Best International Tax Advice for UK Individuals – Resident, Domicile, Income Tax, IHT & CGT + Temporary Non-Residence Rules
The world is getting smaller. Not literally, as this would cause mass global panic.
But in terms of how we spend our working lives and leisure time, we tend to have a very international view. This means people are often on the move.
This can create a number of tax issues and opportunities
Residence & International Tax
Many factors which will affect an individual’s exposure to UK (and other jurisdiction’s) taxes.
A key factor will always be an individual’s residence.
A UK resident individual will usually have to pay UK tax on their worldwide income and gains. The potential impact of double taxation might be reduced by the availability of double tax treaties.
Where one breaks their UK residency then the general rule, subject to some exceptions and all important anti-avoidance provisions, their tax exposure will be reduced to UK income and some UK gains.
Do not fall in to the trap of jumping out of the frying pan in to the fire.
One must be conscious of local taxes which might be higher than UK ones.
Domicile can be an important factor in determining an individual’s tax position. Those having a domicile for tax purposes outside the UK are frequently referred to as ‘non-doms’.
Non-dom tax status may confer a number of tax advantages, although the UK Government’s recent legislative changes have sought to reduce, and in some respects, eliminate these.
Income Tax & Capital Gains Tax
A non-UK resident will usually be subject to UK income tax on any UK source income. However, any non-UK income will be outside the scope of UK tax. One does need to be conscious of anti-avoidance rules such as the Temporary Non-Residence rule.
The position is slightly improved for a Non-Resident when we are looking at CGT. The general rule being that any gains on UK assets are outside the scope of UK CGT. Historically, this was only subject to the temporary non-residence rule below.
This benign position has been somewhat changed by recent legislation.
The new rules drag in to the CGT net most direct and indirect interests in UK real estate.
Temporary non-residence rules that apply for both income tax and capital gains. Where the rules bite then certain (but not all) capital gains and income can become chargeable on the return.
We have an experienced team that can assist you in planning and timing of the payment of income (eg substantial dividends) and also in relation to the sale or transfer of assets.
Unlike the other taxes, the IHT position is primarily dictated by the domicile of the individual in question. The general rule is that:
- UK domiciled: they are subject to UK IHT on worldwide assets; and
- Non-UK domiciled: the starting point is that they are subject to UK IHT on UK assets only
However, if the non-UK domiciled individual has been resident in the UK for 15/20 tax years then he or she is deemed domiciled for IHT purposes. This means that they will become subject to IHT on worldwide assets.
We have extensive experience in advising internationally mobile clients around their estate planning.
International Tax Investigations
One area where it is abundantly clear the world is getting smaller is in the exchange of information between tax authorities. HMRC (and their international counterparts) have an unprecedented amount of information about your financial affairs.
If this information leads HMRC to suspect you have underpaid tax then they are likely to commence a tax investigation.
Further, HMRC’s powers have been sharpened in this area and also now have a specific offence of offshore tax evasion in their armoury. This is a strict liability offence meaning they do not have to prove intent like most criminal offences.
We have an experienced tax investigation team who can assist if you find yourself subject to such an enquiry.
We work with a number of landlords of UK property who themselves live overseas. Whether a trust, company or individual the rental income will be within a special regime.
It should be noted that Companies will fall outside of the Non-resident Landlord scheme with effect from April 2020 and be dealt with in the normal corporation tax regime.
If you would like to explore international tax planning for individuals, then please do get in touch.
International tax planning for individuals was last updated on 4 July 2019.