Increasing numbers of unlicensed advisers are giving incorrect advice to investors resulting in them paying "substantial and unexpected" tax penalties, according to one wealth manager.
According to Aisa International, the unqualified advisers are telling investors that Isas purchased in the UK remain tax-free, even after they take up residence in another country.
However, Aisa has said this is incorrect because all gains and income generated by Isas are subject to declaration and assessment of tax in the country of client tax residence and are likely to be taxable in most cases.
The other issue Aisa highlighted was that an investment Isa holds only assets classified as Mifid products and can only be advised by qualified and registered Mifid investment advisers in, or outside, the UK and within the European Union and USA.
Christopher Lean, Aisa International chief investment officer, said: “Certain third-party firms are offering services in or into the EU without the necessary credentials, licencing, and knowledge to accurately inform their clients.
"Expats with UK investment assets are in danger of receiving tax bills on their Isa accounts, which may be backdated and substantial, after being told the accounts are tax-free in the UK.
“There are reasons why only Mifid advisers are allowed to advise clients on investments: to protect the investor from bad advice and potential loss of money.”
Stuart Ritchie, managing partner at GSB Capital, said this highlighted why it was crucial to receive advice from qualified professionals.
He said: “We would agree with Aisa. An Isa is a tax-efficient savings account in the UK, however, it may not remain as effective when an individual becomes resident in another country.
"An example would be Spain where any income or capital gains would have to be declared and then taxed.
"We tend to find that each country has its own set of rules and tax-advantaged savings options, which are likely to differ from the Isa structure in the UK.
"Therefore, it’s crucial to understand and consider the local financial regulations and tax laws when you move to a new country."
Aisa provides investment advice, financial planning, and asset management for US, UK and EU expat citizens residing abroad.
alina.khan@ft.com
