Topic 1 - Approaches To Personal Tax Liabilties

Question 1

What is the difference between tax planning, tax avoidance and tax evasion?

Give a quote on this topic?

Give an example?

Answer 1

Tax Planning = Legal. Using tax reliefs, exemptions and tax saving products to reduce a tax liability.

Tax Avoidance = Legal but ethically questionable. Such as using loopholes or creating artificial transactions or schemes purely for sake of avoiding tax.

Tax Evasion = Illegal. Element of dishonesty.

“The difference between tax avoidance and tax evasion is the thickness of a prison wall” - Dennis Healey, Former UK Chancellor of the Exchequer 1989

Examples: Window Tax - Glass windows Tax Planning - ‘Dummy’ windows built or windows removed and bricked up. Tax avoidance - one large window rather than two. Tax evasion - covering up window when tax surveyor came round. If caught then tax doubled.

Question 2

ISAs

Answer 2

Free from CGT and Income Tax Up to £20k annual limit Adult ISA for 16/17yo funded by parents, interest over £100 treated as parent income

Question 3

Pensions

Answer 3

Tax deferment through tax relief at highest marginal rate. Growth and income tax free 25% normally tax free

Question 4

Investment Bond

Answer 4

Life assurance policies for lump sum. Usually whole of life. Can be unit linked or with profits. May have surrender penalties if cashed in within the first few years. Gains and income taxes at 20% and paid out of bond. Can take 5% out each year up to 20 years without incurring additional tax charge. When finally cashed in or matured then additional tax will be payable on final amount so doesn’t reduce tax bill entirely but is more of a tax deferral allowing greater income during bond life. All Capital Gains treated as income although it’s already been taxed at 20% so gains can push your income into the higher tax bracket when matured or cashed in. Can mitigate by top slicing. Top slicing - divides profit over life of bond including withdrawals by number of years of bond held. If the figure when added to your income is lower than higher rate tax threshold then no further tax to pay. Defer tax through lump sum Charges can be higher than other products 5% cumulative withdrawals capital per year with no immediate tax liability

Question 5

VCT, EIS, SEIS

Answer 5

Encourages investment into new business to support economic development. Normally only suitable for higher risk investors.

Question 6

Capital Gains Tax

Answer 6

Arises when assets sold, given away or disposed of. Annual exemption and main residence fully exempt. Can carry forward indefinitely. Can be reduced through: Entrepreneurs relief Business asset rollover relief Incorporation relief Gift hold over relief. Wasting asset - Definition is a lifespan of 50 years or less. These are CGT exempt. Private Cars are also exempt. Annual exemption doesn’t apply to non-domiciled but can claim on remittance basis of taxation for foreign income and gains.

Question 7

Chattels

Answer 7

Definition - Tangible, moveable Property. Gain based on disposal price or market value if sold/given to connected person. Exempt from CGT if under £6k per item or set. CGT calculation - pProceeds over £6k x 5/3 = maximum chargeable charge. Compare with actual gain minus costs and lowest figure. If proceeds over £15k then use actual gain. If lifespan under 50 years then CGT exempt. Plant &machinery are wasting but not exempt if business asset.

Question 8

Entrepreneurs Relief

Answer 8

• Reduces CGT to 10% on disposal of qualifying business assets.
• Must have met qualifying conditions for qualifying period of 1 year up to disposal or business closing.
• Available to individuals and certian trustees. Not companies.
• Subject to lifetime limit of £10m on individual basis.
• Claims must be made within 12 months after 31 Jan following tax year of disposal
• Must own at least 5% of the economic value of business…
  
  • sole trader or partner selling or gifting all/part qualifying business.
  • Company director or employee owning 5% or more of shares
  • entitled to at least 5% of net profits and assets of company if closed

In order to successfully qualify for ER, the claimant must have met the qualifying conditions for at least 24 months prior to the disposal. This period was increased from 12 months, with effect from 6 April 2019.

The business must be a trading company (any trade or profession) – in this context ‘company’ also refers to sole traders and partnerships. Property letting businesses do not qualify unless they are furnished holiday lettings.

Business Assets

The assets disposed of are required to meet certain criteria. The assets must:

• include business premises, and have been used in the business for at least 24 months before disposal – assets bought or acquired within 24 months of the disposal cannot qualify;
• form part of the business and not just be assets owned by a person and used in the business; and
• be disposed of within three years of the business ceasing.

In the case of personally-owned assets used in the business, relief is only available if they form part of the disposal, ie they belong to the new owner.

• If goodwill forms part of the gain, ER will not be available on that element if disposal is to a company in which the disposer is a participator (director/shareholder/owner) or a related party. A related party is one who is a close family member of a participator in that company.

If the original company continues after disposal, the part disposed of must be a ‘distinct part’ of the business and capable of running as a business after disposal. If this is not the case, HMRC considers it to be a disposal of just some business assets and not eligible for ER.

Shares

ER is available on disposal of shares or securities of the claimant’s personal company. This is one in which they own 5% or more of the economic value of the business, as described earlier.

If the company is wound up and assets are distributed as a capital distribution (not income) within three years of the date it ceased trading, ER can be claimed on the gain made on the distribution.

The claimant must be an officer, director or employee of the company in the 24 months prior to disposal. There is no requirement as to minimum hours or salary for an employee or officer, but there should be evidence that they work for the business. Officers include non-executive directors and company secretaries.

Trusts

Qualifying beneficiary:

For entrepreneurs’ relief, a qualifying trust beneficiary is someone who has an interest- in-possession in the trust or the part of the trust that owns the business. An interest-in- possession applies where a qualifying beneficiary has an automatic right to the income from all or some of the trust assets.

Trustees have no entitlement to ER. However, a qualifying beneficiary can jointly elect, with the trustees, to allow the trustees to use some or all of their personal ER lifetime allowance. The position is complicated, but in essence the normal rules described earlier apply, with some specific additions.

• The election is not available if the trust is a discretionary trust – one where no beneficiary has a specific right to benefit, and the trustees have discretion over if, when and to whom benefits can be provided.
• ER is available where the beneficiary owns and runs a business in their own right, but a trust owns some of the business or the business assets, or the business is owned by the trust but run by the beneficiary. A typical example would be where the trust owned the business premises.
• The beneficiary must have some of their lifetime ER allowance available.
• The beneficiary must have been using the assets in their business for at least 24 months prior to disposal.
• In the case of shares in a business, the beneficiary must meet the 5% share requirements in their own personal company, with the trustees owning shares in the same company.
• When a claim is made, the beneficiary will make a personal claim for the parts of the business they own, and the trustees will make a claim on behalf of the trust for the part owned by the trust. Both parties will qualify for the 10% CGT rate on gains within the beneficiary’s lifetime allowance.

