MONEY MAKEOVER

by Amanda Davidson of Holden Meehan

Name: Stephen McCarty

Age: 28

Job: Company director of recruitment firm

Salary: over pounds 35,000 p.a.

Stephen faces big changes in September when he moves to Australia to set up an office for his firm. He will be there for two years, after which he will probably come back to the UK, though he might end somewhere else, such as Hong Kong.

He owns two one-bedroom flats in a converted warehouse in east London, both of which will be rented out during his time abroad. He has various investments here, including pounds 20,000 in a Halifax Instant Extra Plus account; pounds 1,500 in Halifax windfall shares; pounds 3,000 in the shares of one company, and he pays pounds 500 per month into a personal equity plan (a tax-free way of investing in shares) with Perpetual Portfolio Management. He also pays pounds 200 per month into a Scottish Equitable personal pension plan.

"The main worry I have is about the financial side of these things when I'm away," he says. "No one seems to know what the situation will be. And everyone seems to have a vested interest in what they tell you."

Amanda Davidson, a partner at independent financial advisers Holden Meehan in London (Tel: 0171 404 6442) says:

"Stephen is earning well and likely to continue to do so. There is a degree of uncertainty whether he will return full-time to the UK or be resident in another country. A high degree of flexibility and care is needed with his financial planning.

He must sort out with the Inland Revenue what his status is as far as residency and tax are concerned. It is possible to be resident in more than one country, although only one country of domicile is possible. These issues will dictate what tax Stephen pays and where. For instance, Stephen may well pay tax in the UK on his rental income even though he is living in Australia.

If he can't find a good accountant who is qualified to give advice, then he can ring the Inland Revenue direct. Often the decision of whether a person is resident or ordinarily resident in the UK is made by the local inspector. Remember though, the Revenue is not set up to give tax advice - just information!

It would probably be best for Stephen to hold his cash reserves in an offshore bank or building society account. The interest will be paid gross and he can declare it as appropriate. Check out the different rates. The Alliance and Leicester in the Isle of Man gives 6 per cent for instant access, whereas the Nationwide International gives 6.6 per cent for 180 days' notice.

Stephen should keep his Halifax shares. The shares he has in a single company he could put into a PEP. The decision will depend on whether he sees these as long-term investments. Be careful that the tax savings are not negated by charges! He should PEP these before he goes abroad.

As to the Perpetual PEP, whether or not he can keep paying into this will depend on if he is judged to be resident in the UK. If not, then Stephen will have to stop it. If this is the case he should keep the money with Perpetual for at least five years before encashing it. He can resume his PEP once back in the UK.

As for his pension, it depends how the Revenue treats the portion of Stephen's income to be paid in the UK. But if he is no longer going to have employed earnings here, he will not be eligible to keep his pension going and should therefore stop paying. Scottish Equitable is a good pension company but its charging structure is such that it will not treat him kindly for stopping after only 10 months.

He may keep the pension going for up to two years by electing that future contributions are set against earnings in previous years. The Revenue has special forms that he should obtain.

Stephen will need to check with the Revenue what tax he will have to pay on the property he owns here. He may have to pay tax on rental but depending on his term abroad, no capital gains tax. He must let the lenders and insurance companies know that he has rented the properties.

The main thing is to look into the opportunities he will have in Australia for savings and pensions, and into some off shore investments, especially as there is uncertainty as to whether he will come back to the UK permanently. Bon Voyage, Stephen!"

If you work in secretarial, administration, banking or law and would like a 'money makeover', please write stating your reasons, name, address, job and salary with a daytime phone number to Money Makeover, Features Department, 'The Independent', 1 Canada Square, Canary Wharf, London E14 5DL; fax 0171 293 2182 or 2451.

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