can do with a million pounds, but not everyone's in that position.
Simon Misiewicz:But you must have, I guess the other side of that is there must be Brits out there right now that either haven't got a U S pension, which they probably could do if they're employed, especially, or they have got a pension, U S pension. And bearing in mind where we are in the tax season, so in the UK you can only make a pension contribution to reduce your tax liability in the same tax year, but in the US it's different. You can carry on contributing your, into a pension, US pension, and get a US tax relief against 2023 even now. So I bet there's many people, Brits over there in the U. S. that aren't even aware of this.
Richard Taylor:Yeah. Most of the, again,
James Boyle:I just want most of the ones we, we work with most people we work with are covered by 401ks. So I'm not sure that would apply, right?
Simon Misiewicz:But it depends on making extra pension contributions though,
Richard Taylor:doesn't it? Yeah, but I think if they're covered by a 401k and they've made, they've maxed out that benefit, I bet there's not much more room for
James Boyle:Making a pension contribution in the
Simon Misiewicz:U. S. I guess that's if they have
James Boyle:maxed it out though, right? Yeah, they all should be maxing it out. They should. But not
Richard Taylor:always. Yeah, so in terms of UK pensions for a British expatriate living in America. Don't leave it. There's help out there. You can't bring it to the U. S. If you've got a defined benefit or a defined
James Boyle:contribution, a pot of money or a final salary pension,
Richard Taylor:the process and the experience and the advice is probably going to be dramatically different. And The critical Well, actually, no. We aren't talking about one
James Boyle:thing. And let's keep it short because we've done this one to death. Tax free cash. UK pensions. Enjoy. A 25 percent lump sum
Richard Taylor:tax free you can take that lump sum in the US and I'll defer to Simon, but it is not clear whether it is taxable
James Boyle:in the US or not taxable. So you need to have a, so
Richard Taylor:anyone who tells you definitively one way or the other, bear that in mind. And. You should work with a tax professional to make sure that whatever you do, whether you treat it as taxable or not you do so in the most compliant and professional manner. So it's declared properly, it's reported correctly. If you are taking it tax free, any the, that is declared and the basis for that treatment is declared. Simon? And therefore, if it is challenged. You can say I did everything by the book. I,
James Boyle:and
Richard Taylor:I don't, I'm not sure what else you can do, but just be aware that there is this uncertainty question mark. I don't know how you describe it, Simon.
Simon Misiewicz:Do you know what one thing that's brought my attention about just for just listening to you? If people do report it correctly, even the 25 percent PCLS, and then they file it correctly with all the notes to the IRS, and the IRS then have plenty of time up to two years to challenge it, after that time, there's very little room for them to go to. However, if you don't file this information and then they say actually we want to dig into this. We think it's fraud, then they can open the case up for a long time. So you have to, and I'm talking about the things like the 8621s, 3520s, all those forms need to make sure you belt and braces, file it properly, do all the forms correctly, two years, you're okay. If you don't file those forms, and then you think I'll just, don't get my head again into the sand. And they are as come knocking, you may have big
Richard Taylor:problems. Simon, I think you raised an incredibly important point. Let's have a moment on this statute of limitations, right? Everyone thinks there's a three or with international stuff, there's a six year statute of limitations. And there is with some very important caveats. And those caveats are. One, and I hope this never applies to anyone I know or any client I work with, if the IRS suspect fraud, like intentional deception, and there's statute of limitations does not apply, they can go back as far as they want, right? And Simon, you're the tax expert here, so correct me if I'm wrong on any of this stuff, right? But there is no statute of limitations, so if you willfully, if you intentionally don't file your taxes correctly, if you omit some income or whatever it is, No statute
James Boyle:of limitations. Don't, I don't think you should be
Richard Taylor:I don't think you should take any comfort in if it was six years ago or 10 years ago, because
James Boyle:they can go back as far as they want. And I hope that never applies to anyone that we know.
Richard Taylor:But of much more relevance, and this applies to almost everyone we know,
James Boyle:unfortunately,
Richard Taylor:is FATCA forms, the informational reporting forms. 89, 38, 35, 20. Some of the forms Simon and I've been talking about today, if they are not filed, my understanding is that can leave the statute limitations open on the entire tax return, sometimes maybe just the specific asset in question that should be on that form, but in other circumstances, the entire tax return I can leave the entire tax return open indefinitely. So if you didn't file the 35 20, if you didn't file the 8, 9 38, there's no three or six year statute limitations potentially,
Simon Misiewicz:And that is at my exact point of file attached, return to the irs, complete with all the forms, even if the this 25% is subject to scrutiny in the future or not. Yeah, say if you've filed the forms, you've done the PCLS 25% tax free, you put it on the documents and then they are, have that three years, they can't go back more than that because it's not fraud because you've comp, you've been completely compliant with the tax, all the forms that's there. Yeah.
Richard Taylor:This is the thing I see. I'm gonna go on a limb here, and I'm making this up, but just from my anecdotal experience, having done this for nine years. 9 years here now, 90 percent plus, 90 percent plus expats who have got international assets and are in some form of non compliance, I believe. There's some, there are forms missing and it's usually this 3520, honestly but I'm still surprised by how often it's FBAR and NH938 and They're going, some of them are using their local CPA and some locals epass in EEA still don't realize about all the, they think they might be aware of the F bar, but not 8, 9 38. They might be aware of 8, 9 38. Not F Bar or none of'em are avail, are aware of 31 twenties. Again, there are cer, obviously there are exceptions. Obviously there are, but in my anecdotal experience then the people aren't doing it. They gonna see the local CPA or worse act of madness. They DIY, it. They do their own taxes as an international person, and they don't know about claiming treaty exemptions. They don't know about the form, was it 86, no not 8621, 8833, or the one where you claim a treaty exemption. They don't know about these forms. So they've done all these taxes, and I just wonder how many expats have got a statute of limitations that's not running? Again, no fraud, but just everything's open forever.
