Chapter 5 domicile Flashcards
Automatically not resident in the UK
• in the UK for fewer than 16 days in the tax year.
• not resident for any of the previous three tax years, and in the UK for fewer than 46 days in the current tax year.
• An individual who works full-time overseas (at least 35 hours a week ), provided they:
– are in the UK for fewer than 91 days in the tax year; and
– spend fewer than 31 days in the tax year working in the UK (a working day is defined as any day where more than three hours of work are carried out).
Automatically resident in the UK
• in the UK for 183 days or more in the tax year.
• has a home in the UK.
– It is necessary to have the UK home for at least 91 consecutive days, of which at least 30 days are within the tax year, and be present in it on at least 30 days during the tax year.
– If the person also has an overseas home during those 91 days, they must be present in that home for fewer than 30 days in the tax year.
• An individual who carries out full-time work in the UK. it is necessary to work for 365 days or more, but only part of that period need be in the tax year.
Split year treatment
Individuals are normally either resident or non-resident for a tax year. However, the year may be split into two parts in certain circumstances, including:
- Where a person leaves the UK for full-time work overseas or comes to the UK for full- time work.
- Where a person leaves the UK to live overseas, this must involve ceasing to have a UK home.
- Where a person comes to live in the UK, this must involve either coming to the UK for full- time work or meeting the only UK home test.
Domicile of origin
At birth, a person gets a domicile of origin.
- In England and Wales, a child usually takes the father’s domicile.
- The domicile follows that of the relevant parent until age 16.
- A wife’s domicile is independent of that of her husband,
Domicile of choice
An individual can acquire a new domicile by moving to a new country with the objective intention of permanently living there. This is called a domicile of choice. There are no set rules regarding exactly what is required to do this, but the following actions would be taken into account:
living, working, voting, community, intention to stay.
Deemed domicile
Since 6 April 2017, an individual who is not domiciled in the UK is ‘deemed domiciled’ in the UK if:
resident for 15 out of 20 last years.
they are born in the UK with a UK domicile of origin and return to the UK (becoming resident) having obtained a domicile of choice elsewhere.
Tax on UK resident:
Income tax is charged on worldwide earned and investment income, whether or not the income is brought into the UK.
CGT is chargeable on the realisation of chargeable gains made anywhere in the world.
IHT is chargeable on gifts of assets anywhere in the world if the individual is domiciled in the UK.
Tax on non UK resident
There is no UK income tax for duties performed outside the UK. Earnings for duties in the UK remain taxable.
There is no UK income tax liability on overseas investment income and all income from British Government securities.
The UK State Pension and other pension income are taxable, except for pension income arising from employment overseas. Income arising from UK property is taxable.
not usually liable to CGT unless they are temporary non-residents.
liable for gains made when they dispose of residential property situated in the UK, although only gains accruing after 5 April 2015 are taxed.
IHT remains chargeable on gifts of assets anywhere in the world, given that the individual is domiciled in the UK.
Remittance basis
Individuals domiciled outside the UK may be taxed on the remittance basis on income arising outside the UK. The remittance basis means that the individual is taxable only on income remitted to the UK.
The annual tax charge is:
• £30,000 for individuals who have been resident in the UK for at least seven out of the previous nine tax years; and
• £60,000 for individuals who have been resident in the UK for at least 12 out of the previous 14 tax years.
The £30,000 or £60,000 charge is a tax charge on the unremitted foreign income and gains that are left outside the UK, and is in addition to any tax that is paid on remitted income and gains.
• The charge is paid through the self-assessment system.
In addition, individuals who claim the remittance basis are not entitled to the income tax personal allowances or the CGT annual exempt amount.
Individuals who are neither domiciled nor resident in the UK are generally only subject to:
- Income tax on UK investment income, on the same basis as for UK domiciliaries.
- Income tax for employment duties performed in the UK and trades carried on in the UK.
- Income tax on income arising from property in the UK.
- IHT on gifts of assets situated in the UK.
