Domicile & Residence Planning

Coming to the UK

We have helped many people and their families prepare for a move to the UK. Specialist tax advice before you arrive can give you peace of mind that you understand what your tax position will be, and tax planning can reduce your tax bill substantially. We can help you to explore the variety of options available to you in order to find the best answer for how you want to come and go from the UK and how you manage your assets.

Basis of taxation in the UK

Residence

UK taxes on income and capital primarily depend on your residence status. If you are not resident in the UK you would only be taxable on UK income and generally not on disposals of UK assets (other than potentially UK property). There is a statutory residence test which sets out the rules to determine whether you are resident in the UK, and these vary depending on whether you are coming to the UK or leaving the UK.

Understanding how the statutory residence test applies to your circumstances is key, and these rules, coupled with the UK’s unusual tax year running from 6 April to the following 5 April, may allow you to make disposals before arrival to fund UK expenditure free of UK tax. It may also be possible to spend substantial time in the UK without becoming tax resident.

Domicile

Where you are not domiciled in the UK, you will only have to pay inheritance tax on UK assets (which includes UK residential property held through companies and trusts). Domicile is distinct from residence. Your country of domicile is not necessarily the country where you have your permanent home or have a substantial connection to and needs to be checked carefully.

If you are not domiciled in the UK you can also claim the remittance basis, which means you would only pay income tax on UK income and capital gains tax on disposals of UK assets. Non UK income and capital gains on non UK assets will only be taxable if these are brought / used – remitted – into the UK. Once you have been resident in the UK for 7 of 9 years you must pay an annual charge of £30,000 to use the remittance basis. This charge increases to £60,000 once you have been UK resident for 12 of 14 years.

Being able to show that you are not domiciled in the UK therefore allows you to potentially structure your affairs in a tax efficient manner. You will be treated as domiciled in the UK once you have been resident here for 15 out of 20 years, but specialist tax advice can allow you to continue to access some of the benefits of the remittance basis even after you have become deemed domiciled.

It is important to take specialist tax advice on your residence and domicile status before coming to the UK to ensure that you take advantage of the current rules that are available to you and to preserve the status of funds that can be brought to the UK without a tax charge.

UK tax return requirements

In the UK you are required to self-assess your tax liabilities. Spouses are subject to independent taxation and should file separate tax returns, which is done by the 31 January after the end of the previous tax year on 5 April. We are happy to help with this process, including registering with HMRC and preparing returns.

Leaving the UK

If you are thinking of leaving the UK, we can advise you on your residence status, the best date on which to choose to leave and the interaction with the tax position in your destination country. You may still have assets in the UK such as the family home or a business or rental property and so you might still have filing obligations, and you may need to preserve any reliefs available on those assets.

As a member of GMN International, we can also liaise with firms in that network to help make your move as simple and easy as possible.

How we’ve Helped:

  • Advising a family coming to the UK on how to set up their bank accounts before they arrive to ensure that they could bring the maximum amount of money into the UK without triggering unwanted tax liabilities. We helped them identify which assets to sell in order to fund UK expenditure in the most tax efficient way. Finally we clarified the tax status of the assets that they retained, and how best to hold them going forward.  This included how to fund and hold their family home and advising them on whether they should dispose of their pre-existing property.
  • Advising on how to fund and hold a UK family home, and whether they should dispose of their pre-existing property.
  • Advising a UK resident and domiciled family on permanently emigrating from the UK while retaining their UK business interests
  • Advising a wealthy European family on UK residence and domicile issues covering the different requirements of the family members with differing levels of exposure to the UK.
  • Helping a UK resident but non-domiciled family to position themselves for a possible exit from the UK in anticipation of a possible sudden change of business circumstances.
  • Helping a dual resident individual to establish which country of residence takes precedence under the double taxation agreement.
 
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