Investors Relief

Investors’ relief is a similar, but separate, relief available to investors who buy shares in an unlisted company. The shares must be newly-issued (not bought from someone else), must have been issued on or after 6 April 2016 and have been held for three years before disposal. As with ER, CGT is charged at 10% on qualifying investments, and IR has its own lifetime limit of £10m, which is not amalgamated with the lifetime limit for ER.

Question 9

IHT

Answer 9

Payable during life and death. 40% flat rate after nil rate band currently £325,000. 36% if 10%+ of estate left to charity. Spouse/civil partner can inherit unused allowance and unlimited exemption between spouse/civil partner. Also residence nil rate band for home/sale of home each - £125k (2018/19), £150k (2019/20), £175k (2020/21). Tapered residence nil rate band if estate over £3m.

Question 10

Trusts

Answer 10

Protection policies written in trust so falls outside of estate. Beneficiaries pay tax on income recieved from trusts at their rate of tax.

Question 11

Residence and domicile definitions

Answer 11

Domicile is regarded as country of natural birth. Difficult to change. Residency is more temporary and may change from tax year to tax year. Determined by statutory residence test (April 2013).

Question 12

Residency Tests

Answer 12

Automatically not resident in the UK

A person stays in the UK for fewer than 16 days during the tax year.

A person stays in the UK for fewer than 46 days during the tax year, provided they have not been resident for any of the previous three tax years. Although actual residence status for tax years prior to 2013-14 must be determined according to the old, less certain rules, for the purpose of this test a person can elect to determine their residency status for years prior to 2013-14 according to the statutory test basis.

A person carries out full-time work overseas (defined as working an average of more than 35 hours per week either on an employed or self-employed basis) during the tax year without any significant breaks.

Visits to the UK must be fewer than 91 days during the year, and no more than 30 days can be spent working in the UK. A working day is defined as any day where more than three hours of work are carried out.

Automatically resident in the UK

Subject to not meeting any of the automatic non–resident tests, the following people will automatically be treated as resident in the UK for a particular tax year:

A person that stays in the UK for 183 days or more during the tax year.

A person whose only home is in the UK. The actual conditions for this test are quite complex, but it is necessary to have the UK home for a period of at least 91 days, and a person must live in that home for at least 30 days during the tax year.

A person that carries out full-time work in the UK (as defined above). The actual conditions are again quite complex, but it is necessary to work for a period of at least 365 days with no significant break (although only part of this period need be in the tax year).

Sufficient UK ties test

If none of the automatic residence tests apply, then a person’s residence status for a particular tax year is determined according to the sufficient UK ties test. 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 that is made use of during the tax year. The definition of what counts as accommodation is quite detailed, but it generally does not include owning a property that is let out, short visits with relatives, and stays in hotels.
3. Doing substantive work in the UK. This is defined as working for 40 or more days during the tax year (a working day is as per previously defined).
4. Spending more than 90 days in the UK during either of the two previous tax years.
5. Spending more time in the UK during the tax year than in any other single country.

_____________________________________________________________

Residence in the UK is a more temporary status than domicile and may change from one tax year to another. The terms ‘residence’ and ‘residency’ refer to residence for tax purposes. The rules on residency before April 2013 were confusing and subject to interpretation. As of 6 April 2013, UK tax residence status is determined by a statutory residence test, carried out sequentially.

Before carrying out the residency test, HMRC will consider the following three factors:

1. Was the individual a non-UK resident during each of the previous three tax years, and is in the UK for less than 46 days in the current tax year?
2. Was the individual a UK resident in any of the previous three tax years, but is in the UK for fewer than 16 days in the current tax year?
3. Does the individual work full-time abroad and spend fewer than 91 days in the UK, and are fewer than 31 of those days spent working?

If any of the factors apply, the individual will be non-resident in the current tax year.

If none of the tests apply, the individual could be UK resident. HMRC will consider the elements of the following automatic UK tests in order, passing any of which will deem the individual to be UK resident. If the individual is not deemed resident by applying the first test, they will be subject to the second test, and so on. The automatic UK tests are:

First test– if an individual is present in the UK for 183 days or more in any tax year, they are ‘resident’ for that tax year.

Second test– this looks at whether the individual has access to a home in the UK and how long they live there. The individual will be UK resident if they are present (even for a few minutes) in their UK home for at least 91 days (at least 30 of which must be in the tax year) and either have no overseas home, or spend fewer than 30 days in a tax year overseas. If the individual has more than one UK home during the 91-day period, the 30-day requirement applies to each home. So, if the individual had three homes in the tax year and spent 25 days in each, they would not pass the 30-day test.

Third test– this considers the individual’s work, and is quite complex. They would pass the test if:

• they work full time in the UK for any period of 365 days (without a significant break from UK work), and any part of the 365 days falls in the tax year; and
• at least 75% of those days involve working for three hours or more; and
• there is at least one day during both the 365 days, and the tax year when the individual works for at least three hours.

The calculation for the third test is:

The total hours worked on days involving three or more hours’ work.

Divide the number of days worked by seven and then divide the result of 1) by 2) to give the average hours for each week worked. A result of 35 hours or more indicates full-time work.

If an individual does not meet the automatic UK test criteria, they may be considered non‑resident, subject to meeting further criteria of the statutory residence test.

First, HMRC will establish whether the individual is an ‘arriver’ (someone who was not UK resident in the previous three years), or a ‘leaver’ (someone who was UK resident in any of the previous three tax years).

Having determined the individual’s arriver/leaver status, HMRC will apply two further criteria:

Days spent in the UK during the tax year – a day generally counts if the individual was in the UK at the end of the day (midnight), unless they were in transit and not working. There are other exceptions and inclusions.

UK ties during the tax year – there are four main UK ties to be considered:

• spouse/civil partner/co-habitee/minor children living in the UK;
• a home in the UK available for 91 days or more and used for at least one night;
• working in the UK for more than three hours on at least 40 days;
• spending more than 90 days in the UK in either of the previous two tax years.

For ‘leavers’ there is one further tie – spending more days in the UK than in any other country.

