Is spending your last years in the sun avoiding British taxation really worth it?

Images of British retirees in Cyprus worried about losing their savings – while having enjoyed low taxation and the UK fuel allowance during 17C winters – raised conflicted feelings in me

 Ian Jack

The Guardian

Expatriates have come in all shapes and sizes. Gérard Depardieu in his Belgian village, Robert Louis Stevenson on his South Sea island, Karl Marx in London, Ronnie Biggs in Brazil: all left their homeland for the great elsewhere, but a common motive is hard to find. Somehow they can't be described as migrants; "expatriate" suggests that to some degree they stand apart from the host country and may eventually return to their own. Well into the second half of the last century, at least to this young reader of Somerset Maugham, the word conveyed a picture of an elegant English novelist in his villa on the Cote d'Azur, or a lonely rubber planter going crazy in his Malayan bungalow.

But that was then. The word got brisker when shortened to "expat" – I first heard that applied to British oil workers in the Gulf – and brisker still when the adjective "Brit" was stuck in front of it. "Brit expat" isn't a phrase that easily fits the leisured world of the parasol, the day-old London newspaper and the creased linen suit.
This week the Daily Mail photographed 13 of them grouped outside a coffee shop in the Cypriot village of Pyrgos. "They arrived in Cyprus dreaming of a carefree life in the Mediterranean sunshine," the copy began, "but last night these expats were left in a state of anxiety after their Cypriot current and savings accounts were frozen in the EU raid." Not a linen suit in sight: jeans, T-shirts and tracksuit tops predominated in a pink-faced, grey-haired crowd who had resettled there from London, Lancashire, Kent and Sussex, and retired from jobs in nursing, accounting and engineering. The sums they stood to lose under the proposed levy ranged from €100 to a few €1,000, with the exception of the €15,000 calculated by a Wembley émigré who ran an alcohol import business. You might have met them at any British garden centre or bus stop. They spoke of ordinary pensions and meagre savings grubbed from hard work. Nobody mentioned the tax rate, though this rather than sunshine alone is the main reason that 60,000 British expats, including 12,000 pensioners and many more approaching pensionable age, have chosen as their final home a politically divided island with a flight time from Heathrow of at least four-and-a-half hours.
In the words of a puff-piece about island property for sale, Cyprus's "deep respect for senior citizens is especially appealing to retirees". The respect has a fiscal dimension; the Cyprus economy needs to attract elderly Britons as well as Russian oligarchs. A taxation treaty with the UK means that British pensioners can elect to pay a fixed 5% rate on state or private pensions above a threshold of €3,417 a year, or they can opt into Cyprus's tiered system, which has a top rate of 30%, and get their first €19,500 tax-free. When pensioners are registered as tax residents after a stay of 183 days, bank interest and share dividends become tax-free too, while the only asset liable to capital gains tax is property. UK inheritance tax is harder to avoid, but not impossible. And all this time, because Cyprus is a member of the EU, your British state pensions will rise every year in line with British inflation and your winter fuel allowance will come rolling in, even though Cyprus has the warmest winter climate of any country in the EU and the December temperature in the coastal zone, where your house is almost certainly located, is rarely colder than 17C (62F) by day and 8C by night. Finally – a great comfort – three quarters of the population speaks English and traffic drives on the left.
So, looking at these faces in the Mail again, I feel rather conflicted. They look straightforward and pleasant folk who, as they say of themselves, have worked and saved hard to afford their years in the sun, and when people begin to count up the summers that may lie ahead of them, the sun does assume an unprecedented importance. On the other hand, did it occur to nobody that a country prepared to lure them with tiny or zero tax rates might have a shaky financial foundation? That a risk was involved? Caveat emptor seems to have occurred to few. In the Daily Telegraph only six months ago, a property correspondent was writing that it would be "a mistake to see Cyprus as a mirror image of Greece" because its GDP was higher and its unemployment lower, and it had cut a few taxes that would benefit the foreign house buyer. If you read the Telegraph, as many expats do (as a target market, they have a special section online), then you might have been reassured. No matter how patriotic the newspaper, Robert Browning is not the moving spirit of these pages. Not so much "Oh to be in England … " as: "Oh to be in Cyprus with an English winter fuel allowance."
The striking thing is how retirement in the sun has become such an ordinary ambition, achievable for less than the average price of a British house (£234,000), assuming you have one to sell, and a £20,000 pension between two, assuming you don't want to fly back to Britain too often. According to a study in 2006 by the Institute of Public Policy Research, about 5.5 million British people live permanently abroad – the largest number in Australia and the next largest in Spain – which means that the UK has the largest expatriate population of any country in Europe. In Spain, more than a fifth of around 760,000 British expats are aged over 64. A lifestyle that was once confined to the ailing British rich in Victorian resorts such as Menton, Biarritz and Pau has spread down the social scale. Milk-white Englishwomen may no longer take to their beds for their jours de repos and the internet makes the English language and some form of companionship constantly available, but the same sense of separateness from the native population surely persists.
Here, for example, is some advice on "how to succeed as an expat" posted on the website created for them by HSBC, which has interest in their money. "Try to read local news – at least the headlines. It makes you live less in a bubble." "Eat like a local." "Learn the basics of Hungarian. It may seem impossible but it can be done."
Is a few final years spent avoiding British taxation and cloud cover worth this price? Neighbours abandoned, friends and family left behind, the intricacies of belonging severed: and in exchange the company of yet-to-be-met people of roughly the same age, marching under brilliant skies in lockstep to what Larkin called the inevitable. At the end of Paul Scott's Staying On, which is a fine novel of expatriate life, an English widow berates her dead husband for leaving her alone in India: "Why did you leave me here … now, until the end, I shall be alone, whatever I am doing, here as I feared, amid the alien corn, waking, sleeping, alone for ever and I cannot bear it … Oh, how can you make me stay here by myself while you yourself go home?"
Cyprus in 2013 isn't as cut-off as an Indian hill station in 1970. Even so, taking the clouds and the tax on the chin seems to me the better deal.