Module 4 Residence Domicile

Question 1

Statutory residence test

What are the three tests that HMRC will carry out on an individual to determine if they are a UK resident or not

Answer 1

Automatic overseas tests (three test that mean a person is automatically non-resident)
Automatic UK tests (three test that mean a person is automatically UK resident)
If the above do not apply then the sufficient UK ties test is used instead

These carried out in strict order

Question 2

What are the 3 automatic overseas tests (automatically not UK resident)

Answer 2

1) individual in the UK for fewer than 16 days in the current year
2) not UK resident in any of the three preceding tax years and fewer than 46 days in the current tax year
3) meets the work abroad condition (35 hrs pw min not present in UK for 91 days or more and less than 31 days working UK

Work abroad condition - working overseas full time average at least 35 hrs pw without significant breaks spending with fewer than 91 days in the UK of which fewer than 31 days were spent working in the UK for three hours or more in the current year

Question 3

What are the 3 automatic UK tests (automatically UK resident)

Answer 3

1) if you spend 183 days or more during the current tax year in the UK
2) meets home in uk test -
3) someone who works full time in the UK for at least 365 days

Home in uk test - present there for at least 30 days during the current tax year and whilst they have home in uk there is period of at least 91 consecutive days where either of following conditions are met:

• they do not have overseas home
• they do have overseas home but are present there for less than 30 separate days during tax year

Question 4

When does Split year treatment occur

Answer 4

This applies where a person leaves the UK for full-time work overseas (and ceases to have a UK home) or comes to the UK for full-time work or meets the only UK home test.
It’s can also apply to a spouse/partner who joins an individual who has left the UK for full-time work overseas 35 hrs pw

Question 5

What are the Sufficient UK ties test

Answer 5

1) Family -having a spouse, civil partner or minor children resident in the UK
2) Accomodation- in the UK which you use during the tax year
3) Working – for 40 or more days during a tax year in the UK (doing substantive work)
4) Presence – Spending more than 90 days in the UK during either of the previous two Tax years
5) Country – spending more time in the UK than any other single country

Question 6

Who is an Arriver

Answer 6

Someone who has not been a resident in the UK in any of the three previous tax years

Question 7

Who is a leaver

Answer 7

A lever is someone who has been UK resident in one or more of the three previous tax years

It is easier for an arrival to remain a non-UK resident then for a leaver to become a non-UK resident

Question 8

Explain the content of the table used to establish if an individual Will be classed as a non-resident or UK resident depending on number of days in the tax year and if they were classed as a leaver or an arriver.

Answer 8

Refer table

Question 9

How long before long-term UK residents will be treated as deemed domicile for all tax purposes

Answer 9

Once resident in the UK for 15 out of the last 20 tax years

Question 10

What happens to an individual born in the UK with a UK domicile of origin and became a tax resident in the UK after having acquired a domicile of choice outside of the UK

Answer 10

They would be deemed UK domicile.

For IHT, only applies if UK resident in at least one of the last two tax years

Question 11

Once deemed domicile under the 15/20 rule how long will they remain deemed domicile for income tax and capital gains tax

And inheritance tax

Answer 11

For income tax and CGT will remain domicile until six years after leaving the UK

For IHT it is 4 consecutive tax years.

Question 12

Who can claim the Remittance Basis

Answer 12

An individual if they are domiciled other than the UK and have income or gains arising outside the UK and choose to send some or all of them to the UK because they are resident in the UK

By claiming the remittance basis they only pay tax on income or gains remitted to the UK (and not on their worldwide income and gains)

Question 13

What are some implications of claiming the remittance basis

Answer 13

This means the individual loses both the personal allowance and the annual exempt allowance

Question 14

What is ignored from remittance basis

Answer 14

Personal effects, as it’s costing less than £1000, as it’s brought into the UK for repair, as it is in the UK for less than 275 days, works of art brought into the UK for public display, certain assets bought before 12th of March 2008 and income and gains remitted to the UK for investment in a qualifying company

Question 15

What is the remittance basis charge

Answer 15

£30,000 on individuals who have been resident in the UK for at least seven out of the previous nine tax years

£60,000 for individuals have been resident in the UK for at least 12 out of the previous 14 tax years

Question 16

How is the remittance charge payable

Answer 16

It is paid via self-assessment
The charge does not apply to those under 18
The charge does not apply where unlimited income and gains are less than £2000 nor where worldwide gains are taxed on and arising basis

Question 17

What is the alternative to the remittance basis

Answer 17

Individuals who do not choose the remittance basis pay tax on worldwide income and gains on arising basis but they keep the personal allowance and annual exempt amount
They may also be able to claim double taxation relief where tax is also payable in their home country