If the individual spends fewer than 183 days in the UK, their status will be determined by a combination of days present and the number of ties. For example, an arriver will not be deemed resident if they spend fewer than 46 days in the UK, while a leaver would be deemed resident if they spent between 16 and 45 days in the UK and had four ties.

Fourth test

The fourth

The taxpayer dies in the relevant year

He/she was UK resident for neither of the two tax years preceding that year, or

He/she was not resident during the preceding tax year and the previous tax year was a ‘split year’.

He/she was resident in the UK for neither of the two preceding years because he/she met the third automatic test for those years or was not resident for the preceding tax year and the year before that was a ‘split year’.

Question 13

Domicile Rules

Answer 13

Domiciled for tax purposes from April 2017 if meet one of the two following conditions: 1) Born in the UK, domicile of origin, and UK resident in the UK for 2017–18 tax year or after 2) being UK resident for at least 15 of 20 years immediately before relevant year.

Question 14

Tax on Foreign Income

Answer 14

If an individual is a UK tax resident, they pay tax on income from any overseas trades, professions, property and investments. Tax on overseas income is calculated in much the same way as on UK income.

If an individual is a UK tax resident but not domiciled or deemed domiciled in the UK, they are also liable to pay tax on foreign income, whether or not it is brought into the UK, unless they opt to be taxed on the ‘remittance basis’. If so, only income brought into the UK will be taxed. However, if they choose the remittance basis, they may lose their personal tax allowances and, adults (age 18 or over), after seven years’ UK residence (within a nine-year period) have to pay a £30,000 annual fee. After 12 years’ UK residence (within a 14-year period) this fee increases to £60,000. These charges do not apply to anyone under the age of 18.

As we saw earlier, since 2017/18 those resident in the UK for more than 15 out of the previous 20 tax years will be deemed UK domiciled for all tax purposes. This means that they will have to pay UK income tax on their worldwide income and can no longer use the remittance basis.

Employees who are resident in the UK pay tax on their remuneration wherever the duties of their employment are carried out.

Non-UK tax residents are not normally liable to UK tax on their overseas income.

If an individual is a non-UK tax resident, they will generally pay tax on their UK income.

Only certain non-residents are entitled to UK personal allowances. They include all Commonwealth citizens, all nationals of European Union states, Norway, Iceland and Liechtenstein and all residents of the Channel Islands and the Isle of Man. In any event, if an individual opts for the remittance basis, they are not entitled to personal allowances if their foreign income and gains in a tax year total £2,000 or more.

UK income tax liability as a non-resident is a complex area, but the broad effect is that no tax is charged on UK bank and building society interest (provided that a certificate of non-resident status is signed), gilt interest will be tax free, and there will be no liability for tax on UK dividends.

Capital Gains Tax

If an individual is resident in the UK, they are liable to CGT on their gains from disposing of relevant assets wherever these are situated. If an individual is resident but not domiciled in the UK, they are still liable to CGT on gains on disposal of UK assets. They will also be liable for CGT on gains outside the UK unless the remittance basis has been claimed or given (in which case only gains remitted to the UK are taxable). In any event, if an individual is a temporary non-resident, or trades in the UK and disposes of UK assets used for their trade, they will be liable to CGT.

If an individual is resident outside the UK for less than five tax years (referred to as temporary non-residence), they are normally, on their return to the UK, liable to CGT on disposals abroad of assets that they acquired before their departure (re-entry charge).

There is no re-entry charge if they were not resident in the UK for four of the seven tax years before the year of their departure.

Generally, there will be no CGT on any gain made by a non-resident (unless a temporary non-resident). However, since 6 April 2015, a non-resident is subject to CGT on disposal of a UK residential property. If a UK residential property was owned before 6 April 2015, the taxable gain will relate to the period of ownership from 6 April 2015.

Inheritance Tax

IHT applies to all the assets of individuals who are domiciled in the UK, wherever those assets are situated. For persons who are domiciled outside the UK, IHT only applies to their assets situated in the UK. There are special additional domicile rules for IHT:

1. At least three years’ domicile outside UK before acquire foreign domicile for IHT
2. Treated as domiciled for IHT if resident in uUK for at least 15 of previous 20 ytax years before a transfer.
3. ‘Deemed domiciled’ if not UK Domiciled but have spouse/civil partner who is and can be elected to be UK domiciled for IHT purposes.
4. The exemption for transfers between spouses is limited to £325,000 where the trnasferor is domiciled in the UK but the recieing spouse is not UK Domiciled.

Question 15

Foreign tax credit relief

Answer 15

Available to UK residents who pay foreign tax on income which is also taxable in the UK if Double taxation agreement exists. Unilateral relief is available if no double taxation agreement exists up to UK tax. Can only claim smaller of foreign tax paid (or allowed by treaty) or UK tax due. The UK tax due is the difference between the UK tax due on total Income MINUS the UK tax due on total income minus foreign income.

Question 16

Remittance Basis

Answer 16

Taxed on arising basis when foreign income and gains are remitted back to the UK. Available to those who are UK resident but not domiciled. May need to pay remittance basis charge

Question 17

Capital Gains Tax - Foreign Assets

Answer 17

UK resident - liable on relevant assets wherever situated UK resident but not domiciled - liable on UK assets but if no remittance basis is claimed then also worldwide assets Temporarily nonresidence - five years or less - liable for disposal is abroad acquired before departure via a re-entry charge No re-entry charge if not resident forfour of seven tax years before year of departure Nonresidence not liable. Since 6 Apr 2015 subject to capital gains tax on disposal of UK property and pro rataed if owned before 2015

Question 18

Tax rules on IHT according to residency and domicile status.

Answer 18

UK Domiciled - Liable wherever assets are situated.

Non UK Domiciled - IHT on assets situated in the UK.

Special Rules for Domicile with IHT:

• At least three years’ domicile outside UK before acquire foreign domicile for IHT
• Treated as domiciled for IHT if resident in UK for at least 15 of previous 20 ytax years before a transfer.
• ‘Deemed domiciled’ if not UK Domiciled but have spouse/civil partner who is and can be elected to be UK domiciled for IHT purposes.
• The exemption for transfers between spouses is limited to £325,000 where the trnasferor is domiciled in the UK but the recieing spouse is not UK Domiciled.

