Module 2 - Residence & Domicile

Question 1

What is residence?

Answer 1

Effectively your status in any given tax year - April 6th to April 5th

Question 2

Definitely NOT a resident if you spend fewer than ? Days in the UK?

Answer 2

16

Question 3

Definitely NOT a resident if present less that ? Days in a tax year and having not been a resident for the past three years.

Answer 3

46 days

Question 4

Definitely NOT a resident if working over seas full time and present less than ? Days?

Answer 4

91 days

Question 5

Definitely ARE a resident if present for ? Days in a tax year?

Answer 5

183

Question 6

Definitely ARE a resident if have a home in the UK and that home is had for ? Days and how many of those in the tax year?

Answer 6

91 consecutive days - 30 of which in the tax year& if they have a home abroad, they would need to be there less than 30 days in the 91 days.

Question 7

Definitely ARE a resident if you have Full Time work?

Answer 7

Yes

Question 8

What are the 5 significant ties?

Answer 8

• spouse, civil partner or minor children in uk
• made use of accommodation in the UK
• substantial work in uk (40+ days)
• more than 90 days in uk in last 2 tax years
• spending more time in the UK than any other country

Question 9

How many ties… Previously resident16-45?

Answer 9

4 or more

Question 10

How many ties… Not Previously resident16-45?

Answer 10

Not resident

Question 11

How many ties… Previously resident46-90?

Answer 11

3 or more

Question 12

How many ties… Not Previously resident46-90?

Answer 12

4 or more

Question 13

How many ties… Previously resident91-120?

Answer 13

2 or more

Question 14

How many ties… Not Previously resident91-120?

Answer 14

3 or more

Question 15

How many ties… Previously resident120+

Answer 15

1 or more

Question 16

How many ties… Not Previously resident120+

Answer 16

2 or more

Question 17

What does previously resident mean?

Answer 17

Previously classed as uk resident in the last 3 years

Question 18

In regards to splitting a year, generally you will be regarded as either resident or domicile - however there are instances where it is done such as which 4 things?

Answer 18

You may be regarded as
being resident for only part of a tax year. These would include:

► Someone who leaves the UK for full-time work (resident until leaving)

► Someone who comes to the UK for full-time work (resident from arriving)

► Leaves the UK to live overseas – ceasing to have a UK home (resident until leaving)

► Comes to live in the UK for full time work or
meeting the UK home test (resident from arriving)

Question 19

Under UK Law an individual can be domicile to how many places?

Answer 19

only 1

Question 20

What determines domicile?

Answer 20

In the first instance, domicile is set at birth.

In England and Wales, it is normally the father’s domicile, while in Scotland it is the country with which the child is most closely associated.

This domicile will then generally remain until at least the age of 16. At this point it becomes possible for a child to adopt a domicile of
choice.

Question 21

How may a domicile be adopted?

Answer 21

A domicile of choice may be adopted by moving to a new country with the intention of permanently leaving the UK.

As there can be consequences to the UK tax
system of ceasing to be domiciled in the UK, HMRC will understandably seek evidence that the individual is truly leaving the UK.

Question 22

Although no hard & fast rules what are some of the factors that ca be used as evidence of permanently leaving the UK? There are 5

Answer 22

► Physically moving to, and living in, another country,

► Buying a house in the other country and not
keeping a house in the UK,

► Setting up a business in the other country,

► Having your family in another country, or

► Arranging to be buried there

Question 23

What happens if an individual permanently leaves the country of adopted domicile?

Answer 23

Should a domicile of choice be abandoned later by leaving the country permanently, the individual reverts to their domicile of origin.

Question 24

If married before 1974 what happens to a woman’s domicile?

Answer 24

To that end, you should note that if marriage
occurred prior to 1974, a women will adopt the
domicile of her husband unless she specifically elects a different domicile.

Question 25

What is deemed domicile?

Answer 25

Effectively treats you as domiciled once you have spent a certain amount of time in the UK, even if you’d otherwise be regarded as domiciled elsewhere.

Question 26

What taxes does deemed domicile apply to?

Answer 26

Traditionally, this concept of deemed domiciled has only applied to Inheritance Tax, but with effect from April 2017 it was extended to Income and Capital Gains Tax.

Question 27

How many years out of 20 to be deemed domicile?

Answer 27

HMRC will regard those who are in the UK during

15 out of 20 TAX YEARS as ‘deemed domiciled’.

Where this applies, the individual is deemed to be UK domiciled from the start of the 16th year or residence.

