5 - Residence & Domicile

Question 1

Difference between residence and domicile. What does each effect most

Answer 1

Residence - looks at the status of an individual in any one tax yr. effects income tax & NIC

Domicile - looks at the country an individual regards as their permenant home. This effect IHT mostly

Question 2

Automatic overseas test

Answer 2

If an individual meets any one of the below they will be classed as non-UK resident:

Test 1
- resi. 1 of last 3 tax yrs but <16 days in the UK in tax yr

Test 2
- resi. 0 of last 3 tax yrs but <46 days in UK in tax yr

Test 3
- works full time over seas
- <91 days in UK
- <31 days in tax yr spent working in UK (3hr min.)

Question 3

Automatic residence test

Answer 3

Test 1
- spent 183 days or more in UK

Test 2
- have a home in the UK and atleast one period of 91 days (30 of those days within tax yr)
AND
- have no overseas home or spend no more than 30 days in overseas home

Test 3
- work full time for any period of 365 days in UK with no significant break

Question 4

Sufficient ties test (5 ties)

Answer 4

Family - have a spouse or minor in UK

Accommodation - having accommodation available for 91+ days in UK

Work - working 40+ days in UK

Presence - spending 90+ days in either of last 2 tax yes

More days - for leavers only specifies if spent more days in UK than other country

Question 5

How to classify an arriver or leaver

Answer 5

Arriver - not resident in UK for previous 3 tax yrs

Leaver - resident for atleast one of last 3 tax yrs

Question 6

Residence 3 part statuatory test

Answer 6

1. Automatic overseas test
2. Automatic residence test
3. Sufficient ties test

Question 7

Day of presence meaning regarding residence

Answer 7

Being present in UK after midnight

Question 8

Working day classification

Answer 8

Working more than 3hrs

Question 9

Who is domicile decided by?

Answer 9

By the courts under general law

Question 10

4 Types of domicile

Answer 10

Domicile of origin - place of birth and adopt fathers domicile unless born after death of father then is mother. Usually stays with them until 16

Domicile if dependence - if legally dependent then adopt that domicile of theirs

Domicile of choice - after age 16 can choose their domicile by settling permanently in a country

Deemed domicile - for IHT purposes only so UK domicile people are liable for IHT on worldwide properties but non UK domicile people are only liable for IHT on UK properties.

Question 11

What if an individual chooses a new domicile then later abandons it?

Answer 11

Will revert back to domicile of origin

Question 12

How do you qualify for being deemed domicile as a UK domicile person?

Answer 12

Been resident in UK for 15 out of last 20yrs

Question 13

How long do you keep UK domicile after emigrating?

Answer 13

Atleast 5yrs

Question 14

Tax liability types based on residence and domicile for arising and remittance basis

Answer 14

Arising basis
- UK tax paid as it arises on income and capital gains
- UK tax paid as it arises on foreign income & foreign gains

Remittance basis
- UK tax paid as it arises on UK income and capital gains
- UK tax paid on foreign income & foreign gains that it brings in (remits) to the UK

Question 15

What is a remittance basis?

Answer 15

• Individual is only taxable on UK income remitted (action of sending money)
• Money, service or property brought in, received in, used by the UK for a relevant person

Question 16

Remittance basis is not automatic for (3 rules)

Answer 16

1. Adults who have been resident in UK for 7 out of last 9tax yrs - Must pay tax charge of £30K to qualify for remittance on tax
2. Resident for 12 of previous 14 tax yrs - Must pay tax charge of £60k to qualify for remittance on tax
3. Resident for 15 of previous 20 tax yrs - Not eligible for remittance on tax

Question 17

3 examples of when does tax remittance not apply?

Answer 17

• If under 18
• Foreign income and gains less than £2k
• If individual is happy to be taxed on arising basis

Question 18

If a settlor is to an offshore trustee and the trustee if a UK resident but the trust is subject to UK income tax, what is the reason for this?

Answer 18

Trustee is UK resident