Question 19

Offshore Investments

Answer 19

Capitalises on advantages offered outside an investors’ home country Offshore companies offer money market, bond and equity assets are fiscally sound, time-tested and legal Advantages 1) Tax reduction through tax havens-designed to attract outside wealth. For small countries this can be very beneficial. Corporation often set up as show to shield attacks in the home country. Corporation has no engagement and local operations so little tax. 2) Asset Protection-popular for restructuring ownership of assets through trusts, foundations or corporation. Good for lawsuits, foreclosing lenders/creditors acting on outstanding debts, as can elect to transfer portion of assets from personal estate to foreign entity.. 3) Confidentiality-secrecy legislation. Breach of confidentiality include disclosure and shareholders or identities. 4) Diversification Access to international markets and major exchanges. Opportunities in developing nations and privatisation. 5) Less or Limited tax means quicker compounding of investment returns. 6) Disadvantages 1) Tightening tax laws. Cannot predict future changes or guarantee no retrospective protection. 2) Cost- If new corporation needs to be started then legal fees, requirement for residence, account corporate registration costs, minimum investment amount may apply. 3) risks are often higher as jurisdiction is not as tightly regulated 4) Maybe double taxed on income by the UK and the host country.

Question 20

The Ramsay Doctrine and tax avoidance legislation

Answer 20

Anti tax avoidance legislation was always behind by one or two years due to long legal process meaning new ways could be found around new legislation and also caught out innocent transactions as people didn’t know law existed. The Ramsey doctrine states “if a tax planning scheme involves a series of pre-ordained steps, and one or more of those steps has no commercial purpose except to avoid tax, then that step can be ignored, and you look at the commercial reality of the transaction rather than the form it has been given by the scheme “ Disclosure rules - must disclose if marketing or using tax avoidance schemes. Meaning HMRC will look at them closely to ensure technical accuracy. If not then all names are known to HMRC and even if it works legislation, sometimes retrospective may be introduced to block it. .

Question 21

The Disclosure Rules

Answer 21

All schemes must be disclosed. Therefore you know HMRC will look closely at the scheme to see if it is technically correct and will know who is using it. Even if it works then legislation which may be retrospective will be introduced to block it.

Question 22

Thoughts & Ideas - Effects of High Tax, regulation and governance. ‘EU vs USA’ Timbro 2004 Study critiques soundness of economic policy . EU countries GDP per capita is well below the majority of US states. Also GDP growth rates.

Answer 22

High tax - Social safety net Taxes Rise - GDP, currency, prosperity, and investment tends to fall. Evidenced by the performance of comparing over the last few decades the major indices of China and USA and European countries and the GDP per capita rate. The 28 European Union countries GDP per capita ranks below all states but Mississippi if it was a single country. Contradictory as the Competition Commissioner at the European Commission is tasked with stamping out monopolistic practices and enforcing completion among corporations but 1998 The Harmful Tax Competition was started targeting and blacklisting countries with low tax policies citing unfair tax competition. So a tax cartel is good and competition between states on tax is bad but a corporate cartel is bad and competition between companies is good. List of sovereign states in Europe by GDP per Capita - 2017 - IMF - Wikipedia (average of 28 EU countries is 33,120) List of US States by GDP Per Capita - 2017 - Bureau for Economic Analysis - Wikipedia (Mississippi is 31,633)

Question 23

Tax Quotes

Answer 23

“Every man is in entitled if he can to order his affairs so that the tax attaching under the appropriate act is less than it otherwise would be” - Duke of Westminster Case - House of Lords - s 1935 “The difference between tax avoidance and tax evasion is the thickness of a prison wall” - Dennis Healey, Former UK Chancellor of the Exchequer 1989

Question 24

CGT - Business Asset Rollover Relief

Answer 24

Deferment of CGT when disposal proceeds of business assets are reinvested in new business asset. Deduct chargeable gain from cost of new asset. Rollover relief allows a trader to defer the payment of capital gains tax where the disposal proceeds of a business asset are reinvested in a new business asset. The deferral is achieved by deducting the chargeable gain from the cost of the new asset. It can be where proceeds are fully or partially reinvested. Example 1 – proceeds fully reinvested David sold a factory on 1January 2010 for £300,000 and this resulted in a chargeable gain of £80,000. If David is replacing the old factory with a new factory costing £350,000, he can make a claim to defer the gain he has made. The amount deferred (in this case £80,000) is rolled over and reduces the base cost of the new asset purchased. So the base cost of the new factory will be £270,000 (being cost of £350,000 less rolled over gain of £80,000). Example 2 – proceeds not fully reinvested Eve sells a business asset for £500,000 realising a capital gain of £100,000. Eve uses the money to buy an office block used for the purpose of her trade which costs £480,000. As Eve has not spent the entire sale proceeds, the cash retained of £20,000 (£500,000 less £480,000) is immediately chargeable to capital gains tax. The remainder of the gain (£80,000) is rolled over into the base cost of the replacement asset. The base cost of the new asset is £400,000 (being amount paid £480,000 less gain rolled over £80,000). Conditions for relief Individual/partnership Rollover relief can only be claimed by persons who are carrying on a trade as a sole trader or within a partnership. If an individual carries on two trades, the disposal and acquisition do not have to occur in the same trade. So it is possible to make a gain on a disposal of an asset used in trade A and buy an asset used in trade B. For rollover relief purposes, both trades are regarded as one single trade. The relief is also available if the person: carries on a business of furnished holiday lettings is occupying commercial woodlands and managing them commercially to make a profit carries on a profession, vocation, office or employment is providing an asset to his personal company (a company in which he is able to exercise 5% or more of the voting rights) which has been used in its trade. Company Rollover relief can also be claimed by a company that sells an asset and reinvests the proceeds in a replacement asset. The companies in a gains group are treated as a single entity for the purposes of rollover relief. This means that the gain on a qualifying business asset sold by a company in a gains group can be rolled over when a qualifying business asset is purchased by any company within the gains group within the qualifying period. Time limits The new asset must be acquired within 36 months after the disposal of the old asset, or up to 12 months before the sale. These time limits can be extended at the discretion of HMRC. The rollover relief is not automatic and a claim should be made within four years of the end of the tax year in which the gain arises or the new asset is acquired (whichever is the later). Example 3 – time limit claim Patricia sold a factory on 1 January 2016 (so financial year 2015/16) and, in the absence of a claim, the CGT on that gain will be due by 31 January 2017. A roll over claim should be made by no later than 5 April 2020. If Patricia has not bought the replacement asset by 31 January 2017 but is intending to do so before the three year anniversary period has expired, HMRC will allow her to defer the gain. The new asset must be immediately taken into use for trade purposes. Qualifying assets To qualify for rollover relief, both the old asset and the new asset must be qualifying assets. The list of qualifying assets can be found in s.155 TCGA 1992. The most relevant types of qualifying asset are: land and buildings fixed plant and machinery goodwill. It is not necessary for the old asset and the new asset to be in the same category. ‘Fixed’ means immovable. Therefore, whilst the sale of a printing press will be eligible for rollover relief, the disposal of assets such as tractors, lorries and vehicles will not. Depreciating assets A ‘depreciating asset’ is any fixed plant or machinery or any asset which will have a life of 60 years or less from the date of acquisition. If the new assets acquired are depreciating assets, relief is given by freezing the gain of the old asset until the earliest of the following: the disposal of the new assets the date the new assets cease to be used in the trade 10 years from the date of acquisition of the new assets Example 4 – depreciating assets Milana sold a building for £200,000 giving rise of a gain of £50,000. Milana immediately bought fixed plant and machinery for £180,000. As Milana has not reinvested all of the proceeds in the new depreciable asset, she will have an immediate capital gain equal to the cash proceeds not reinvested of £20,000. The remaining gain of £30,000 will be deferred. The gain is not rolled over against the base cost of the new asset, and so the base cost of the asset remains as £180,000. Instead, the gain of £30,000 is frozen. Milana sells the new asset five years later for £195,000. Her gain will be £15,000 (being £195,000 proceeds less cost of £180,000) plus the ‘frozen’ gain of £30,000, which crystallises on the disposal of the plant and machinery. Depreciating assets and ‘parking’ If a gain is frozen on a depreciating asset and, before that gain crystallises, the trader purchases a non-depreciating asset, the frozen gain can be rolled over and set against the base cost of the new non-depreciating asset. This relief allows the trader to ‘park’ the capital gain on a depreciating asset, until a non-depreciating asset is purchased. Example 5 – Parking Chris sold a building used in her trade in July 2000 for £300,000 giving rise to a gain of £50,000. In March 2001, she reinvests £290,000 in a baking oven used for her cake making business. As not all of the sale proceeds were reinvested, Chris will have an immediate capital gain tax on the cash retained of £10,000. The remaining gain of £40,000 is frozen. This gain will crystallise either when the baking oven is sold, or in March 2011 (10 years from purchase). In February 2010, Chris buys a factory for £500,000. Because the factory was acquired before the frozen gain became chargeable, the gain of £40,000 can be rolled over against the base cost of the factory. So the base cost of the factory is £460,000. Accordingly Chris made a gain on the sale of a building in July 2000, and effectively rolled it over against a building that she bought in 2011 that is over 10 years since disposal.

