Individual overseas issues Flashcards by Muznah Noman

if a person is UK resident, what taxes do they have to pay?

UK income tax and gain tax on WORLDWIDE income and gains

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If a person is a non UK resident, what taxes do they have to pay?

Income tax on UK incomes only (EG. rental, dividend)
Special rules for CGT

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income and gains earned in UK are taxed on what basis?

arising basis
means jis year mein kamaya, ussi year mein tax lagega

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overseas income and gains are taxed on what basis?

can be taxed on either arising basis or remmitance basis (when brought in UK) however not up to the individual, some rules apply

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what are the different types of remmitances

when overseas income and gain are brought into UK in form:
-cash or bank transfer
-asset which was purchased by those earnings
-UK loan is repaid via those earnings

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what transactions are not remmitances?

asset brought to UK for:
-personal use
-repair purpose
-exhibition
-less than 1000 pounds

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from taxpayer perspective, is remmitance basis more favorable or arising basis?

remmitance basis is more favorable
as tax gets delayed

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when does tax dep allow remmitance basis?

only allowed in two cases:

-automatic remittance basis
-opting remittance basis

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what is automatic remittance basis

no election needed

this is permitted when:
1-unremitted amount is less than 2000 pounds (jo paisa bahar para hua hai is less than 2000 pounds)
2-remittance is restricted due to any overseas law (money is locked in that country due to immigration etc)

we can opt out of automatic remmitance basis, its not compulsory

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what is opting remmitance basis, what are the penalties and who is it available for?

if automatic remmitance not available but person opts for it

following penalties will apply:
-personal allowance withdrawn
-annual exemption withdrawn
-no allowed expense for overseas traveling and subsistence (food,rent etc)
-overseas dividend income will be taxed at N/S income tax rates
-Remmitance base charge may be payable

it is only available for a tax payer who is UK resident but non UK domicile holder

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what is remmitance base charge?

it is payable if:
- taxpayer age is older than 18 yrs
AND
-they have been UK resident for at least 7 yrs out of last 9 years, RBC will be 30,000
OR
-if they have been UK resident for atleast 12 years out of last 14 years, RBC will be 60,000

this will be assessed yearly

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impact on CGT if remmitance base charge gets applied

Rate of CGT becomes higher rate (20% and 28%)

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if someone is UK resident + domicile holder, how will UK and overseas income and gains be taxed?

UK income and gains: arising basis

non UK income and gains:
arising basis
automatic remittance basis may be applied

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if someone is UK resident + Non UK domicile holder, how will UK and overseas income and gains be taxed?

UK income and gains:
Arising basis

overseas income and gains:
Arising basis
Opting basis is allowed
Automatic remmitance basis may be applied

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If someone is non UK resident, non domicile holder?

UK earnings: arising basis

overseas:
exempt

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3 steps of determining UK residency

1) Are you automatically non UK resident?
2) Are you automatically UK resident?
3) Consider UK ties and days in UK

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Step 1. A person automatically becomes non UK resident if?

3 situations:
-a person who has an overseas job, and lived in UK less than 91 days
workdays in UK should be less than 31 days
-no overseas job, lived in UK less than 46 days
-has been a UK resident in the past 3 fiscal years, lived in UK less than 16 days

yes= NON UK RESIDENT
No= move to step 2

Step 2: A person becomes automatically UK resident if

1- lived in UK for 183 days in the fiscal year
2- worked 365 days continuously in UK, such that some days lie in current yax year
3- lived 30 days in UK such that only home is in UK

yes= UK resident
No= move to step 3

step 3- consider UK ties and days in UK

5 ties which will be evaluated:
-close family member is resident in UK (spouse or children)
-worked atleast 40 days in UK
-lived atleast 90 days in UK in any of previous 2 fiscal years
-have an accommodation in UK available (own or close relatives’) for atleast 91 days, in which atleast one night is spent
-comparative day tie: must greater comparative days in UK as compared to other countries. not relevant for those who are not previously resident.(resident in any past 3 previous years)

what is split year treatment

usually residency status is for whole year

this concept says that for part of the year, you are resident and part non resident

