5 - Residence and Domicile Flashcards
What are the two broad definitions of residence and domicile?
Residence - the status of an individual in any one tax year
Domicile - the country that an individual regards as their permanent home
What are the three tests that determine the residence status of an individual?
Automatically not resident
Automatically resident
Sufficient UK ties test
What type of individual will be automatically not resident?
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)
what type of individual will automatically be classed as UK resident?
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
At what time of day is counted as a day of presence in the UK?
At midnight
Who can claim split year treatment?
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
What are the five sufficient ties that are part of the test?
- spouse, children, civil partner or minor children in the UK
- Having accommodation in the UK which is used during the year. Does not include lettings, hotels or stays with relatives
- Substantive work in the UK - 40 days per tax year
- Spending more than 90 days in the UK in either of the previous 2 years
- Spending more time in the UK than any other country
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?
4 or more
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?
2 ties
3 ties
How many days can a person apply to HMRC to be disregarded for exceptional circumstances in relation to being resident?
Up to 60 days
What are the three residency tests in the correct sequence?
- Automatic UK non-resident tests apply
- Automatic residence tests
- Sufficient UK ties (if none of the auto tests apply)
What are the three deeming rules and when would they apply?
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
What is the definition of domicile?
The country which is their natural home and to which they would expect to eventually return to if they went abroad
After which parent does a child take their domicile?
The father
If a woman married before 1974, how would this affect her domicile?
She would have taken her husband’s on marriage
What is domicile of choice?
Moving to a new country with the intention of permanently living there
Does the registration to vote in the UK impact on a person’s domicile?
No, it is not taken into account
What happens if a domicile of choice is abandoned?
A reversion to the domicile of origin is automatic
In what circumstances would a person be deemed domiciled in the UK?
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)
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?
six years
three years for a person emigrating
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?
Yes
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?
No, only within the UK
When would a person be exempt from CGT if they had acquired assets before leaving the UK to become resident elsewhere?
After 5 years
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?
6th April 2015
It was extended to include non-residential property and shares in ‘property rich (75% +) companies
What is the objective of the CGT rules for temporary non-residents?
To prevent people leaving the UK for short periods to realise large gains and avoid tax
Is the remittance basis for tax available for a person who is deemed domiciled in the UK?
No, they have to be domiciled outside of the UK
What are the two conditions for remittance tax treatment?
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
What are the exemptions from the remittance rules?
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
Who is a relevant person under remittance rules?
Taxpayer, spouse, children, grandchildren under 18
Person who is living with the taxpayer as a couple
Certain companies and settlements
What is the annual tax charge for remittance?
£30,000 for individuals resident for at least 7 of last 9 tax years
£60,000 for 12 of the previous 14 years
If a gain is less than £2,000 would the annual charge still be due?
No
If a person paid tax on their worldwide income for a tax year, would they still pay an annual charge for remittance?
No
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?
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
Can a person obtain advance agreement from the HMRC as to their residency or domiciled status?
No, it must be declared as part of self assessment
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?
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
