UK TAXATION FOR MOBILE PROFESSIONALS

Tim Keeley BSc TEP

CTA (Fellow)

Numera LLP

SCOPE OF TAXATION –

UK RESIDENT INDIVIDUALS UK resident and domiciled individuals - Liable to the following taxes on a worldwide basis:

Income Tax Capital Gains Tax Inheritance Tax (charged on the estate of an individual upon death)

UK resident but non-UK domiciled individuals Worldwide basis of taxation applies. However (and usually by election) a non-UK domiciled individual can

reduce his tax liability to the following: UK source income and capital gains Inheritance Tax on UK located assets only No tax on foreign source capital gains provided that there is no remittance of such income or gains to

the UK By further planning, normally by using a trust, sometimes in conjunction with a non-UK resident

company, the following can also be achieved for non-UK domiciled individuals: No Capital Gains Tax on the gains arising from any assets unless those gains are remitted to the UK No Inheritance Tax even on UK located assets (apart from UK residential property which will remain

liable to IHT from 6 April 2017)

SCOPE OF TAXATION -

NON - UK RESIDENT INDIVIDUALS

UK non-resident but still UK domiciled individuals - Liable to the following taxes:

Income Tax on UK source income only No Capital Gains Tax on disposal of any assets apart from gains on the disposal of UK

residential property (but not the main family home) Inheritance Tax on worldwide assets (not merely UK assets)

UK non-resident and non-UK domiciled individuals Income Tax on UK source income only No Capital Gains Tax on disposal of any assets apart from gains on the disposal of UK

residential property (but not the main family home) Inheritance Tax on UK assets only

PRINCIPAL UK TAX RATES

Income Tax – 0-45% (45% applies to all income above £150,000)

Capital Gains Tax – main rate is 20% but 28% rate applies to gains on disposal of UK residential property (but not your main or only family home)

Inheritance Tax – 40% - which applies to the value of the estate above the exempt limit of £325,000 which is not taxable

UK TAX ADMINISTRATION

BASIC POINTS

The UK tax year runs from 6 April to 5 April – the UK does not operate a calendar year for tax purposes

Taxes are administered by H M Revenue & Customs (HMRC) Individuals who are liable to tax have to inform HMRC of this fact UK employment income is normally taxed by the employer, who deducts the tax and

passes on the tax to HMRC Self employed individuals and shareholders of companies do not usually have tax deducted

from their income If you are not sure if you have to complete tax returns for UK purposes, take professional

advice

WHY DOES ALL OF THIS

MATTER?

Because your UK tax liability will depend upon the following questions:

Are you already UK tax resident?

Are you not yet UK tax resident but intending to come to the UK?

If so for how long do you intend to say in the UK?

If you decide to live in the UK, do you intend to remain here permanently or to leave at some point to return to your home country or to live elsewhere?

If you are currently UK tax resident, are you intending to leave in order to live and work abroad?

If you intend to move abroad, will this be for a limited period or do you intend to live outside the UK permanently?

WHAT OTHER FACTORS ARE

IMPORTANT?

If coming to the UK from overseas – the tax regime of the country where you currently reside

If leaving the UK – the tax regime of the country to which you intend to relocate

Your UK domicile – probably more likely to be important for persons who come to the UK from overseas and/or persons who were born to a family of non-UK origin

The value of any overseas wealth that you may have

(Possibly) any members of your family who are living overseas

HOW IS UK TAX RESIDENCE

DETERMINED?

By a statutory residence test that was introduced from 6 April 2013 Its rules are complex. However a person who is in the UK for 183 days or more in the UK

tax year is automatically UK tax resident. However a person who spends more than 16 days in the UK tax year can also sometimes

be UK tax resident. Best to take advice if you are not sure if you are tax resident, and especially if:

You are planning to come to the UK to live and work You are already in the UK but don’t know your tax residence status You are planning to leave the UK to live elsewhere Tax residence is not the same concept as having a visa or permission to live

in the UK which might be granted by the UK immigration authorities

WHAT ABOUT MY DOMICILE?