circumstances when residency status is changed during year:
-permanent job in UK or overseas , residency status gets changed immediately

applies automatically if conditions are met, no election needed, and cant choose to disapply

split year treatment conditions for people leaving UK

-full time job overseas for atleast one complete tax year
-to live with partner with overseas job for atleast one complete tax year
-leaves UK, ceases to have UK home, spends minimal time (less than 16 days) in UK

split year treatment conditions for people coming to UK

-buys a home, not sufficient ties before acquiring UK home
-full time job for atleast one tax year, not sufficient ties before coming to UK
-partner gets full time job in UK
-returns to UK after leaving full time job overseas, or partner leaves job overseas

determination of UK domicile

1- domicile by origin: born in UK
2- domicile by dependecy: due to domicile status of parents
3- domicile by choice: if emigrates to UK

there is also deemed domicile status

2 cases in which person can be deemed domicile

1) Long term residents of UK are assumed to be UK domicile holders
-UK resident for atleast 15 out of last 20 years
-resident for atleast 1 yr after 6 april 2017

2) formerly residents of UK are also deemed domicile:
-born in UK
-obtained domicile by origin
-resident in UK in current fiscal year

UK CGT for NON UK RESIDENTS

general rule: No CGT on UK gains or overseas gains. (non UK resident does have to pay income tax on UK income)

however CGT is payable if:
-disposal of asset used in trade in UK (trade was permanent establishment, eg. a branch)
-disposal of UK property (residential and non residential)
-temporary absence period rules become applicable on an individual

if shares, painting sold in UK, no tax

How are non UK residents taxed on disposal of Residential UK property?

-property includes land and any building built on that land
-Non UK residents have to pay CGT on disposal of Residential property on OR after 6th april 2015
-if it was a main residence PPR may be available (if they or their spouse lived atleast 90 days in the tax year) last 9 months will be exempt.

How are Non UK residents taxed on disposal of Non residential UK property (commercial) ?

only disposals made after 6 april 2019 are subject to CGT

Gain/loss will be calculated for post 6 april 2019 period only

it will be lower of:
1) DP less cost
2) DP less MV on 6 april 2019 (if purchased before this date)

what are temporary absent rules?

-If non UK residency is considered as temporary absece, disposals made will be subject to UK tax
-tax will be assessed when individual returns to UK after temporary absence period

this only applies on assets purchased during resident status and being disposed during non resident period (to avoid paying tax)

during this period both UK and overseas gains will be taxable

as asset purchased in non UK residency period and sold in non UK residency period as well

not subject to CGT

what makes a person temporarily absent?

1) person was resident for atleast 4 out last 7 years
2) the person regains UK residency status in the following next 5 years

Do non UK residents get rollover relief?

Yes same as normal. on disposal and reinvestment of assets used in trade.

Do non UK residents get gift relief?

Yes on gift of qualifying UK properties (if GR conditions are met)

do NON UK residents get loss relief?

yes, same as normal, loss can be offset against future gains

what is double taxation?

a UK resident has to pay tax on worldwide income and gains
this may lead to double tax situation, as this amount may already be taxed overseas

a double tax treaty may exist between UK and foreign country, and so one of the country will waive tax according to the treaty

normally, country in which person is resident is allowed to take tax

what if a double tax treaty does not exist?

In this case double taxation relief is given at lower of:
-UK tax on foreign income
-overseas tax

how to maximise Double taxation relief?

UK tax on foreign income has to be maximised

-dont use losses and personal allowance on overseas income first
-tax overseas income last so higher rate band is used, so tax is higher

if examiner is silent overseas income is gross or net

net

if there are multiple overseas income in which order is DTR calculated

DTR is first calculated on foreign income with highest overseas tax rate

DTR working

first compute tax normally

then take income with higher overseas rate first, then calculate DTR. DTR will be deducted from tax payable

wo overseas income jiska overseas rate zyada hai, usse UK mein bhi zyada rate pe tax karwyen, take DTR maximise ho sakay

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Individual overseas issues Flashcards

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