Question 18

Income tax – as applied to a UK resident and UK domiciled

Answer 18

Income tax charge on all earned income and investment income whether brought into the UK or not

100% income from foreign pension now taxablez

Question 19

Income tax – UK resident, not UK domiciled

Answer 19

Income arising in the UK fully taxable
Employment income fully taxable if duties performed in the UK or the employer is UK resident or both
The following can be taxed on a remittance basis
– investment income arising outside UK/Ireland
– and income from foreign employer and duties paid overseas
– earned income from employment performed overseas regardless of employers residence but only for the tax year that the employee becomes UK resident and the next two tax years
– most pensions arising abroad
– income from self-employment carried out outside UK/Ireland

Question 20

Income tax – non-UK resident. UK domiciled

Answer 20

Not paid on earned income for duties performed overseas, overseas investment income all girls
Paid on earnings for duties in the UK taxable, unless only incidental to overseas duties
Paid by self-employed on profits of trade/professional carried on in UK
UK investment income generally taxable but total liability limited to the amount of income tax that would be due if investment income if excluded and no personal allowances given
Paid on UK state pension/other pension income taxable unless arises from overseas employment, and on income from UK property

Question 21

Income tax –Non-UK resident and non-UK domiciled

Answer 21

Income tax on UK investment income
Employment duties performed in UK/trade is carried on in the UK
Property income arising in the UK

Question 22

Residency domicile and capital gains tax (CGT)

UK resident and UK domiciled

Answer 22

Liable on worldwide gains
If become deemed domicile under 15/20 role
– – Is previously paid remittance charge for any year before April 2017
– – can re-base any/all overseas assets to market value on fifth of April 17
– – meaning gains occurring before fifth of April 17 would not be charged to CGT

Question 23

Residency domicile and capital gains tax (CGT)

Answer 23

Liable on UK gains
Liable on foreign gains if remittance basis used charge may be payable
If remittance basis not used on foreign gains, liable on worldwide gains

Question 24

Residency domicile and capital gains tax (CGT)

Answer 24

Aside from UK property not liable on this temporary non-resident
– – anyone who leads the UK must be non-UK resident for at least five years (five tax years if they left 2012/13 or earlier) before they are no longer liable for CGT on as it sold
– – not as clear cut as it sounds – if you are UK resident for four or more out of the seven tax years and Maisie before you leave the UK (including part years), then become non-resident for a period of Leston five years and only assets to get disposed of before you leave the UK then you are still chargeable to CGT on the disposal
– – If the disposal occurs in the same tax year the individual leaves the UK then CGT is payable immediately
– – if the disposal occurs in a taxi after the individual has left the UK then CGT becomes payable in the tax year that the individual resumes UK residence

Gains that accrue to non-UK resident and non-residential property will be subject to CGT from sixth of April 2019

Question 25

Residency domicile and capital gains tax (CGT)

Answer 25

Cat aside from UK property, not liable on this temporary non-resident

Question 26

Residency, Domicile and Inheritance Tax

UK resident and UK domiciled/deemed domicile ( 15–20 years)

Answer 26

Liable on worldwide assets

Question 27

Residency, Domicile and Inheritance Tax

UK resident, not UK domiciled/deemed domiciled (15/20 years)

Answer 27

Liable on UK assets, double taxation relief may be available

Question 28

Residency, Domicile and Inheritance Tax

Non-UK resident, UK domiciled/deemed domiciled (15/20 yrs)

Answer 28

Liable on worldwide assets

Question 29

Residency, Domicile and Inheritance Tax

Non-UK resident and non-UK domicile/deemed domicile (15/20 years)

Answer 29

Liable on UK assets, double taxation relief may be available

Question 30

What is the IHT spousal exemption for non-domiciled spouse

Answer 30

As the spouse of a UK domiciled person, an individual can elect to be treated as UK domiciled for IHT purposes
– – this would grant a full spousal exemption
– – a retrospective election, up to 2 years after the date of death can be made and backdated up to 7 years (but not before sixth of April 2013)
– – the election cannot be revoked but ceases to have affect where the person has not been resident in the UK for four successive tax years
– – if no election was made only the first £325,000 of UK assets would be exempt from UK IHT

