In today’s global economy, individuals need to understand their exposure to UK tax and National Insurance as they come to or leave the UK, or divide their time between two (or more) jurisdictions.
In establishing your exposure to UK tax, you need to consider your country of residence and domicile.
Domicile is a legal concept. It describes the country that you consider to be your home and where you ultimately belong. It is distinct from nationality, citizenship and residence. It is only possible to have one country of domicile at any given time.
Residence
The Statutory Residence Test (SRT) has been in force since 6 April 2013. It applies a series of tests taking into account days spent in the UK and overseas, work patterns and connections with the UK in order to establish your UK residence position for a given tax year.
The SRT is complex but, if followed correctly, provides certainty as to your UK residence status. HMRC’s guidance on the matter covers over 100 pages and we can assist you in establishing how the rules apply to your individual circumstances.
Domicile
Your domicile is broadly where you have your permanent home and where you belong. It is where, whenever you are absent, you ultimately intend to return. If you are not domiciled in the UK, you may be able to benefit from a number of tax advantages.
From 6 April 2017 new deemed domicile rules came into force. These rules mean that you are treated as domiciled in the UK for all tax purposes once you have been UK resident for at least 15 of the last 20 tax years.
Where am I domiciled?
Working out which country you are domiciled in can be complicated, and there are many factors which need to be considered. There are three types of domicile:
- Domicile of origin; based on the domicile of your parents (usually your father) when you were born.
- Domicile of dependence; if the person whom you are legally dependent upon changes their domicile when you under 16 years of age.
- Domicile of choice; when you settle permanently in another country and break all ties with the country of your existing domicile.
How does domicile affect my tax position?
You may be able to benefit from a number of UK tax advantages if you are resident but not domiciled in the UK including:
- Only paying UK tax on your foreign investment income and capital gains when remitted to the UK.
- Claiming tax relief on overseas workdays for the first three years you are resident in the UK.
Your domicile status also affects the tax payable on your Estate when you die.
What is deemed domicile?
From 6 April 2017 new deemed domicile rules came into force. These rules apply for all tax purposes where either:
- you were born in the UK, have a UK domicile of origin and are resident in the UK for 2017/2018, or later years, or
- you have been UK resident for at least 15 of the 20 tax years immediately before the relevant tax year.
How we can help
We offer advice in the following areas:
- Establishing your UK residence status and advising you on your exposure to UK taxes.
- National Insurance obligations on coming to or leaving the UK.
- Non-residential Capital Gains Tax.
- Double tax relief claims, including foreign tax credits and treaty exemption.
- Establishing your actual and deemed domicile status.
- Claiming the remittance basis and paying the remittance basis charge.
It is important to understand your domicile status and how it affects your tax position. Please contact Emma at CLKG for further details.
