Chapter 5 - Residence And Domicile Flashcards
Which of these individuals will NOT automatically be treated as being non-resident for tax purposes?
a. Selina, who spends 180 days in the UK every year, and the rest of the time outside the EU.
b. Ricardo, who spends the last two weeks of March in the UK every year.
c. Vasoulla, who is a new visitor to the UK, is spending six weeks working in London over the summer.
d. Spencer, whose job is in Norway but he comes to the UK every month for two days.
a. Selina, who spends 180 days in the UK every year, and the rest of the time outside the EU
Automatically in:
Subject to not meeting any of the automatic overseas tests, the following people will automatically be UK resident:
An individual who is in the UK for 183 days or more in the tax year.
• An individual who has a home in the UK. The conditions for this test are quite complex:
- 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. For this test only, presence means being at the home in person for any amount of time. It is not necessary to be present at midnight for the day to be counted. The home does not have to be owned by the individual.
• An individual who carries out full-time work in the UK. Again, the conditions are quite complex, but it is necessary to work for 365 days, but only part of that period need be in the tax year.
Automatically out
The automatic overseas tests determine if a person is automatically not UK resident. The following individuals will always be treated as non-resident:
An individual who is in the UK for fewer than 16 days in the tax year.
• An individual who was not resident for any of the previous three tax years and is in the
UK for fewer than 46 days in the current tax year.
• An individual who works full-time overseas (defined as an average of at least 35 hours a week either on an employed or self-employed basis), provided they:
are in the UK for fewer than 91 days in the tax year; and
- spend fewer than 31 days in the taxlyear working in the UK (a working day is defined as any day where more than three hours of work are carried out).
Toby both lives and runs his own management consultancy business in France, having done so for the last four years. He also earns £20,000 per annum for 15 days’ consultancy work in the UK, as well as receiving an additional £1,500 per year in investment income from his UK government securities. His UK related income is:
• a. subject to income tax, regardless of Toby’s residence.
• b. not subject to income tax as Toby is not resident in the UK.
• c. subject to income tax as Toby is resident in the UK.
• d. not subject to income tax, regardless of Toby’s residence.
• b. not subject to income tax as Toby is not resident in the UK.
There is no UK income tax liability on employment income for duties performed outside the
UK. Earnings for duties in the UK remain taxable unless they are only incidental to the overseas duties.
Self-employed individuals are liable to income tax only on profits of a trade or profession carried on in the UK.
Investment income
There is no UK income tax liability on overseas investment income and all income from
British Government securities.
UK investment income generally is taxable in principle, but a non-resident’s total UK tax liability is limited to the amount of tax that would be due on the non-resident’s income if investment income were excluded and no personal allowances were given.
Dirk is non-UK domiciled and has set up an offshore trust with no UK trustees. If Dirk can benefit from the trust, under UK anti-avoidance legislation:
• a. inheritance tax on the trust could be payable by him.
b. trust income and gains are not attributed to him
c. trust income could be attributed to him.
d. trust gains only could be attributed to him
c. trust income could be attributed to him.
Income tax and offshore trusts
• An overseas trust can be subject to UK income tax if there is a UK-resident trustee.
•If an overseas trust has no UK trustees, it is not subject to UK income tax. However, anti-avoidance legislation can attribute trust income to the settlor when the settlor or certain connected parties can benefit. Alternatively, beneficiaries can be taxed when capital is distributed from a trust within which income is accumulated.
• An overseas trust set up prior to the settlor becoming deemed domiciled in the UK will retain its tax advantages, as long as the settlor, their spouse/civil partner or minor children receive no benefit from the trust.
Under double taxation treaties, what type of income will typically receive some relief from UK tax?
a. UK Government pensions.
b. Property letting income.
c Personal pension income.
d. Employment income.
c Personal pension income.
Residents of a country with which the UK has a double tax treaty may be able to claim exemption, total or partial, from UK tax on some types of income from UK sources. They may also be able to claim exemption from CT on the disposal of assets.
The exact conditions of the exemption may be found in the relevant treaty but, usually, nonresidents will receive some relief from UK tax on the following types of income under the terms of a treaty:
• pensions (other than UK Government pensions);
• royalties;
• dividends; and
• interest.