Question 31

What is Double taxation relief

Answer 31

Available to individuals who have income and gains in one country but are resident in another
The double taxation treaty between the two countries is examined and the individual will be taxed accordingly
Residents of the country which has a treaty with the UK may be able to claim exemption from UK tax on UK pensions (not government pensions) royalties dividends and interest (they may be liable in their own country before they qualify for relief in UK
Some residents may qualify for exemption from UK tax on earnings from UK employment (providing they are not in the UK for more than 183 days and their employer is not resident in the UK) or self-employment (providing they do not operate from a fixed price in the UK)

UK residents may qualify for relief against UK tax on overseas income or gains the attacks all in both the UK and the country of origin
IHT is also covered by a number of double taxation treaty is

Question 32

What can you tell me about tax on overseas trusts

Answer 32

They can be subject to UK income tax if there is a UK resident trustee. If not the settlor may be liable if they or a connected party can benefit. Beneficiaries can be taxed where capital is distributed from accumulated income.

An overseas trust is not subject to UK CGT unless it is a settlor-interested trust

Transfers to overseas trusts are UK domicile settlors are disposal for CGT purposes and transfer of value for IHT

Question 33

When is payment on account is not

Answer 33

If income tax payable outside PAYE in the previous year was less than £1000 or if more than 80% of previous years income is taxed under PAYE

Question 34

What are the penalties for late self-assessment

Answer 34

£100 if the return is not submitted by the 31st of January following the end of the tax year
If return is three months late – £10 daily penalty up to 90 days even if no text you
Return more than six months late – penalty the higher of £300 or 5% of the tax outstanding
Return 12 months late– Similar penalty to the above or higher if the non-submission is deliberate

Penalties also for failing to keep records and documents and deliberate or careless errors or by failing to notify HMRC of a liability to tax by fifth of October following end of tax year

Question 35

How long have HMRC got for compliance checks

Answer 35

Taxpayer can amend the return any time in the 12 months following 31st of January
HMRC check for obvious errors anyway
Compliance checks maybe random more targeted I must know have you started within 12 months of HMRC you receiving the tax return (later if they are suspicious)
They could be penalty all fine if I mistake is found and HMRC believe that this was due to the lack of reasonable care. The penalty will be a percentage of the correct text you and increased if HMRC believe the inaccurate reporting was deliberate

The penalty may be waived or reduced if the individual tells HMRC and cooperates

Question 36

What are the key dates for PAYE

Answer 36

Text month begins on the sixth of the month and ends on the fifth of the following month
By the 22nd following the end of each month (19th if not paying electronically)) the employer must pay HMRC tax NIC payments et cetera do you less permitted deductions

Question 37

What are the penalties for breaching timescales on PAYE

Answer 37

Three day grace period then penalties on a monthly basis for lights emissions
– no penalty for first mate submission in the tax year
– then between £100 and £400 depending on the number of employees
– additional 5% went three months late
– penalty for inaccurate full payment submissions
– penalty where monthly/quarterly payments of PAYE late
– – none for the first mate payment
– – 10 1% of the light amount
– – Rate increases for supper can make payments
– – 5% white payments more than six months late
– – further 5% we more than 12 months late
– –Interest charged on a daily basis

Question 38

Important tax deadlines

Answer 38

31st of January – First payment on account
Sixth of April – tax return issued
31st of May – employees given P60
– sixth of July employees given P 11 D
– 31st of July 2 payment on account
31st of October/three months after issue of return issued after 31st of July – filing date for paper returns
– 30th of December(Online 31st of October (paper) – balancing payment under £3000 collected via PAYE
– 31st of January at end of tax year/3 months after issue if later – filing date for online returns
31st of January following tax year – balancing payment

Question 39

What is disclosure of tax avoidance schemes (DOTAS)

Answer 39

UK firms that market tax avoidance schemes must register with HMRC and those that use them must give the number on the tax returns
Registration number divided and if one is defeated the HMRC issues a fellow notice to claim the tax (otherwise can charge a penalty of up to half the amount of tax over)
Promoters provide HMRC with coffee list of clients
Being registered is no indication of a successful scheme
Penalties for failure to notify HMRC include a daily penalty of up to £5000

Question 40

General anti-abuse role ( G a a R) as applied to

Answer 40

To counteract abuse of arrangements
Is there a tax arrangement? Does the tax advantage relate to one of the taxes? Is the tax advantage the main purpose of the arrangement? Is the arrangement abusive?