Question 28

In terms of IHT, once UK domiciled which assets will fall into UK IHT net?

Answer 28

Worldwide (in UK)

Question 29

How do you lose deemed domicile status?

Answer 29

Once UK domiciled, you will have to leave the UK for 5 years to lose your ‘deemed domiciled’ status.

(if you’ve been in the UK for 15 years, for the next 5 years you will continue to fall foul of the 15 in the last 20 test).

In the past this was only 3 years and there are some transitional measures to protect those impacted by the increase.

Question 30

A non dom spouse can claim up to how much tax free?

Answer 30

£650K - £325 NRB + £325 Spousal Exempt Transfer

Spouse can elect dom status on death of partner to claim totally tax free but obviously WW assets will then come into the mix.

Question 31

Where someone is both uk resident & domicile - they are liable for tax on what?

Answer 31

Where someone is both UK resident and domiciled, they are effectively liable for all UK taxes in full. This means:

► Income Tax – liable to UK income tax on worldwide income whether or not this is brought to the UK. Liable to income tax on 100% of any overseas pensions since April 2017, having previously been 90%

► Capital Gains Tax – liable to UK Capital Gains Tax on worldwide realised gains

► Inheritance Tax – liable to UK Inheritance Tax on worldwide assets

Question 32

What is the tax position of income tax if domicile but not resident?

Answer 32

Income Tax will not be due on pay for work which takes place outside the UK. Generally, will be liable for tax on income for work in the UK unless this is purely incidental to the main role. Investment income should escape income tax.

Question 33

What is the tax position of CGT if domicile but not resident?

Answer 33

► Capital Gains Tax – If non-resident for (usually) 5 years, no CGT should be due on disposals other than on residential property.

Question 34

What is the tax position of IHT if domicile but not resident?

Answer 34

► Inheritance Tax – liable to UK Inheritance Tax on worldwide assets

Question 35

What are the two key concepts relating to being UK resident but Non-Domicile?

Answer 35

► The remittance basis
► The annual charge

Question 36

What is remittance basis?

Answer 36

In simple terms, they will only be liable to UK income and capital gains tax where income or gains are remitted to the UK – i.e.
brought here.

If the income / gains are left outside the UK, no UK tax will apply.

Question 37

What is the annual charge?

(uk resident non-dom)

Answer 37

Given how significant the remittance basis is, in terms of allowing people to avoid UK tax, it is perhaps understandable that the government sought to prevent abuse of the system.

As a result, they brought in a charge on those people who are long term resident in the UK but seek to use the remittance basis by virtue of being non-domiciled. T

This is an annual charge, in addition to tax on any remitted gains.

Question 38

How much is the annual charge for individuals resident in the UK for 7 of the last 9 tax years?

Answer 38

£30,000

Question 39

How much is the annual charge for individuals resident in the UK for 12 of the last 14 tax years?

Answer 39

£60,000

Question 40

Why does the 3rd annual charge of £90,000 for those resident 17 out of the last 90 no longer apply?

Answer 40

Because if you’re resident 15 out of 20 tax years (starting on the 16th year) you’re deemed domicile.

Question 41

What is the alternative to the annual charge?

Answer 41

The alternative to this charge is simply to pay tax on all income and gains whether remitted or not in line with resident / domiciled individuals.

This charge will not be levied where unremitted foreign income and gains is less than £2,000 since there is a small exempt amount of £2,000 where the remittance basis need not be claimed.

Question 42

What is the tax position of income tax if resident but not dom?

Answer 42

► Income tax – on income arising in the UK or
remitted to the UK. Will be due on worldwide income where the remittance basis is not claimed (in order to avoid the annual charge).

Question 43

What is the tax position of GCT if resident but not dom?

Answer 43

► Capital Gains Tax – due on gains made in the UK or worldwide gains if the remittance basis is not used

Question 44

What is the tax position of IHT if resident but not dom?

Answer 44

► Inheritance Tax – only due on UK based assets

Question 45

Who is reponsbile for assessing residence and domicile?

Answer 45

The UK operates a system of self-assessment.

This means that it is up to each taxpayer to make a decision regarding their own residence and domicile.

Where seeking to make use of the remittance basis (unless covered by the £2,000 exemption mentioned above), this should be done via the self-assessment return.

In broad terms, HMRC will assume that someone is resident unless they complete the relevant non-residence pages of the tax return and taxpayers should be ready to provide evidence if they believe they are not resident.

Question 46

Overseas trust may be liable for UK income tax if…

Answer 46

if the trust has UK resident trustees.