Question 25

CHT Partial Encashmenr Calculation

Answer 25

Total acquisition cost x Value of disposed of assets / market value of disposed shares + market value of shares retained.

Example

Value of unit holding £55,000; original investment £30,000; disposal £25,000.

Acquisition cost of units:

£30,000 x £25,000 = £750,000,000

£25,000 + £30,000 = £55,000

£750,000,000 / 55,000 = £13,636

This gives an acquisition cost of £13,636.

£25,000 – £13,636 = £11,364 gain.

In simple terms, this calculation works out the proportion of the total current market value represented by the disposal, and then applies the same percentage to the original acquisition cost.

Therefore, £25,000 / £55,000 is 45.454% of the current value.

45.454% of the original acquisition cost is £13,636.

There are two important calculations that may be required.

Question 26

CGT - Share Pooling and Share Matching

Answer 26

Rebasing a.k.a Bed and Breakfasting. 1998 rules changed this. Any sale and repurchase that can be matched and used with the same proceeds within 30 days

Share Pooling - all shares of the same class in the same company held by the same person Are deemed to form a pool of shares under section 104 of the taxation of chargeable gains act 1992. This pool is referred to as a section 104 holding.

Share Matching - When holdings in a shared pool have been acquired at different times, there is a strong likelihood that shares in each tranche will have been bought at different prices. Share matching is a set of rules to establish a notional acquisition cost to be used when part of the Holding is sold.

Example

George bought a number of shares in Allied Ltd in four tranches. He decided to sell 4,000 shares in May 2019 for £4.25 each, net of sale costs.

1/1/2008 - 3000 shares at £2 = £6,000

1/1/2010 - 1000 shares at £3 = £3,000

1/1/2012 - 2000 shares at £2.50 = £5,000

1/1/2014 - 3000 shares at £3.50 = £10,500

May 2019:

Value of holding 9,000 shares at £4.25 = £38,250

Sale of 4,000 shares at £4.25 = £17,000

Using the HMRC calculation – £24,500 x 4,000 / 9,000 = £10,889 acquisition cost

£17,000 – £10,889 = £6,111 gain.

If some of the Section 104 holding had been sold earlier, that has to be included in the calculation. The holding sold is calculated as a percentage of the total holding at that date, and allocated that percentage of the acquisition cost incurred up to that date.

1/1/2008 - 3000 shares at £2 = £6,000

1/1/2010 - 1000 shares at £3 = £3,000

1/1/2012 - 2000 shares at £2.50 = £5,000

1/1/2013 - Sold 2000 shares at £2,60 (33.33% of holding) - £4,662 (33% of cost so far)

1/1/2014 - 3000 shares at £3.50 = £10,500

The acquisition cost in May 2019 is calculated as the total acquisition cost, less the notional acquisition costs of the shares sold in 2013.

TOTAL - 7,000 shares - £24,500 – £4,662 = £19,838 acquisition cost

Average acquisition cost per share = £2.83

Accumulation units in a unit trust

Accumulation units automatically reinvest any income received, although the trustees must declare a notional dividend based on the unit share of any income received by the manager. Such a notional dividend is subject to income tax from the investor, even though it was not actually received. As this notional dividend would already have been taxed, HMRC allows the notional dividends as additional expenditure for accumulation units when calculating the acquisition costs.

Shares bought within 30 days of the disposal

If the investor sold shares from the Section 104 holding but then bought shares in the same company and the same type within 30 days of the disposal, the new shares do not form part of the Section 104 holding. Instead, they are matched first against any shares bought on the same day as the disposal and then against any shares bought within 30 days of the disposal. However, the notional disposal price of the new shares is calculated as if they had been sold as part of the Section 104 holding.

