Chapter 13 - Overseas Aspect of IT and CGT Flashcards
What are the basic definitions around resident and domicile?
Resident - you are normally UK or non-UK resident (told which in the exam).
Domicile - considers where you have your permanent home, 3 types (of origin, of dependency and of choice).
Deemed UK Domicile - for IT and CGT purposes if they are EITHER 1) UK resident for 15 of last 20 years, 2) they’re non-UK domiciled but were born in UK, with UK domicile of origin and are UK resident.
How is employment income taxed for resident & domiciled/ resident but not domiciled/ not resident?
All UK tax on UK income is on arising basis.
Resident & domiciled - arising basis for duties performed wholly/partly inside & outside UK. Arising basis for duties performed wholly outside UK.
Resident but not domiciled - arising basis for duties performed wholly/partly inside & outside UK. Remittance basis OR amount earned for duties performed wholly outside UK.
Not resident - arising basis for duties performed wholly/partly in UK but not taxable for duties outside UK. Not taxable for duties performed wholly outside UK.
What is double tax relief (DTR)?
If someone is UK resident, they will be taxed on their overseas income in the UK, but may also have already been taxed overseas.
This is double taxation.
Relief is available on this.
It is done on a source by source basis.
How is non-employment income taxed for resident & domiciled/ resident but not domiciled/ not resident?
Resident & domiciled:
UK income = arising basis, Overseas income = arising basis.
Resident but not domiciled:
UK income = arising basis, Overseas income = possible remittance basis/arising basis.
Non-resident:
UK income = arising basis, overseas income = not taxable in the UK.
How does the Unilateral Relief method work for calculating Double Tax Relief (DTR)?
1) If no o/s treaty exists, include the gross amount (exc. overseas tax) of the foreign income in the UK income tax calculation.
2) DTR calculated on a SOURCE-BY-SOURCE basis as the lower of:
- UK tax on o/s income. (the decrease in tax liability if o/s income was removed).
- O/s tax on o/s income. (Given in exam Q)
How do you calculate UK tax on overseas income?
1) Calculate total income tax including the overseas income.
2) Calculate total income tax excluding the overseas income.
3) Difference = UK tax on o/s income.
Who is the remittance basis used by?
UK resident, but non-UK domiciled.
What is the purpose of remittance basis?
To avoid income tax on unremitted o/s income (income not brought into the UK.
To avoid capital gains tax on unremitted overseas gains (proceeds not brought into the UK).
What are the consequences of the remittance basis?
Have to pay a Remittance Basis Charge (RBC):
- £30k pa if resident 7 of 9 last years.
- £60k pa if resident 12 of 14 last years.
Lose entitlement to personal allowance and capital gains tax annual exempt amount.
Must treat remitted foreign savings and dividend income as NSI.
How are capital gains taxed for resident & domiciled/ resident but not domiciled/ not resident?
Resident & domiciled:
Taxed on arising basis for UK AND overseas gains.
Resident but non-UK domiciled:
Taxed on arising basis for UK gains, but possible remittance basis for overseas gains.
Non-UK resident:
UK gains not taxable in the UK (exceptions), and overseas gains not taxable in the UK.
For overseas gains (on the disposal of overseas disposals), how do you calculate the amount of the gain that can be remitted?
Lower of:
1) Proceeds remitted to the UK.
2) The original gain.
As DTR is available on overseas gains/income, how should you use the AEA/capital losses/remaining basic rate band?
Use it against UK gains/income first, and then against overseas gains/income.
This will maximise the double tax relief you can get.
