Ch 17: Overseas aspects: individual

Question 1

What are the 2 deemed UK domicile rules for CGT?

Answer 1

An individual is deemed UK domiciled if either:

• They have been UK resident for 15 of the last 20 years (up to and including the prior tax year)
  OR
• They were non-UK domiciled, but were born in the UK, with a UK domicile of origin and are UK resident

Question 2

What is the impact on the remittance basis of being deemed domicile?

Answer 2

• Non-domiciled could claim remittance

- Deemed domicile CAN’T claim remittance

Question 3

How do you calculate DTR?

Answer 3

On a source by source basis, as the LOWER of:

• UK tax on the o/s income
• overseas tax suffered

Deduct from tax liability - SAME rule for every tax
Use separate columns for each o/s income

Question 4

What is another name for foreign income/dividends?

Answer 4

Withholding tax

Question 5

What do you do to foreign income/dividend/withholding tax if it is given net?

Answer 5

Gross it up = No. x 100/100 - %

Question 6

How do you calculate the UK tax element on each source of income?

Answer 6

The decrease in IT liability if the o/s income were removed
i.e.
1. Calculate total tax incl. o/s income
2. Calculate total tax excl. o/s income
The difference = UK tax on that source of o/s income

Question 7

Who can claim the remittance basis/ when can you apply for the remittance basis?

Answer 7

Individuals who are UK resident but non-UK domiciled

Question 8

Why would you claim remittance?

Answer 8

To avoid:

• IT on unremitted o/s income (income not brought to the UK)
• CGT on unremitted o/s gains (proceeds not brought to the UK)

Question 9

What is the impact of claiming remittance?

Answer 9

1. They lose their entitlement to UK personal allowance and CGT annual exempt amount
2. Must treat remitted foreign savings and dividend income as NSI
3. Have to pay a charge of £30,000 per annum if resident for 7 out of the last 9 years OR
   £60,000 per annum if resident for 12 out of the last 14 years
   *Charges are added to the IT liability

Question 10

When does automatic remittance basis apply?

Answer 10

If unremitted o/s income and gains are < £2000

If so the individual doesn’t lose their tax free amounts and doesn’t pay the RBC

Question 11

What tax does the remittance basis affect?

Answer 11

IT and CGT

Question 12

What are the types of domicile?

Answer 12

1. Of origin - born with your father’s domicile
2. Of dependency - as a child <16yrs a domicile changes with that of the person whom they are legally dependent
3. Of choice - can change your permanent home by:
   - leaving the old country permanently, severing ALL ties, and
   - settling permanently in a new country

Question 13

What are the three statutory residence tests?

Answer 13

1. Automatic overseas test: non-UK resident
2. Automatic UK test: UK resident
3. Sufficient ties test: UK resident

Question 14

What are the three Automatic Overseas tests?

Answer 14

1. In UK < 16 days in tax year, or
2. In UK < 46 days in tax year & not resident in prior 3 tax years, or
3. Works full time abroad

Question 15

What are the three Automatic UK tests?

Answer 15

1. In UK > 183 days, or
2. Has a home in UK for 91 consecutive days, or
3. Works full time in the UK

Question 16

What are the five types of sufficient ties?

Answer 16

1. UK resident close family: spouse/civil partner/minor child
2. UK accomodation available > 91 days (occupied for > 1 night in tax year)
3. Substantive UK work
4. Spends > 90 days in UK in either of previous 2 tax years
5. In UK for more days than any other country this tax year

Question 17

How are temporary non-residents assessed for CGT?

Answer 17

They are assessed for CGT on their return to UK residency on disposals of assets owned before they became non-resident and disposed of whilst they were non-resident.

Question 18

When is an individual deemed to be temporary non-resident?

Answer 18

• If they were UK resident for 4 of the last 7 years prior to the tax year of departure
• If they are non-UK resident for < 5 years (60 months from date of departure to date of return)

Question 19

What are the 3 deemed UK domicile rules for IHT?

Answer 19

An individual is deemed UK domiciled if either:

• They have been UK resident for 15 of the last 20 years (and one of the 4 years prior to transfer)
  OR
• They were born in the UK with a UK domicile of origin and are UK resident in the tax year of transfer and one of the prior 2 tax years
  OR
• For the 3 years following losing their UK domicile to another domicile of choice

Question 20

Can a non-UK domiciled person elect to be UK domiciled (4 things)?

Answer 20

Yes, but:

• election is only available if spouse is or was UK domiciled
• if alive the election can apply to prior 7 years
• if dead the election has to be made within 2 years of death
• election apples to IHT only and is irrevocable