5 - Residence and Domicile

Question 1

What are the two broad definitions of residence and domicile?

Answer 1

Residence - the status of an individual in any one tax year

Domicile - the country that an individual regards as their permanent home

Question 2

What are the three tests that determine the residence status of an individual?

Answer 2

Automatically not resident
Automatically resident
Sufficient UK ties test

Question 3

What type of individual will be automatically not resident?

Answer 3

In the UK for fewer than 16 days
Not resident in any of the previous 3 tax years & in the UK fewer than 46 in the current
Works full time overseas (35 hours min) and ;
in the UK fewer than 91 days
Fewer than 31 days working in the UK (more than 3 hours per day)

Question 4

what type of individual will automatically be classed as UK resident?

Answer 4

In the UK for 183 days or more

Has a home in the UK and;
Have the home in the UK for 91 consecutive days, of which 30 are in the tax year, be present on at least 30 days
Have a home abroad during the 91 days, present fewer than 30 days (not necessarily owned) and be present for any amount of time

Carries out full time work in the UK

Question 5

At what time of day is counted as a day of presence in the UK?

Answer 5

At midnight

Question 6

Who can claim split year treatment?

Answer 6

When a person leaves or comes to the UK for work
When a person leaves the UK to live overseas, ceasing to have a UK home
When a person comes to live in the UK, involving coming for full time work or meeting the only UK home test.
Applies to spouse or partner who subsequently joins or accompanies the individual

Question 7

What are the five sufficient ties that are part of the test?

Answer 7

1. spouse, children, civil partner or minor children in the UK
2. Having accommodation in the UK which is used during the year. Does not include lettings, hotels or stays with relatives
3. Substantive work in the UK - 40 days per tax year
4. Spending more than 90 days in the UK in either of the previous 2 years
5. Spending more time in the UK than any other country

Question 8

If someone was automatically not resident having spent 16-45 days in the UK, how many ties would they need if they had been previously resident, to be resident in the current tax year?

Answer 8

4 or more

Question 9

If a person was in the UK between 91-120 days and where previously resident, how many ties would then need?
And if they were previously not resident?

Answer 9

2 ties

3 ties

Question 10

How many days can a person apply to HMRC to be disregarded for exceptional circumstances in relation to being resident?

Answer 10

Up to 60 days

Question 11

What are the three residency tests in the correct sequence?

Answer 11

1. Automatic UK non-resident tests apply
2. Automatic residence tests
3. Sufficient UK ties (if none of the auto tests apply)

Question 12

What are the three deeming rules and when would they apply?

Answer 12

Three or more ties for the tax year
Present in the UK on more than 30 days, without being present at midnight
UK resident in one or more of the previous tax years

If all 3 are met, the deeming rule means that after the first 30 qualifying days, all subsequent qualifying days in the tax year are treated as days of presence

Question 13

What is the definition of domicile?

Answer 13

The country which is their natural home and to which they would expect to eventually return to if they went abroad

Question 14

After which parent does a child take their domicile?

Answer 14

The father

Question 15

If a woman married before 1974, how would this affect her domicile?

Answer 15

She would have taken her husband’s on marriage

Question 16

What is domicile of choice?

Answer 16

Moving to a new country with the intention of permanently living there

Question 17

Does the registration to vote in the UK impact on a person’s domicile?

Answer 17

No, it is not taken into account

Question 18

What happens if a domicile of choice is abandoned?

Answer 18

A reversion to the domicile of origin is automatic

Question 19

In what circumstances would a person be deemed domiciled in the UK?

Answer 19

The are resident for at least 15 of the previous 20 tax years
They are born in the UK and return to become resident (for IHT they would need to be resident for 1 of the last 2 previous tax years)

Question 20

If a person is deemed domiciled under the 15/20 rule and they then leave, how many further tax years will they remain deemed domicile?

Answer 20

six years

three years for a person emigrating

Question 21

If overseas investment income cannot be remitted to the UK due to exchange controls in the country of origin, is there any tax relief available?

Answer 21

Yes

Question 22

If a person earns income (either employed or self employed) for duties or a trade outside of the UK, will they be subject to income tax?

Answer 22

No, only within the UK

Question 23

When would a person be exempt from CGT if they had acquired assets before leaving the UK to become resident elsewhere?

Answer 23

After 5 years

Question 24

What was the date after which non-residents became liable for CGT on disposals of residential property in the UK?
How was this updated in April 2019?

Answer 24

6th April 2015

It was extended to include non-residential property and shares in ‘property rich (75% +) companies

Question 25

What is the objective of the CGT rules for temporary non-residents?

Answer 25

To prevent people leaving the UK for short periods to realise large gains and avoid tax

Question 26

Is the remittance basis for tax available for a person who is deemed domiciled in the UK?

Answer 26

No, they have to be domiciled outside of the UK

Question 27

What are the two conditions for remittance tax treatment?

Answer 27

Money/property is brought to, received in or used in the UK for the benefit of a relevant person or services to a relevant person
Consists of or is directly or indirectly from the income or gains

Question 28

What are the exemptions from the remittance rules?

Answer 28

Personal effects
Assets costing less than £1000
Assets brought for repair
In the UK for less than 275 days
Works of art for public display
Assets bought before 12th March 2008
Commercial investment in a qualifying company

Question 29

Who is a relevant person under remittance rules?

Answer 29

Taxpayer, spouse, children, grandchildren under 18
Person who is living with the taxpayer as a couple
Certain companies and settlements

Question 30

What is the annual tax charge for remittance?

Answer 30

£30,000 for individuals resident for at least 7 of last 9 tax years
£60,000 for 12 of the previous 14 years

Question 31

If a gain is less than £2,000 would the annual charge still be due?

Answer 31

No

Question 32

If a person paid tax on their worldwide income for a tax year, would they still pay an annual charge for remittance?

Answer 32

No

Question 33

If an individual is neither domiciled nor resident in the UK, what Income taxes would they be subject to on investments, employment, property and gifts of assets?

Answer 33

Investment income earned in the UK
Income tax for duties performed or trades carried out in the UK
Income from UK property
IHT on gifts in the UK

There is no CGT unless a temporary non-resident/or property related

Question 34

Can a person obtain advance agreement from the HMRC as to their residency or domiciled status?

Answer 34

No, it must be declared as part of self assessment

Question 35

What is the legislation that is applicable to offshore trusts which are set up by people domiciled outside the UK?
How might this be applied?

Answer 35

Anti-avoidance legislation

A trust can be subject to UK income tax is there is a UK resident trustee
Trust income & gains (for income tax and CGT purposes) can be attributed to the settlor where they or connected parties can benefit. Beneficiaries can also be included if capital is distributed where income is accumulated