Losing your UK resident tax status can be a very good tax break, as generally non residents are exempt from UK tax on overseas income and can avoid UK Capital Gains Tax (CGT) as well.
A new statutory residence test came into effect on 6 April 2013. It is designed to give greater certainty and clarity as to whether or not you are UK-resident for tax purposes and therefore whether or not you are subject to UK income and capital gains tax. The test does not have retrospective effect, so it does not apply for tax years before 6 April 2013.
The statutory residence test determines an individual's residence status for the whole tax year. However, if part way through a tax year, an individual leaves the UK to live or work abroad or comes from abroad to live and work in the UK, and certain conditions are met, the tax year will be "split" into two parts.
The test distinguishes between ‘arrivers’ and ‘leavers’. Arrivers are people who have not been resident in the UK in any of the previous three tax years. Leavers are those who have been resident in any of the three previous tax years. Arrivers and leavers must use different measures to establish their residence status.
The first part of the test is an ‘automatic overseas test’. The automatic overseas test sets out factors which, if they are met, prove that a taxpayer is conclusively non-resident. If the individual is not conclusively non-resident, he/she moves on to the automatic residence test, which sets out factors which prove someone is definitely UK-resident.
If an individual is neither conclusively resident nor non-resident under the tests, the ‘sufficient ties test’ applies. This sets out five further factors which must be considered, together with the number of days spent in the UK, in order to determine an individual’s residence.
In general your domicile is where you were born or where your father was born (Domicile of origin). It is possible to obtain a domicile of choice by completely cutting all ties with your country of birth and never intending to return.
Domicile has a major impact on the treatment of overseas income and gains remitted to (brought into) the UK. Great care should be taken by non UK domiciles wishing to leave overseas income outside the UK tax net so as not to incur the Remittance Basis Charge.
At Acklands we can advise on a range of issues regarding a potential move abroad including:
Reducing exposure to UK income tax, CGT and Inheritance Tax (IHT) on moving overseas
Planning your exit from the UK
Dealing with all UK tax reporting prior to departure and whilst non resident
A. Call Tim O’Keefe for a free consultation to see how we can help on 0117 923 7788 Please note that phones are answered between 8.30am & 5.15pm Monday to Friday