Under the terms of some treaties, individuals must be subject to tax in the other country concerned before they qualify for relief from UK tax.
Sharon spends 190 days in the UK in the current tax year. For tax purposes, this means that she will be treated as UK resident.
a. if she has more than three UK ties
b. automatically.
c. If she has more than four UK ties.
d. if she has more than two UK ties
b. automatically.
Subject to not meeting any of the automatic overseas tests, the following people will automatically be UK resident:
An individual who is in the UK for 183 days or more in the tax year.
• An individual who has a home in the UK. The conditions for this test are quite complex:
- 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. For this test only, presence means being at the home in person for any amount of time. It is not necessary to be present at midnight for the day to be counted. The home does not have to be owned by the individual.
• An individual who carries out full-time work in the UK. Again, the conditions are quite complex, but it is necessary to work for 365 days, but only part of that period need be in the tax year.
Gloria, a Spanish resident, arrives in the UK to start a contract of employment on 1 July 2023 which ends on 6 August
2024. She expects:
a. not to be a UK tax resident as she was not in the UK for previous tax years.
b. not to be a UK tax resident as she arrived part way through the tax year.
c. to be a UK tax resident as she is in the UK for at least 183 days in the 2023/24 tax year.
d. to be a UK resident as she is from another European state.
c. to be a UK tax resident as she is in the UK for at least 183 days in the 2023/24 tax year.
Subject to not meeting any of the automatic overseas tests, the following people will automatically be UK resident:
An individual who is in the UK for 183 days or more in the tax year.
• An individual who has a home in the UK. The conditions for this test are quite complex:
- 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. For this test only, presence means being at the home in person for any amount of time. It is not necessary to be present at midnight for the day to be counted. The home does not have to be owned by the individual.
• An individual who carries out full-time work in the UK. Again, the conditions are quite complex, but it is necessary to work for 365 days, but only part of that period need be in the tax year.
An individual would automatically be non-resident if they were not resident in the UK for any of the previous three tax years, and spent fewer than
A. 46 days in the UK in a tax your
B. 91 days in the UK in a tax year
C. 183 days in the UK in a tax year
D. 31 days in the UK in a tax year.
A. 46 days in the UK in a tax your
Automatically out
The automatic overseas tests determine if a person is automatically not UK resident. The following individuals will always be treated as non-resident:
An individual who is in the UK for fewer than 16 days in the tax year.
• An individual who was not resident for any of the previous three tax years and is in the UK for fewer than 46 days in the current tax year.
• An individual who works full-time overseas (defined as an average of at least 35 hours a week either on an employed or self-employed basis), provided they:
- are in the UK for fewer than 91 days in the tax year; and
- spend fewer than 31 days in the taxlyear working in the UK (a working day is defined as any day where more than three hours of work are carried out).
Wesley, who is aged 14, was born in Spain shortly after the death of his father, who was Belgian. His mother was domiciled in France at that time but is now UK domiciled living in England. In which country is Wesley most likely to be domiciled?
A. Belgium
B. France
C. Spain
D. UK
D. UK
At birth, a person gets a domicile of origin.
• In England and Wales, a child usually takes the father’s domicile. Illegitimate children and children born after the death of their father take the mother’s domicile. The law in Northern Ireland is generally similar to that in England and Wales.
The domicile follows that of the relevant parent until age 16.
• In Scotland, children under 16 are normally domiciled in the same country as their parents, but otherwise in the country with which the child is, for the time being, most closely connected.
• A wife’s domicile is independent of that of her husband but if she married before January 1974, she took her husband’s domicile on marriage and retains it until she acquires a new domicile of choice of her own.
Sunil has just arrived in the UK to take up employment. He has not been a resident in the UK before. What factor would NOT be taken into account in determining his residenry in the UK for tax purposes?
a. Spending sixty days in the UK during either of the two previous years
b. Having accommodation in the UK which he has used.
c. Having a spouse resident in the UK.
d. Doing substantive work in the UK.
a. Spending sixty days in the UK during either of the two previous years
There are five potential UK ties:
1. having a spouse, civil partner or minor children resident in the UK;
2. having accommodation in the UK of which use is made during the year: there is a very detailed definition of what counts as accommodation for this purpose, but generally it does not include a property that is let out, stays in hotels or short visits with relatives;
3. doing substantive work in the UK: this is defined as working for 40 or more days during a tax year;
4. spending more than 90 days in the UK during either of the two previous years; and
5. spending more time in the UK than in any other single country.
