Do you know about the tax advantages of being non-UK domiciled (even if you are UK resident)?
Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. Taxation is a complex subject and what follows is a basic outline only.
David Anderson is a specialist Tax Solicitor at Sykes Anderson LLP and can be contacted at at david.anderson@sykesanderson.com or on 020 3178 3770.
Residence v. Domicile
In the UK, a distinction is drawn between residence, ordinary residence and domicile. To be regarded as a resident in the UK you must normally be physically present in the country at some time in the tax year. You will always be a resident if you are here for 183 days or more in the tax year. If you are a resident in the UK year after year then you will be treated as being ordinarily resident here. Where you are a resident in more than one country the UK may have a double tax treaty with the country containing special provisions to deal with your situation.
Domicile is a different concept to residence or ordinary residence. It has a different meaning in Anglo Saxon countries to continental Europe. Broadly speaking you are domiciled in the country in which you have your roots, and you can only have one domicile at any given time. It is possible to be resident and ordinarily in the UK for many years without being domiciled here.
Moving to the UK and becoming UK Resident
The UK tax year runs from 5th April to 6th April and not from 1st January to 31st December. If you move to the UK part way through a tax year you should normally be able to have your tax liabilities on income calculated on the basis of the period of your actual residence rather that the entire tax year.
Generally, if you arrive in the UK to live here permanently or you come and remain here for 3 years or more you are treated as a resident and ordinarily resident from the date that you arrive.
Moving to the UK and preserving your non-UK Domicile
If you wish to preserve your non-UK domicile you should at least retain your original passport and links with your home country. This could mean retaining a holiday home in that country, or ensuring that you make frequent visits to that country. You should preserve links with your friends and family in that country and you may for example have the intention to retire back to your home country. You should take professional advice before submitting your first tax return in the UK.
Some of the Advantages of being non-UK domiciled (even if you are UK resident):
- As a non-domiciled individual, you are able to make capital gains in the UK through an offshore company, which will not be chargeable to UK capital gains tax.
- Income that is not remitted to the UK will not be chargeable to UK income tax. Contrast this with a UK domiciled individual whose worldwide income would be chargeable to UK tax unless tax was paid in the country in which it was earned.
- Ordinarily resident and resident individuals in the UK who dispose of overseas assets will normally be liable to capital gains tax on any gains arising from those disposals. However, if you are not UK domiciled you are only taxed on such gains to the extent that they are received or remitted to the UK in a tax year for which you are a resident or ordinarily resident here.
- UK tax will normally be due on investment income wherever it arises. However, where you are resident in the UK but non-domiciled you are entitled to receive overseas investment income gross, provided it is not remitted to the UK.
- You will pay no Inheritance Tax on assets, which are not situated in the UK though this is subject to various other limitations.
Anyone with substantial assets moving to the UK is well
advised to look into these advantages before moving. You
may be able to utilise the Double Tax Treaty with your country
of origin to legally reduce or eliminate your liability
to tax whilst you are resident in the UK.
9 Devonshire Square, London EC2M 4YF Tel 020 3178 3770 Fax 020 3178 3771 DX 729 London/City E-mail: |
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