Taxpayer would need to explain to HMRC senior officer YG a a R would not apply
Text Geared penalty of up to 60%

Question 41

What is the VAT taxable supplies limit

Answer 41

£85,000

Question 42

If Jane is taxable supplies exceeded £85,000 on the 30th of September 2019 when would you need to notify HMRC and when will she be registered from

Answer 42

She should inform HMRC within 30 days at that date and be registered from the 1st of November 2019

Question 43

If the value of taxable supplies in the next 30 days is expected to be more than £85,000 when should HMRC be

Answer 43

HMRC should be Notified before the end of the 30 day period and registration will be affected from the beginning of the next 30 day period

Question 44

What are the different types of supplies as classified under VAT

Answer 44

Taxable – 20%
Exempt – output tax not charged on exempt supplies
Zero – no charge on supplies but can reclaim input VAT on standard rate purchases

Question 45

What special VAT schemes are there

Answer 45

Flat rate – small businesses
Cash accounting – taxable supplies of 1.35 million or less can join with VAT paid on a cash basis (once customer paid) rather than on an invoice basis which helps cash flow
Secondhand goods – VAT on the difference between the price paid and the price sold
Retail schemes – allows retailers to simply my VAT calculation by not having to account for it on individual sales

Question 46

How and when is VAT collected

Answer 46

VAT returns know me submitted and tax owed paid quarterly
Regular reclaimers and some large companies submit monthly
Making Tax Digital (MTD) is generally use by firms with a turnover over £85,000
Returns should be submitted via MTD by seventh of the month after the month following the VAT period. Payment you have the same date, three additional working days I’ll given were made by direct debit

Question 47

What is domicile of origin

Answer 47

England and Wales take fathers domicile (mothers for a legitimate children/children born after the death of their father) until 16

Question 48

What is domicile of choice

Answer 48

Acquired by moving to a new country with the objective of permanently staying there
HMRC will take following actions into account when assessing whether the new domicile is effective – number of these:
Physically living in the country of choice
Expressing an intention to remain in that country
Buying a house in the new country and disposing of property in country of origin
Establishing a business of getting a job in the new country
Involvement in the local community
Getting on the electoral roll
Acquiring citizenship or nationality
Making locally valid well and bearing arrangements
Having friends family and business interest there
Severing ties with friends family in country of origin

Question 49

How long is an individual treated as UK domicile having acquired a domicile of choice

Answer 49

Three years

Question 50

How long before long time you can residents are treated as deemed domicile

And the other way to be deemed domicile

Answer 50

15 out of the last 20 years

If born in the UK have UK domicile of origin and become tax resident in the UK after having acquired a domicile of choice outside the UK will be deemed domicile
For IHT only applies if UK resident in at least one of the last two years

Question 51

Explain remittance basis

Answer 51

Left on the side other than the UK but with income or gains arising outside the UK and choose to send some of them to the UK because they are UK resident

Question 52

What happens to the personal allowance and the annual exempt allowance if claiming the remittance basis

Answer 52

Both lost

Question 53

Charge for remittance basis

Answer 53

£30,000 on individuals have been resident in the UK for at least seven out the previous nine tax years

£60,000 for those resident in the UK for 12 out of the previous 14 tax years

No charge for those under 18 or where unlimited income and gains are less than £2000 or where worldwide gains are taxed on the arising basis (in which case personal allowance and AEa are kept)

Question 54

List the circumstances where a self-assessment tax return would be necessary

Answer 54

Self-employed
Individual receiving more than £2500 in untaxed income
Income from savings or investments was £10,000 or more before tax
Income from dividends from shares was £10,000 or more before tax
Most company directors
Child benefit where one partners income over £50,000
Individuals with income of 100 K or more
Trustee of a trust or registered pension scheme
Capital gains tax to pay
Request from HMRC

Question 55

Conditions for underpaid tax to be collected through PAYE

Answer 55

Less than £3000 owed
Tax return by the due date
HMRC discretion

Question 56

If you were to make taxable supplies in excess of £85,000 during June 2019 but what date must HMRC be notified that the limit was exceeded and well when will this be registered from

Answer 56

30 days from the end of the month in which the limit was exceeded i.e. 30th of July 2019 to notify HMRC

Then registration from the first day of the second month after exceeding the limit i.e. first of August 2019

Question 57

Lucy is not VAT registered on the 1st of August 2019 she realises that her sales for that month will exceed £85,000. But what date machine notify HMRC that the limit will be exceeded and when will she be registered from

Answer 57

Lucy has 30 days from the day she realises that she expects to sales to exceed £85,000 to notify HMRC i.e. 30th of August 2019

She will then be registered retrospectively from the start of the 30 day period first of August 2019

Question 58

Can you complete the tables to illustrate income CGT and IHT treatment of

Answer 58

UK resident domiciled in the UK

UK resident not domiciled in the UK

Non-UK resident domiciled in the UK

Non-UK resident not domiciled in the UK