Week 2 residency Flashcards
Split year rules
if the move overseas is for other than work, then split year treatment will be available for a person who ceases to live in the UK for less than 16 days in trhe year. Thye must show that they intend to live abroad, more or less permanently by evidencing links with the new country within 6 months of leaving in the UK. If the move overseas is other than for work, then split-year treatment will only be available if the person ceases to have a home in the UK at some point in the tax year and once they leave they return for less than 16 days in that year. They must also show that they intend to live abroad more or less permanently by evidencing links with the new country within 6 months of leaving the UK. They must not be UK resident in the following tax year.
Different rules apply to persons arriving in the UK. Such a person must not have been resident in the UK in the previous tax year. If they only had one home, that must not have been in the UK. They must not have had sufficient UK ties (the number of ties deemed ‘sufficient’ will vary according to how long they spend in the UK in the year of arrival and the time-driven ties are scaled down according to the length of time in the UK).
Capital gains arising in the overseas part of the year will generally not be chargeable to UK tax, although there are complex rules.
Income
World wide as it arises
entitlement of personal allowance. ITA 2007
Income Taxation of the non-resident.
Foreign source not charged to UK income tax.
tax is charged on UK income, ‘merely incidental’
Tax on UK pensions and employment.
Tax is charged on profits of a trade which is not carried out in the UK.
Investment - tax is limited to witholdings.
May exempt host country tax on sourced income, Article of employment.
Entitlement to personal allowance.
No entitlement to persons claiming remittance.
CGT of non-resident
NRCGT gains. http://www.hmrc.gov.uk/gds/cg/attachments/CG-APP14__Non-resident_capital_gains_from_6_April_2019_draft_guidance.pdf
carrying on a business in the UK through a perm establishment.
Income and CGT
UK res are taxed on arising basis. including income arising outside the UK.
Residents who are not domiciled in the UK, have a special set of rules.
Overseas sources of ivestment income.
Domicile
primary role as resulting factor.
Main reason for wishing to establish a person’s domicile is outside the UK is that any foreign income or proceeds of sales of foreign assets will only become liable to UK income tax if actually remitted to the UK.
The main reason a person would want to escape UK IHT on non - uk assets.
Domicile
Domicile of origin
Domicile of dependence
Domicile of choice
Current rules for taxing non - doms.
Overseas workday relief 1st 3 yrs UK residence.
Can choose to pay UK tax on foreign income and gains only/if when remitted into the UK.
Tax haven - it is difficult to establish exactly when and if foregin income has been remitted into the UK. It is difficult for HMRC to track all flows of funds into the UK to such persons.
The remittance basis
Brought in/enjoyed in the UK.
Gifts
loan repayments
Scope of IHT
Persons linked to the UK
Deemed domicile
3 year rule
15 year rule
Deemed domicile for UK IHT
Deemed to retain his UK domicile for a period of 3 years.
Those leaving the UK - need to establish that they now have a foreign domicile of choice before entering into a transaction. the best solution is to wait 3 years before making a gift of foreign situs assets in excess of the IHT nil-rate band to a trust.
3 year rule- common law allow an individual to abandon a domicile for another. (267)(1)(a) imposes a delay of 3 years between the date on which the individual loses a UK domicile for general purposes on the date in which he ceases to be UK - dom for IHT purposes. Any non-exempt transfers withinthis period will continue to be in the scope of IHT.
17 year rule trap
17 year rule may happen sooner than expected. It can happen in a little as 15 years and 2 days.
- A non-dom in his 16th year must leave before the end of the 16th year as a single day in the subsequent year will pull him into IHT with this rule.
- it applies notwithstanding the cessation of residence. a non-dom who has been deemed domicile by this rule, will remain domicile for 3 tax years after cessation of UK residency.
Domicile mismatches and the elections
Tax free spousal transfers.
limitation between dom and non-dom. - once election is made non dom will become dom for IHT purposes only.
Death election - may be made within 2 yrs of the death of the domiciled spouse. The effect being that failed PETs may then be converted into exempt transfers.
GWR rules - property are subject to a reservation of benefit. the relevant period ends on the donors death and begins 7 years before then, (FA 1986 s102(1)). if the donors property is subject to a reservation, he is treated as beneficiary entitled to it immediately befor his death. It is then included in his estate for IHT purposes.
Excluded property
Any transfer of exluded property is not chargeable for IHT. Factors inndeterming exlusion; - Domicile of transferor -situation of te property. -nature of transfered properrty.
