17. TC - Overseas aspects of IT and CGT Flashcards
Why is it important to determine a taxpayer’s residence and domicile?
TO identify the tax treatment of overseas and UK income
How do you know whether an individual is a resident?
- To decide an inidivudla’s residence a statutory resident test applies
But you don’t need to know the detail for exam
Will be told if the taxpayer is a UK resident or not
What is a domicile?
An individual’s domicile is the country in which he or she has their permanent home
What is an individuals domicile when they are born?
An indiv acquires a domicile of origin at birth
This is usually the domicile of the individual’s father if his or her parents were married at the time of the birth, or the mother otherwise
When may a domicile change?
Domicile is retained unless the indiv acquires a domicile of choice:
- From 16, an indiv can change from one dom to another
- Can occur when someone shows an intention to change the country of their permanent home, and servers ties with their previous country of domicile
TYU1: Oscar was born is Singapore because his UK domiciled father, Alan, was working their at the time. Oscar’s mother Vera was American domiciled and was married to Alan at the time of Oscars birth
Following Vera’s death, Oscar and Alan moved to Australia when Oscar was 11 years old. Alan severed all ties with Signapore and the UK
Oscar moved to UK for uni and has never returned to Australia. He has reserved a plot at a natural burial ground in the UK
Explain Oscars domicile
As his parents were married at the time of his birth and his father was UK domiciled, he has a UK domicile of origin
His birthplace is irrelevant
When Oscar was 11 years old, his domicile change to Alans, as it appears Alan adopted Australia as his domicile of choice, so it also became Oscar’s domicile of dependence
Oscar appears to have chosen the UK as his new domicile by renouncing all ties with Australia, his prev country of domicile
His intention to be buried in the UK indicates his intention to remain permanently
When is an individual a formerly domiciled resident?
the indiv was born in the UK, had domicile of origin in the UK and is UK resident of the tax year.
What does the concept of deemed domicile apply to?
Overseas IT and CGT Inheritance tax (but the rules are slightly different)
What are the 2 bases of assessment depending on domicile?
Arising basis
Remittance basis
What is the basis of assessment under the arising basis
An individual will pay UK income tax at normal rates on their worldwide income for the tax year in which in the income arises
What is the basis of assessment under the remittance basis?
Non-domiciled UK resident individual pays UK income tax on their UK income for the tax year in which the income arises
But only pays UK tax on foreign income when the income is brought (remitted) to the UK
What is the basis of assessment under the remittance basis?
Non-domiciled UK resident individual pays UK income tax on their UK income for the tax year in which the income arises
But only pays UK tax on foreign income when the income is brought (remitted) to the UK
What basis is UK income and overseas income taxed under when the indiv is Resident and domiciled
UK Income- arising
Overseas income - arising
What basis is UK income and overseas income taxed under when the indiv is Resident but not domiciled
UK Income- arising
Overseas income - possible remittance
What basis is UK income and overseas income taxed under when the indiv is not resident
UK Income- arising
Overseas income - not taxable
What are non-resident individuals taxed on?
Taxed in the UK on their UK income
Are non-resident individuals entitled to a personal allowance?
Generally not unless they are
- EEA, isle of Man or Channel Islands citizens
- Current or former crown servants and their widows/widowers
- Former residents who left the UK for health reasons
What is remitted foreign income taxed under?
Nonsavings income
Can personal saving allowance and dividend allowance be used against remitted foreign savings?
NO
Can personal saving allowance and dividend allowance be used against dividend income?
NO
When does the remittance basis automatically apply to non-domiciled UK resident individuals?
- if the indiv has unremitted foreign income and gains under £2k in tax year
- The indiv has no UK income or gains in TY (or only has UK investment income of under £100), doesn’t remit any foreign income and gain that arose in prior years under remittance basis AND
- > has not been resident in UK for more than 6/9 last tax years OR
- > is under the age of 18 for the whole tax year
If the remittance basis applies automatically to a non-domiciled UK resident indiv, are they entitled to personal allowance and how is overseas income taxed?
They ARE entitled to personal allowance
The overseas income is taxed when remitted to the UK
When are overseas earnings taxed on the remittance basis?
ONLY if the indiv’s employer is also non-UK resident
Can non-domiciled UK resident indivs ever get the remittance basis if it doesn’t apply automatically?
Yes, they can make a claim to use the remittance basis