The notional disposal price is:

Number of new shares purchased x total disposal price

Total Section 104 holding

The acquisition cost is then deducted from the notional disposal price to see whether there is a gain or loss on those shares.

The 30-day rule applies to shares of the same company and class as those disposed of, and only on purchases up to the amount realised on disposal. It does not matter where the re-purchase funds come from – it is the fact that the same shares have been sold and then re-purchased that determines the position. For example, if the investor sold all or part of a shareholding and then purchased 50% of the same shares within 30 days, that purchase would be subject to the 30-day rules, regardless of which bank account was used for the purchase.

If the re-purchase was for more shares than originally sold:

shares equal to the original disposal would be subject to the 30-day rule; and

the other shares would be matched with those in the Section 104 holding, using the standard method for such holdings (Old Mutual Wealth, no date).

Example 1.3

Returning to George, who bought a number of shares in Allied Ltd in four tranches; he decided to sell 4,000 shares in May 2019 for £4.25 each, net of sale costs (£17,000). Within 30 days of selling the shares, he purchased a further 500 shares at £4.20 = £2,100.

Section 104 holding:

1/1/2008 - 3000 shares at £2 = £6,000

1/1/2010 - 1000 shares at £3 = £3,000

1/1/2012 - 2000 shares at £2.50 = £5,000

1/1/2014 - 3000 shares at £3.50 = £10,500

TOTAL - 9000 shares at £24,500

Average acquisition cost £2.72 per share

His gain would be calculated as:

New shares

500 / 4,000 x £17,000 = £2,125 notional disposal price

Cost of new shares = £2,100

Gain = £25.

Section 104 holding shares

Disposal value = total sale value x shares from pool / shares sold

£17,000 x 3,500 / 4,000 = £14,875.

Acquisition cost – £24,500 x 3,500 / 9,000 = £9,527

£14,875 – £9,527 = gain £5,348 + gain from new shares £25

Total gain £5,348 + £25 = £5,373.

Question 27

Self Assessment Question 1: Explain the taxation of UK dividends in 2018/19. Calculate the tax liability on dividends where an individual has non-dividend income of £41,000 and dividend income of £8,000 in the current tax year.

Answer 27

There is a £2,000 tax-free dividend allowance. Dividends above this level are taxed at 7.5% basic rate, 32.5% higher rate and 38.1% additional rate. Non-dividend income £41,000 − £11,850 personal allowance = taxable £29,150, with £5,350 below the higher-rate tax threshold. £5,350 of dividend falls into the basic-rate band. Of this, £2,000 is covered by the dividend allowance and £3,350 is taxed at 7.5%. £2,650 of the dividend falls into the higher-rate tax band and is taxed at 32.5%. £3,350 x 7.5% = £251.25. £2,650 x 32.5% = £861.25. £251.25 + £861.25 = £1,112.50 tax liability.

Question 28

Self Assessment Question 2: Detail the qualifying rules for life assurance policies and explain how these affect a higher-rate taxpayer.

Answer 28

The main conditions are broadly as follows: a. The policy term must be ten years or more. b. Premiums must be payable yearly or more frequently. c. The level of premiums must be reasonably smooth – the rules are complex, but in essence the premiums paid in any 12-month period must not exceed: - twice the premiums in any other 12-month period; - one-eighth of the total premiums paid for a period of ten years or, in the case of an endowment or term policy, its specified term. d. For policies taken out on or after 1 April 1976, if the policy has a surrender value, the sum assured must be not less than 75% of the premiums payable: - during its term, if an endowment policy; - within a specified premium payment term, if a whole life policy; - until age 75 in the case of a whole life policy with no specified premium term. e. The policy must be issued by a UK company or through a UK branch or permanent establishment of an overseas resident insurer. f. The 75% of premiums rule is modified in certain cases. g. For an endowment policy where the insured life exceeds 55 years, the 75% figure is reduced by 2 percentage points for each year over 55. h. For a term policy with no surrender value that does not run beyond age 75, the rule is disapplied. i. For policies issued since 6 April 2013, there is an annual limit of £3,600 for premiums payable into non-exempt qualifying policies. Transitional rules applied between 21 March 2012 and 5 April 2013. Where a policy meets (and continues to meet) the qualifying rules then there is no further liability for a higher rate/additional rate taxpayer upon any gain arising from a chargeable event. Any tax deducted at source from an onshore life fund will, however, not be reclaimable. Where an onshore policy does not meet the qualifying rules, then upon any gain arising from a chargeable event, a higher-rate taxpayer will have a further 20% income tax liability (further 25% if an additional-rate taxpayer).

Question 29

Self Assessment Question 3: Identify the types of investment that may be placed in a stocks and shares ISA wrapper.

Answer 29

• Shares and corporate bonds issued by companies officially listed on a recognised stock exchange anywhere in the world. • Shares listed on the Alternative Investment Market (AIM) • Gilt edged securities (‘gilts’) issued by the UK government, or similar securities issued by governments of other countries in the European Economic Area and ‘strips’ of all these securities. • Units or shares in funds authorised by the Financial Conduct Authority (unit trusts or • open-ended investment companies (OEICs)). • Units or shares in non-UCITS retail schemes authorised by the Financial Conduct • Authority for sale to retail investors in the UK. • Shares and securities in investment trusts. • Units or shares in Undertakings for Collective Investment in Transferable Securities • (UCITS) funds based elsewhere in the European Union (these are similar to unit • trusts and OEICs authorised by the Financial Conduct Authority). • Any shares that have been transferred from an HMRC-approved SAYE share option • scheme or share incentive plan. • Life insurance policies. • Stakeholder medium-term products.

Question 30

Self Assessment Question 4: Explain what a Qualifying Regulated Overseas Pension Scheme (QROPS) is and under what circumstances it would be used.

Answer 30

A Qualifying Recognised Overseas Pension Scheme (QROPS). a) Started by HMRC in 2006 to make transferring pension money easier. b) A form of pension scheme that is based outside the UK that is recognised by HMRC as being able to receive a transfer from a formally recognised UK pension fund. c) Any pension can be transferred so long as it has not been crystallised. The transfer itself is a benefit crystallisation event and therefore a lifetime allowance charge may apply. d) For transfer requests received on or after 9 March 2017, the whole of a transfer to a QROPS will be subject to a 25% tax charge unless it meets one of the following conditions: - the individual and the QROPS are in the same country after the transfer; e) - the QROPS is in an EEA state and the individual is resident in another EEA state; f) - the QROPS is an occupational pension sponsored by an individual’s employer; g) - the QROPS is an overseas public service scheme of one of a number of specified organisations. Suitable for a client who is planning to live permanently abroad.

