On your side: Keren Bobker answers questions on deposit accounts in the UK and unlimited employment contracts in the UAE.
Don't panic, your savings of up to £85,000 are safe
I live and work in Abu Dhabi, but I send money to the UK on a regular basis - most of it to an account with the Cooperative Bank. I heard the bank has some problems and would like to know if my money is safe. I have a balance of around £50,000 (Dh276,100). Can you tell me if I should move it, given that it's not easy to open a new account if you aren't resident or physically in the UK? BN, Abu Dhabi
The first £85,000 of all deposit accounts in the UK are protected by the UK's Financial Services Compensation Scheme, so there is no need to panic. The Cooperative Bank was substantially downgraded by Moody's, the credit ratings agency, three weeks ago as it has a significant amount of impaired lending following the purchase of the Britannia Building Society in 2008. Steps are being taken to improve the situation and the bank still has substantial excess liquidity. I expect the bank will increase its charges over time, but there is no need to move to another bank.
My friend and I are working for a private school in Abu Dhabi, but following the completion of the first year of work we now want to transfer to a government organisation. I have an unlimited employment contract and she has a limited contract. Our school wants us to pay Dh20,000 for the remainder of rent and also forego 45 days' pay each. They are also throwing medical, visa etc costs into the mix too. Do we need a letter of release from them to now work in a public school? Can they ban us? How will our old visa be cancelled? CL, Abu Dhabi
The situations are different for limited and unlimited contracts. On an unlimited contract you can simply give notice as per the terms of your employment contract, usually 30 days in writing. Breaking a fixed-term contract is a different matter and penalties apply which will affect CL's colleague. According to article 116 of UAE Labour Law "the employee becomes liable for compensating the employer against losses incurred by him in consequence of contract termination, provided that the amount of compensation may not exceed half a month's pay for a period of three months or for the remaining period of contract, whichever is shorter." In this case 45 days' pay as a penalty for breaking the contract is about right. In both cases, the employer cannot legally make you repay any visa or medical insurance costs. If you wish to stay in company accommodation once you have stopped working for a company, then you will need to pay for that, but you are not liable for rent for a property in the company's name once you have moved out. If someone leaves service after a full 12 months, any ban can be lifted if they are educated to bachelor's degree level and receive a new salary of at least Dh12,000 per month. It is the responsibility of the current employer to cancel an employment visa. Should the school persist in trying to act in contradiction of labour law, contact the Ministry of Labour for guidance.
A few months ago I bought a property in Cyprus that I plan to rent out as a holiday home at least six months a year. The rental income will be paid into a Cyprus bank account that I will use for my expenses when I am out there myself. I will also spend some of the income on property improvements. I do not plan to take any money out of the country. I am a UAE resident so don't pay any income tax on my earnings here, but it has been pointed out that this may not apply to the rental income I will receive in Cyprus. How does the system work and will I be liable for any tax? MS, Dubai
As you are not resident in Cyprus, your only liability is for tax on income received from the rental property. The taxable amount for rental income is computed as rental income less a 20 per cent exemption, which is assumed to be the cost of agent's fees and so on. The appropriate rate is then applied to the net amount. The tax bands are nil up to €19,500 (Dh92,650), then 20 per cent up to €28,000, 25 per cent up to €36,300, 30 per cent from €36,301 to €60,000 and 35 per cent above that. Married couples are taxed separately so if a property is jointly owned you should each have your own allowances. When you sell the property you will be subject to capital gains tax at a rate of 20 per cent, which applies to all properties acquired after January 1, 1980. This is calculated as the gross sale price, less acquisition costs and improvement costs, so it is important to keep a record of all monies spent on the property. If at the time of the sale you have lived in the property for at least five years there is a cumulative exemption of €85,430.
Keren Bobker is an independent financial adviser with Holborn Assets in Dubai. Contact her at firstname.lastname@example.org