Peter is UK domiciled, has been resident in the UK for the past three tax years and has his only home here. If he starts working for a Paris-based firm where he has his desk, but still does most of his work in the UK, he is:
a. UK resident but could claim the remittance basis with charge.
b. non-resident for tax purposes.
c. still UK resident for tax purposes.
d. UK resident but could claim the remittance basis without charge.
c. still UK resident for tax purposes.
Subject to not meeting any of the automatic overseas tests, the following people will
automatically be UK resident
• An individual who is in the UK for 183 days or more in the tax year.
• An individual who has a home in the UK. The conditions for this test are quite complex:
- 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. For this test only, presence means being at the home in person for any amount of time. It is not necessary to be present at midnight for the day to be counted. The home does not have to be owned by the individual.
• An individual who carries out full-time work in the UK. Again, the conditions are quite complex, but it is necessary to work for 365 days, but only part of that period need be in the tax year.
Felicia has recently moved to the UK, having NOT been resident in the UK during the previous three years. She has three UK ties as determined by HM Revenue & Custom’s Statutory Residence Test.
What minimum number of days will she need to reside in the UK during the tax year 2023/2024 to be regarded as a resident for that year?
A. 16
B. 46
C. 91
D. 121
C. 91
Min ties needed based off days in UK
Days in UK-Previously resident-not PR
16-45 4 Auto out
46-90. 3 4
91-120 2 3
121-182. 1 2
- To avoid a Capital Gains Tax liability on an asset purchased before leaving the UK without any held-over gains, an individual must be resident outside the UK for:
A 1 complete tax year
B 2 complete tax years
C 5 complete tax years
D 7 complete tax years
C 5 complete tax years
Client must be resident g outside the uk for 5 complete tax years to avoid CGT liability
Which of the following would be liable for CGT on their worldwide investment gains? (Tick all that apply.)
A. Frank farther of three, a non-UK domicile and UK temporary non-resident.
B. Amy - a UK resident and UK domicile.
C. Charles, a non-UK domicile and UK resident not using the remittance basis.
D. Edward, a non-UK domicile and UK temporary non-resident.
Rationale
Amy is liable because those who are both UK resident and domicile are liable to CGT on their worldwide gains.
Charles is liable because he has not elected to be taxed on the remittance basis.
Edward is liable because he is only temporarily non-UK resident. -
Chapter 5, Section D5, Learning Outcome 3.1
Which of the following statements regarding the annual tax charge for non-domiciled persons is
true?
A. Paying the annual tax charge on unremitted foreign income and gains allows the individual to remit other income and gains with no further liability.
B. An individual can elect to pay tax on their worldwide income and gains for a specific tax year to avoid the annual tax charge.
C. The annual tax charge is £30,000 for adults resident in the UK for at least 12 tax years and who claim the remittance basis.
D. The charge does not apply to unremitted income and gains of less than £3,000 in any tax year.
B. An individual can elect to pay tax on their worldwide income and gains for a specific tax year to avoid the annual tax charge
Rationale
Correct. To avoid paying the annual tax charge for non-domiciled persons, an individual can elect to pay tax on their worldwide income and gains for the tax year concerned. - Chapter 5, Section D1/D2, Learning Outcome 1.5
The remittance tax charge for 12 years out of 14 is £60,000, the charge for 7 out of 9 is £30,000
Once that charge is paid they are still liable to tax on remitted income and gains
The restriction does not apply to individuals who have unremitted overseas income of less then £2000
Georgia spends from 1 December to 31 March in her house in Spain and returns to the UK for the rest of the time. She is kely to be treated by HMRC for residence purposes:
As automatically resident in UK
Georgia spends over 183 days a year in the UK. She is therefore likely to be treated by HMRC as automatically resident in the UK. - Chapter 5, Section A2, Learning Outcome 1.5
