Repatriating money earned overseas is a major topic and one which we cannot extensively cover in this article.  We will summarise the situation and provide excellent advice for the unwary expat who is looking to return home to the UK, and hopefully keep the taxman’s hands off their savings and capital.

Many expats find that repatriating funds is not just a matter of meeting with their banker and arranging some paperwork.  There are legal and tax issues to be dealt with and there is also the thorny issue of how much the transaction is going to cost you and the foreign exchange rate you can expect to be offered.

Legal Issues

We are accustomed to moving money around the European Union with no obstacles (there are no currency controls within the EU).  This idyllic situation does not apply to every country or jurisdiction and you should ensure you understand the rules for removing currency from your overseas state to avoid breaking the law there.

There is little that can be done to legally remove money from a country if they have a law which prohibits the transfer.  Therefore, prospective home buyers and expats should check what the local laws are before they invest in such a country, as they will be severely restricted in their options if they cannot repatriate the money.

Some countries will allow you to repatriate funds provided you have met certain conditions, such as declaring the money when it is first imported to the country.  Again, this requires thorough forward planning on the part of the expat.

While there may be some currency control in operation, this does not mean that you are entirely blocked from repatriating funds.  It is typical for there to be some upper limit or threshold, below which you are free to remove currency.  Always check what the limits are before you attempt to make a transfer, or indeed invest in the country to begin with.

Money Laundering Issues

Money laundering and anti-terrorism legislation in the UK have drastically changed the standards of proof required to show the money you are transferring is in fact “legitimate”.  You will be required to prove not only your own identity but the source of the funds themselves and be prepared to support this with a paper trail as required.

Money laundering rules can be onerous so it makes sense to keep all of your paperwork and documentation in good order, not least as these rules are likely to become even stricter in the future.
Timing Issues

The decision as to when to finalize the currency transfer will have a huge impact on how much you finally realize in British pounds.  Timing is crucial, especially in a volatile currency market, and the decision may be better off postponed or accelerated depending on the impending economic climate and relative interest rate policies of the overseas state and the UK.

Do not take foreign exchange movements for granted; some overseas property owners have been unfortunate in that thought they made a profit on selling their overseas home, they found that because of adverse foreign exchange rate movement that their paper profit was turned into an actual loss when converted to UK currency!

Transaction Costs

It pays to shop around because the difference in fees and charges when converting to British pounds can be as much as £3,400 per £100,000 of UK Sterling currency bought. 

In addition, you should step outside the traditional banking realm and look at the specialist services provided by foreign exchange dealers where the fees and exchange rates can be much more favourable.

UK Tax Issues

Finally, we should mention the British taxman who is waiting to take a slice of your money when you return to the UK.  Just because you have made a gain or received income from an overseas source does not mean that you do not have to pay UK tax on it; the issue depends on whether you are treated as a tax resident or non-resident.  You need to check with your local tax office or accountant as the rules are complex.

In addition, you may be liable for British Capital Gains Tax if you sell an overseas property after you re-establish tax residency back in the UK after returning.  Again, the rules are complex and you must seek competent tax advice before entering into an overseas transaction or look to repatriate funds back to the UK.