Taxation Domicile and residence Flashcards
Tax liabilities for deemed/domiciled in the UK - Residents
Individuals not domiciled but resident are subject to CGT on disposal of UK assets. Gains made outside of the UK may be taxed on the remittance basis.
If a person chooses not to use the remittance basis, all worldwide gains are subject to CGT.
Tax liabilities for individuals not domiciled in the UK - IHT
Where an individual is not domicile or deemed to be domicile, IHT is only payable on assets in the UK (UK gov. securities removed from assessment for IHT)
Where a non-domiciled person has a UK domiciled partner, and has opted to be domiciled for IHT purposes, then their worldwide assets will be assessed for IHT.
What is the annual charge when talking about remittance basis
Charge paid for having access to the remittance basis after a certain number of years
The annual charge is £30k for adults who have been resident for 7 of the previous 9 years
Annual tax charge increases to £60k once adults have been resident in the UK for 12 of the previous 14 years
Tax liabilities for individuals not domiciled in the UK - Income tax
This is where remittance basis can be applied
Even if they are eligible, they are not required to use the remittance basis, can use arising basis
The annual charge can be applied here after qualifying years
Tax liabilities for deemed/domiciled in the UK - Non-residents
Income tax –
Non-residents who have moved away for sufficient time usually not liable
Non-residents only pay on profits earned through UK branch
No liability on overseas investment income or British gov. securities (Gilts)
CGT -
Generally no CGT paid for gains made by non-resident (unless temporary non-resident)
If assets were acquired before being non-resident, must be non-resident for at least 5 years
Since 2015, all UK property is subject to CGT for non-residents upon disposal
Disposal of any assets through UK branch is taxable
Tax liabilities for deemed/domiciled in the UK - Residents
Income tax – chargeable on worldwide income, but double taxation relief available if taxes are paid overseas and from the UK
CGT – chargeable on worldwide gains
IHT – chargeable on the gift of assets worldwide
If you are deemed domicile, what tax rules apply to you
all tax rules are applied meaning foreign and UK assets are subject to IHT
For income tax and CGT, they can lose their deemed domicile after leaving the UK for at least 6 years, if they return after this the 15-year countdown is restarted from 0. For IHT, they lose their deemed domicile after 4 tax years
Someone is deemed domicile if they are…
UK resident for the previous 15 out of 20 tax years
Factors taken into account in determining whether an individual can change their domicile
Is the person physically living there
Is there intention of staying there
Have they bought property there and disposed of all UK property
Have they started working there
Do they have involvement in the local communities
Are they acquiring citizenship
Domicile is the idea of ‘home’, what is the 2 categories of domicile
Domicile of origin – when born, you take your parents domicile until you are 16, where you are then allowed to change to a domicile of choice
Domicile of choice – where an adult can change their ‘home’, long process with lots of proof required e.g. change of residence etc.
What is the rule for individuals being counted as being in the UK and the exceptions
An individual is typically counted as being in the UK if they are in the UK at midnight, exceptions being people solely in for transit (plane passengers) or those due to exceptional circumstances (medical emergency)
What is the dependant factor relating to sufficient ties tests
Number of ties varies depending on previous residence status and number of days spent in UK for the current tax year
Sufficient ties tests
Family tie – spouse, co-habiting partner or minor child (unless child is in UK for studying or haven’t seen the child for more than 60 days of the tax year
Accommodation tie – if the individual has accommodation in the UK that is available to them for a continuous period of 91 days, and if they spend at least 1 night there in the tax year
Work tie – if they work for more than 3 hours a day for at least 40 days
90-day tie – if individual spent more than 90 days in either or both of the 2 previous tax years
Country tie – UK if the country that the person has spent the greatest number of days in the tax year
Automatic UK tests
Person has a home in the UK for more than 90 days in which they are present on 30 days or more in the tax year, providing that for at least 91 consecutive days they either have no home overseas or spend less than 30 separate days in a tax year at any overseas home
They work full time in the UK for a period of 365 days or more, that part of or all fall into the tax year with no significant breaks from UK work
Automatic overseas tests
If the person spends less than 16 days in the UK for the tax year
If the person wasn’t UK resident for past 3 tax years and spend less than 46 days in the tax year
The person works full-time overseas and spends less than 91 days in the UK (fewer than 31 days are working days)
The person dies having spent less than 46 days in the UK and was not resident for previous 2 tax years
