The coronavirus pandemic has had devastating consequences for people around the world. Every country has responded differently to the crisis, but most have implemented forms of quarantine to help prevent the spread of the highly contagious virus.
This has affected economies, on a local and global scale. Different quarantine rules and closed borders have also had some potentially devastating consequences for individuals.
Read on for three horror stories about how seemingly simple decisions turned into a catalogue of unexpected and costly results.
British expat living in Spain stranded in the UK after visiting family at Christmas
Daniel hadn’t seen his family since the start of the pandemic. So, Christmas 2020 was a precious chance to spend time with his loved ones.
When he travelled from his home in Spain to stay with his family, he had no idea that he’d become stranded, unable to fly home.
The Covid-19 Delta variant was spreading rapidly in the UK and many European countries responded quickly by introducing restrictions on travellers arriving from the United Kingdom. Daniel had already been in Britain for a couple of weeks when the Spanish government suspended all flights from the UK.
For Daniel, becoming a UK resident for tax purposes would be costly
We all know it’s possible to outstay a welcome but, in this case, the bigger problem was that Daniel was now at risk of becoming a UK resident for tax purposes. He didn’t need to do the sums to know that being assessed for Income Tax on his global income would be costly.
If he didn’t find a way to get back to Spain before a certain date, Daniel would fall into the problem of double taxation. This would mean having to pay a heavy Income Tax bill in both the UK and in Spain, and he was unsure about any Double Tax Treaties between the UK and Spain at that time.
Already classed as a non-resident for UK tax purposes, Daniel was keen to retain his non-resident status. But there are thresholds and conditions that determine how many days you’re allowed to spend in the UK as a non-resident expat.
The conditions are subject to the ties you have in the UK, how you spend your time in the UK, and how long you stay.
With more than three ties in the UK, Daniel knew he could spend a maximum of 46 days in the UK during any one tax year. If he exceeded this, he would automatically become subject to double taxation.
Fortunately, Daniel was fortunate to find a way back to Spain and avoid the hefty tax bill he had feared.
Family death leads to lengthy and costly problems for a loving son
In another story, one of our team returned to the UK following the death of his mother.
Because of his experience in dealing with financial matters, it fell to Tom to sort out the estate. He also had to look after and console his elderly father.
Due to events outside his control, Tom ended up staying in the UK far longer than he’d originally planned. Like Daniel, Tom was in danger of becoming a tax resident, which wasn’t in his interests.
Changing rules caught Tom on the hop
At the time, travel rules allowed Tom to fly into Dubai. He did this in the expectation of only having to quarantine for a short time when he got back to Hong Kong. However, while in Dubai, Hong Kong re-rated Dubai as high risk, along with many other countries.
This means that when he arrives back in Hong Kong, instead of a short quarantine, Tom would have to quarantine for 21 days. But Hong Kong’s rapid re-rating of countries created a bottleneck and quarantine hotels became fully booked before Tom could secure a room. The frustrating thing is that Tom managed to secure a hotel room and booked his flight to travel back to Hong Kong. But as he was travelling to Dubai airport to fly back, his flight was cancelled. This left him back at square one.
At the time of writing, Tom remains stuck in Dubai waiting for a vacancy to become available in a quarantine hotel in Hong Kong.
Every day he is searching for a vacancy so he can book his quarantine stay and fly back to Hong Kong.
On top of this, Tom still has daily work commitments to attend to.
Whilst Zoom calls are helpful, nothing beats face to face meetings, especially with clients. And not all documents can use DocuSign as some need wet signatures and certification by a notary, or equivalent. These then need to be couriered to Hong Kong. Again, adding another layer of hassle and expense to arrange in temperatures exceeding 40 degrees.
The cost of being a dutiful son
Of course, Tom did the right thing for his family in returning to the UK following the death of his relative. And offering to take care of the estate and his parents wasn’t something he was willing to turn away from.
But being a good son has cost him a lot more than he ever expected. He’s having to shell out for accommodation in Dubai while he waits to then pay more money to stay in the quarantine hotel once he arrives back in Hong Kong. And all the while, his home lies empty.
Summer tour to the USA turns into an epic saga
Finally, Celia, a US citizen who has been resident in Hong Kong for many years, travelled back to the States for her annual summer tour of friends and family.
Celia was supposed to arrive back in Hong Kong several weeks ago, but she too has been caught in the problem of fully booked quarantine hotels and a series of cancelled flights.
While there is no tax problem hanging over Celia since US citizens living outside the United States are subject to US Income Tax, regardless of where they live, the disruption is no less annoying.
We are waiting to see how this story ends. At the time of writing, Celia is still in the USA trying to get back to Hong Kong.
Covid-19 has caused disruption to travellers around the world
The coronavirus pandemic has caused disruption for travellers around the world. Thanks to successful vaccine rollouts, more countries are relaxing travel rules and there are more flights in and out of most countries. But before you make your travel plans, think about the tax implications of getting stuck somewhere.
Where possible, it is probably wiser not to travel, but if it is essential that you do, be prepared to be flexible, and don’t be afraid to change your plans if you suspect you’ll get caught out by countries changing quarantine rules.
Make sure you have good insurance for back up
If you are going to travel, make sure you have good travel insurance. Don’t skimp on the premiums. The better the cover you have, the more likely you’ll be able to make a claim if you get caught in a difficult situation.
Private medical insurance is also a good idea. Make sure your policy offers global cover, so you have protection if you need medical help wherever you end up.
Think about the tax implications of getting stuck. There’s nothing good about being stranded in a country you didn’t intend to be, and hotel costs can be a pain in the neck, but unforeseen tax complications could be an even more costly problem that’s best to avoid.
Boarding and quarantine arrangements if you’re arriving at Hong Kong under “vaccine bubble”.
Get in touch
We specialise in building, managing, and preserving the wealth of Hong Kong’s international community and can help ensure you make all the right steps to protect your wealth, family, and succession needs.
If you’re interested in learning more about how we can help you grow and preserve your wealth long into the future and want to discuss your options, get in touch. Email email@example.com or call +852 3975 2878.
Please note, all names have been changed to protect identities.