UK tax issues to be aware of for professionals helping people move to the UK

Our tax year runs from 6th April to 5th April.

For every individual it is necessary to determine the following for the year ended 5th April
– their domicile; and
– their tax residence status
And from this their liability to UK income tax and capital gains tax to 5th April.

There are 3 types of domicile:
– domicile of dependency;
– domicile of origin;
– domicile of choice
It is a reasonable assumption that most new immigrants are not UK domiciled when they first move to the UK.

If you are UK tax resident to 5th April, why is being domiciled outside the UK beneficial from a UK income tax and CGT standpoint? It effectively allows you to elect to put up a wall to 5th April and keep all your non UK source income and gains for the year outside of UK income tax/CGT unless ‘remitted here’. This is called the remittance basis of taxation (‘RB’).
NB clients need to be aware
– that there is a wide definition of ‘remitted’ including via a ‘relevant person’; and
– of our ‘mixed’ bank account rules.

Clients,  UK tax resident to 5th April and electing ‘non doms’,  need to know they can’t avoid having a taxable UK remittance to 5th April by e.g. giving wealth abroad to a defined group of people including a non UK company they are involved with and that person bringing the otherwise taxable sum to the UK. They also need to know that if they remit funds here from an offshore bank account that has monies from many different sources in it e.g. salary; dividends; chargeable gains and gifts that HMRC has a statutory regime that taxes the remittance to the UK as if the most tax expensive sum has been brought here first.What does it cost to make a remittance basis election?

Years UK resident             Remittance basis charge
UK tax resident less than 7 of the preceding
9 tax years                        £30,000

UK tax resident for at least 12 of the preceding
14 tax years                      £60,000

UK tax resident for 15 or more of the preceding  
20 tax years                      Ineligible to claim RB

How do these rules apply e.g. to a Tier 1 Investor visa or a business visa applicant who wants to bring prior earned offshore income/gains to the UK to help buy a home here?

In order to apply our statutory residence test introduced by the Finance act 2015, one must determine X’s residence status to 5th April

Our self assessment system of taxation imposes on the taxpayer the obligation to self assesses their UK tax status and UK tax liability to 5th April and report it to HMRC.

Double tax treaties are a bilateral contract between e.g. the UK and a named 3rd country. It may be for the year of arrival (or departure) X is a tax resident of their country of departure and not their new ‘home’. This needs to be considered; assessed and if relevant claimed on a case by case basis. All double tax treaties have a residence tie breaker clause.

Issues to watch out for if X becomes UK tax resident for the first time in the year ending 5th April include inadvertently making
– His/her non-UK private company UK tax resident; and/or
– His/her offshore trust UK tax resident

Robert Schon