Question 31

Self Assessment Question 5: Compare and contrast the benefits available to UK taxpayers of investing in VCTs, EIS and SEIS.

Answer 31

Question 32

Self Assessment Question 6:

Wasting chattels are those possessions with a predictable useful life of how many years?

Answer 32

50 or fewer years and are expected to have only a scrap or residual value at the end of that life.

Question 33

Self Assessment Question 7:

Ifkar sold a watch for £12,000, having bought it eight years ago for £2,000. He incurred costs of £200 when buying the watch and £300 when selling it. Dominic bought a classic car for £12,000 and sold it three years later for £15,000. Calculate the CGT payable by Ifkar and Dominic, assuming both have used their CGT exemption for this year.

Answer 33

Ifkar

Standard calculation – Disposal price £12,000 less £2,000 (acquisition costs) + £500 (costs) = £9,500 gain

Using chattels relief – £12,000 less £6,000 (chattels limit) means disposal exceeds £6,000 limit by £6,000. £6,000 x 5/3 = £10,000 gain.

In this case, using the standard CGT calculation would result in a lower gain of £9,500.

Dominic

Despite the fact that he made a profit on sale, Dominic’s car is a wasting asset and will not be subject to CGT. As a supplementary point, had Dominic been classed as a motor trader (by buying and selling such cars on a regular basis), the gain of £3,000 would have been treated as potentially taxable income.

Question 34

Self Assessment Question 8:

Stefan bought shares in Associated Engineering over a period of five years as shown below: On 1 January 2019 he sold 5,000 shares for £16,250. Calculate his gain for CGT purposes.

Answer 34

£45,750 x 5,000/18,000 = £12,708

£16,250 less £12,708 (acquisition) = £3,542 gain

Question 35

Self Assessment Question 9:

Explain how the HMRC rules relating to residency and domicile impact on UK taxpayers.

Answer 35

Resident

This is subject to a statutory residence test. The following will be automatically non-resident:

• An individual who is in the UK for fewer than 16 days in the tax year;
• An individual who is in the UK for fewer than 46 days in the current tax year and was not resident in the previous three tax years;
• An individual who has left the UK to take up full-time work abroad and is in the UK for fewer than 91 days in the current tax year, of which a maximum of 30 days are spent working in the UK.

The following will be automatically resident:

• An individual who is in the UK for 183 days or more in the tax year;
• An individual whose only home is in the UK;
• An individual who works full-time in the UK.

The residence status of someone who does not meet the criteria of the automatic tests is determined by the time spent in the UK and a number of UK ties. The longer the time spent in the UK, the fewer the number of ties that need to apply.

The ties are:

• having a spouse, civil partner or children in the UK;
• having accommodation in the UK and making use of it;
• doing substantive work in the UK;
• spending a total of more than 90 days in the UK over the previous two tax years;
• spending more time in the UK than in any other country.

Domiciled

• Domicile is a general law concept referring to the country that is an individual’s ‘permanent home’. A range of factors can affect where an individual is domiciled at any point in their life.
• An individual’s domicile status is usually acquired from their father if the parents were married, or from their mother if the parents were not married, although they can change it when they become an adult. So if both an individual and their father were born in the UK, have lived in the UK for all or most of their life, and do not have strong connections outside the UK, then they will be domiciled within the UK.

Question 36

Self Assessment Question 10:

Miles was born in London and lived there until he took a full-time job with a major German manufacturer five years ago. He has lived in Germany since then and is entitled to six weeks’ holiday each year, which he usually spends visiting family in the London area. He also works at the firm’s UK office for around three weeks each year. What is his residence status for UK tax?

Answer 36

Miles works full-time abroad, spends fewer than 91 days in the UK and, of those days, fewer than 31 days are spent working. This means he meets the requirements to be a non-UK tax resident.

Question 37

Residency Tax Case Law

Answer 37

In English tax law, Gaines-Cooper v HM Revenue & Customs is an important test case on residence and played a large part in clarification to the rules on residency effective since 6 April 2013.

In brief, Mr Gaines-Cooper moved abroad many years before the case, and spent less than 91 days a year in the UK, as per HMRC rules. Although he lived abroad, his wife and family continued to live in the house he owned in England. He owned various assets in the UK, had a will drawn up under English law, and his son went to private school in England.

Mr Gaines-Cooper relied on HMRC guidance in IR20 when claiming he was non-resident. IR20 presented less rigorous requirements for non-residency than the law prescribed, mainly stressing the 91-day rule and the need to live outside the UK. At the initial hearing and appeal courts, the judgement went in HMRC’s favour, though the case eventually went to the Supreme Court.

The Supreme Court judges ruled that, although IR20 was not as clear as it should have been, there was enough detail to show that merely living abroad and spending no more than 91 days in the UK was not enough. There was also a requirement to leave the UK permanently and indefinitely, that the 91 days limit related to visits rather than work or other reasons, and that any property owned in the UK could not be used as their residence. In simple terms, living outside the UK should be seen as a distinct break from the country (Tax Journal, 2011).

Question 38

4 Types of Domicile

Answer 38

Domicile is regarded as an individual’s natural home country under the principles of common law: there can only be one domicile. HMRC decides what constitutes an individual’s natural home.

Domicile of origin

This is normally acquired at birth and will be the same domicile as the father, or the mother if the parents were not married; as a result, it may not be the same country where the child was born. Adopted children take their domicile of origin from their adoptive father, or adoptive mother if there is no adoptive father.

Domicile of dependence

Those under the age of 16 will take their domicile from who they are dependent on, ie the person looking after them. They do not have the option to choose their domicile until they reach the age of 16. If their married parents separate, they will acquire the domicile of the parent they live with, and if they divide their time between parents they will keep their father’s domicile.

Deemed domicile

This applies to people who have been resident in the UK for tax purposes for 15 of the last 20 tax years (prior to 6 April 2017, this was 17 of the last 20 tax years), and starts at the beginning of the tax year after they reach the 15-year point. Those who are deemed domicile will be treated as being domiciled in the UK for income, capital gains and inheritance taxes.

There is an extra element of the rule applying for inheritance tax purposes only. A standard five-year rule applies, but if the individual becomes a non-UK resident for four consecutive tax years, they will no longer be deemed domicile. However, if they return to the UK in years five or six, the 15 out of 20-year rule will apply.