A foreign domiciled individual may be able to reduce his liability to taxes in the UK, especially if he may have foreign income, capital gains and non-UK assets of substantial value.

If this is likely to apply to you – best to take professional advice Domicile is a complex area but a few key points are listed below Domicile is not the same as tax residence – so an individual can have a different tax

residence to his domicile. Nor is domicile the same concept as citizenship A person born to overseas parents who is living in the UK but does not intend to do so

permanently may still have a foreign domicile A person born to UK parents will find it very difficult to lose his UK domicile unless he:

Decides to and actually moves to live overseas and Intends to live in the adopted country overseas indefinitely

From 6 April 2017 any person who has lived in the UK for 15 tax years or more will be treated as domiciled in the UK for tax purposes even if his domicile for other areas of UK law remains overseas

WHAT PLANNING OPTIONS

MIGHT BE AVAILABLE TO ME?

You may be able to take steps to reduce your UK tax liabilities depending upon your current and anticipated tax status.

The key points are:

Planning before you become UK tax resident

Planning whilst you are UK tax resident

Planning if you are intending to leave the UK

Avoiding artificial and aggressive planning which HMRC are increasingly attacking – if something sounds too good to be true it probably is too good to be true

If there are overseas taxes in the country that you are leaving in order to come to the UK, or in the country that you may be moving to if leaving the UK, overseas tax advice may also be essential

PLANNING OPTIONS ARRIVING IN THE UK

EXAMPLES

Protecting overseas income and capital from UK taxation before arrival

Keeping income generated overseas in separate bank accounts from UK source income

Claiming the remittance basis of taxation once you become UK tax resident especially of you have significant overseas income

PLANNING OPTIONS ALREADY RESIDENT IN THE UK

EXAMPLES

Keeping income generated overseas in separate bank accounts from UK source income

If foreign domiciled, taking action to limit the taxation of overseas income and assets – especially if you are at risk of becoming UK domiciled

Don’t overlook your UK income and how it might be structured. Consider:

Pension planning

Tax efficient investments

Structuring some of your income through a company (UK Corporation Tax rate is only 20% and may fall to 16% in the next few years – UK Income Tax rates can be as high as 45%)

Dividing income and assets among other members of the family

PLANNING OPTIONS LEAVING THE UK

EXAMPLES

Checking the tax regime of the country where you intend to relocate

Paying dividends from UK companies until you are nolonger UK tax resident (no tax on dividend)

Delay capital gains disposals until non-UK resident

If intending to leave the UK permanently, keep your domicile status under review – if you acquire a foreign domicile there may be greater opportunities available

OTHER MATTERS

Make sure (in particular if you hold significant assets) that you have a valid Will in place especially for UK assets

Some countries have succession laws on death which work upon forced heirship – a person may not then be free to leave his assets on death in accordance with his wishes. Sometimes planning ahead can reduce this risk

Taxation does not stop at ‘The White Cliffs of Dover.’ If your family is internationally based, the advice that you need might also need an international element.

Such advice may also require an understanding of the different interpretations that some territories place upon structures that are recognised in the UK but may be perceived differently overseas

AND FINALLY

UK taxation is a complex subject. It covers several thousand pages of legislation and tax cases. Even tax experts do not always agree on how every aspect of the law should be interpreted

It has been possible to cover only a few basic concepts in this brief presentation and even then only in the most general terms

I hope this has been helpful but no liability can be accepted for any planning that is undertaken without suitable professional advice having been obtained

Remember also that there are other things in life to worry about apart from taxation!

Don’t be fooled by those who may offer tax schemes that may appear to promise more than is realistic

THANK YOU FOR PARTICIPATING

Tim Keeley BSc TEP CTA(Fellow) Numera LLP Tel: 0044 207 794 5757 E mail: tk@numerallp.com