Simon Misiewicz:I think one of the things that we have to bring to attention, though, is the individual that's using, let's just call it commercial individual tax returns software. I'm not going to mention names. But if you're using one of these platforms They don't even know what you
Richard Taylor:are,
Simon Misiewicz:so you've got no chance of completely being compliant because they do not tell you, you need to do your 3520 for a trust that you are beneficiary of in the UK or any other country for that matter. It won't ask you those questions.
Richard Taylor:No, it won't. It's an act of madness. An act of madness. Okay. So it always comes back to reporting. Yeah. It always comes back to work with the tax pro. Don't DIY
James Boyle:taxes don't go to a local,
Richard Taylor:don't go to Joe on the block. Nothing wrong with Joe around the corner, but they don't, they aren't equipped to deal with this stuff and this stuff is really important. And finally, UK, US experts, tax experts, they're, it's my experience. They're in the UK or they're UK based.'cause they've got the UK stuff and they have the US stuff and they have the cross-border stuff. And I don't see that in the us.
Simon Misiewicz:It's surprising, but you're right, it's not that, but just to echo that point though, I think the mantra that people should be taken from this show is build your wealth because don't let your investments just dwindle and dissipate and evaporate and then do it with a tax efficient mindset because it's easy to just get it completely wrong whereby you leave your investments to the, in the UK, okay. Let's not forget about this high fees. Some management companies won't care how your investments are actually performing. I know that's sound disingenuous, but I seen it. People, your investments are eroding high fees and you're not even tax compliant and you're paying taxes on top of all that. It's a, it could be a real bad show for you in 2024. If you don't work with plan for as well to get your investments straightened out.
Richard Taylor:Yeah, I appreciate that. So we're seeing, I don't want to badmouth other firms, but there are, when I joined, when I set this up, there are a handful of firms who are all licensed by the sec. Now there are firms calling in under other firms licenses, and I see people calling in from Spain and the Middle East. And I just wonder what disaster this holds for the future because these people have no idea about F bar and H938 let alone 35. They have no idea of this stuff. And I just I know this one about the 25 percent PCLS and I just wonder What is in store? What's what's going to come out in the wash 10 years down the line
James Boyle:frightening? Yeah. Yeah. Look we've
Richard Taylor:done our 30 minutes, so let's leave it there. We'll be back next month. I'm wondering who we get on the show. You can do a 15 minute update. So I'll think about that. And then we'll do on our agenda will be a U. S. retirement accounts for people for expats here. And of course, we'll take questions and queries as
Simon Misiewicz:always. Richard, can I make a suggestion for the next, that next show, talking about pensions for the US. Is the types of pensions that people can have, so whether they're employed or self employed? Yeah. Okay, so I think I've got a few clients that are going over to the U. S. starting their own businesses and are deemed to be self employed. So they may not know about 401ks and whether they can even use those or not. So they're quite good to run down there.
James Boyle:Okay, I'm going to
Richard Taylor:draft in our resident CPA, CFA here. One of our residents, we have, I don't know what I'm talking about, we have three CFAs, CFPs, we have three CFPs at this firm. But one of them happens to be with us right now, Mr. James Boyle. So I'm going to draft, so we're talking SEPs and SIMPLs, right? And SOLOs, 401ks, yeah. Dust off your You dust off your CFP textbook and James can help us out with that. So yeah, we'll definitely cover that stuff. So you're seeing people come over here, set up their own businesses. Are we talking thing? Is this people doing so under E2 visa programs?
Simon Misiewicz:Yeah. So we're partnering up with, specialist to try and help people invest in their own businesses. Funny enough, that's what I potentially will be coming on as well. In two years, two, three years time. So yeah, so the E2 visa is a definitely a great portico of for someone's going over L1A visas, L1B visas as employed in your own business as well. Could be a good venture. But those people need to understand what kind of tax structure they set up. So we're helping with that, setting U. S. bank accounts, which is near and impossible for individuals coming over to U. S. without a credit history. But then coupled with that is the understanding taxes and then saying if I'm going to be here for a long period of time, shouldn't I have a pension or some type of investment, which they may not have. And I think it's about educating those guys.
James Boyle:I love it. Absolutely. So
Richard Taylor:yeah, we'll absolutely do that. 90 percent of our clients, I reckon came over as employees, senior execs. So that's really has always traditionally been our focus, senior execs in multinational businesses. So most of them had a 401k, occasionally 403b but more and more of these clients are actually leaving now and doing their own thing.
Simon Misiewicz:And it's because it's America, there is, it's the land of opportunity for people to have the sidekicks. Or to start on their own adventures, but there is a huge shortfall in terms of knowledge about what you could do from an investment perspective out of your own company. Yeah. And I'm talking about C corporation LLC escorts.
James Boyle:Okay.
Richard Taylor:We will we'll come prepared.
James Boyle:All right, folks,
Richard Taylor:we're going to help. As always, we are and we'll see you next month. Ciao. Take care.