A new category of deemed domicile, formerly domiciled resident, was introduced as of 6 April 2017. To be regarded as a formerly domiciled resident, the individual must have:

been born in the UK with a UK domicile of origin;

acquired another domicile of choice.

For income and capital gains taxes, the formerly domiciled resident will be regarded as deemed domicile as soon as they return to the UK. For inheritance tax they will be deemed domicile if they have been resident in the UK in at least one of the previous two tax years.

Domicile of choice

It is possible for an individual with mental capacity to change their domicile from the UK to another country. It applies to those aged 16 or over in England, Wales and Northern Ireland, and boys aged 14 or over and girls aged 12 or over in Scotland. In effect, once an individual has opted to change their domicile, they will be regarded as ‘deemed domicile’ by HMRC until they have been out of the UK for five years – the 15/20 year rule. For IHT purposes, they would be subject to IHT if they were domiciled in the UK during the three years immediately before death.

It is not as simple as just announcing a decision, however, and the individual must prove they have changed their domicile. There is no formal procedure, but certain steps are seen to be evidence of a change.

Question 39

Changing Domicile - Tests

Answer 39

Changing domicile – two key tests

To prove an individual has changed their domicile, there are two key tests they must pass:

the individual must physically live in the new country; and

intend to live permanently or indefinitely in the new country, without the intention of living anywhere else.

The second test is more difficult to meet, and there are no specific rules or processes to follow.

Examples of actions taken to demonstrate the intention to live permanently in the new country could include:

gaining citizenship or nationality in the new country;

• severing ties with the UK – resigning from clubs, giving up property;
• establishing a business or gaining employment in the new country;
• establishing bank accounts and credit cards in the new country and closing UK accounts;
• educating children in the new country;
• living with family in the new country;
• writing wills under the new country’s jurisdiction and revoking UK wills;
• arranging a funeral in the new country.

Having opted for a domicile of choice, and made the arrangements as we learned earlier, the individual will still be deemed domicile until they have been out of the UK for a period of five years. It may also take a few years to demonstrate the intention to live permanently in the new country before the five-year deemed domicile period starts. Therefore, establishing a new domicile is not a quick process.

Question 40

Domicile for IHT

Answer 40

We look at domicile and IHT in more detail in Topic 5. For now, it is important to remember that UK IHT will apply to the worldwide estate of anyone who is UK domicile or deemed domicile – any of their assets anywhere in the world will be part of their IHT estate. In contrast, the estate of someone who is non-UK domiciled will only be liable to IHT on assets located in the UK.

Question 41

1. David, aged 14, was born in London as a result of a short-term relationship. His Spanish mother was on a two year work contract in the UK, and his English father, born and raised in Essex, was an executive for the same company. Shortly after David’s birth, mother and son returned to her permanent home in Spain, although his father pays maintenance and David visits him during school holidays. On the basis of the evidence, which of the following is true in relation to David’s domicile? He would be:

A. UK domicile

B. non-UK domicile

C. deemed domicile

D. able to choose his domicile when he reached age 16

2. Ann, an Australian, lived and worked in the UK from 6 April 2002 until 5 April 2015, moved back to Australia on 6 April 2015, and then returned to work in the UK on 6 April 2019. Assuming she stays in the UK, from what point would she be deemed UK domicile?

A. immediately

B. 6 April 2020

C. 6 April 2021

D. 6 April 2023

3. Amir was born and raised in Pakistan to Pakistani parents, and has lived and worked in the UK for the past 10 years. Which of the following would be included in his estate for inheritance tax?

A. his London flat

B. shares listed on the US stock market

C. his deposit at his bank in Karachi

D. all of the above

4. Gareth has decided to move to New Zealand, and will take steps to change his domicile to that country. What is the most likely timescale before he would no longer be deemed UK domicile?

A. 2 years

B. 3 years

C. 5 years

D. 7 years

Answer 41

1.

David, aged 14, was born in London as a result of a short-term relationship. His Spanish mother was on a two year work contract in the UK, and his English father, born and raised in Essex, was an executive for the same company. Shortly after David’s birth, mother and son returned to her permanent home in Spain, although his father pays maintenance and David visits him during school holidays. On the basis of the evidence, which of the following is true in relation to David’s domicile? He would be:

Correct answer B – non-UK domicile. David’s parents were not married, so he would adopt his mother’s domicile, which would not be the UK. As he is not UK domiciled, domicile of choice would not apply, as it only applies to those of UK domicile who wish to change to another domicile.

2.

Ann, an Australian, lived and worked in the UK from 6 April 2002 until 5 April 2015, moved back to Australia on 6 April 2015, and then returned to work in the UK on 6 April 2019. Assuming she stays in the UK, from what point would she be deemed UK domicile?

Correct answer C – 6 April 2021. When she left the UK, she had been in the UK for 13 years. On 6 April 2019 she would have been UK resident for 13 of the previous 20 years. On 5 April 2021 she would have been in the UK for 15 out of the previous 20 tax years, but deemed domicile takes effect from the start of the following tax year, which would be 6 April 2021.

3.

Amir was born and raised in Pakistan to Pakistani parents, and has lived and worked in the UK for the past 10 years. Which of the following would be included in his estate for inheritance tax?

Correct answer A – his London flat. As Amir is not domiciled in the UK, only his UK based assets would be included.

4.

Gareth has decided to move to New Zealand, and will take steps to change his domicile to that country. What is the most likely timescale before he would no longer be deemed UK domicile?

Correct answer D – 7 years. Gareth would be deemed domicile for 5 years after he changed domicile. However, that clock only starts ticking when all arrangements to change domicile have been made, he actually has moved and he can demonstrate that his move is permanent. This means the whole process is likely to take significantly longer than five years.

Question 42

Tax Rules on UK and Foreign CGT depending on Residency and Domicile status.

Answer 42

UK Resident - Liable on gains from relevant assets wherever situated.

UK Resident but Not Domiciled - Liable on gains from relevant assets wherever situated unless remittance basis is claimed in which case only UK assets taxable.

Temporary Resident - Out of UK for less than 5 tax years. On return liable on disposals abroad that acquired before departure a.k.a (re-entry charge). No re-entry charge if not UK residen tfor four of seven tax years before year of their departure.

Non Resident - Typically no CGT for non-residents unless on a UK residential property since 6 April 2015. If owned before then CGT liable for period since 6 April 2015.