Posted by Nick Day on 08 Oct 2015

Non-Domiciled Status and UK Tax Planning

A consultation has been launched by the Government regarding the stricter regime to be introduced for non-domiciled status from April 2017. Please see our previous article on this subject. However, the good news is that for non-domiciled individuals moving to the UK to work for relatively short periods of time, the UK tax rules remain highly beneficial.

Many “expats” we meet and help move to the UK for a few years only before setting sail for work in another country and this group of people are set to continue to enjoy significant UK tax benefits if proper tax planning is undertaken in advance. The “remittance basis” of taxation is a special method of filing UK tax returns that is only open to non-domiciled individuals or to “non-doms” as they are often referred to.

UK Domiciled Individual Tax Returns

UK domiciled individuals have to file their UK tax returns on the “arising basis”, reporting world-wide income and gains, but the remittance basis is available to UK residents that are non UK domiciled and means UK tax is paid on foreign income/gain only if remitted (brought) to the UK.

Providing the correct planning steps are taken, non-domiciled individuals filing their UK tax returns on the remittance basis can legally avoid paying UK tax on earnings relating to non-UK workdays for the year they arrive in the UK after first becoming UK tax resident and the next two tax years. Non-UK investment income/capital gains that arise outside the UK can also avoid UK tax if not remitted to the UK.

Once a non-dom has been UK tax resident for more than seven years a hefty Remittance Basis Charge is payable should the non-dom continue to wish to file on the remittance basis, which increases the longer the individual remains in the UK.

The UK has some complex “mixed fund” rules and hence it is important to seek advice in advance on how to set up non-UK bank accounts and investments in the correct way, so that offshore funds are not “contaminated” with funds that could perhaps be remitted to the UK on a tax-free basis, such as “pre-UK” earnings/capital.

Care must also be taken in tracking/monitoring remittances to the UK, which will include cash transfers to the UK, asset transfers to the UK, and the use of credit cards and offshore loans depending on how these operate. We have wide experience of tax planning in this area so if you are non-domiciled and would like to discuss how you might legally minimise your UK tax liabilities, please contact us for a consultation.

Expat Tax Tips

Please see our article on the “top ten expat tax tips for individuals moving to the UK” that gives outline details of some of the tax planning that is available, and our page outlining further details of the services we offer to “Expats”.

Please also see our summary of the UK tax residence/domicile rules.

Specialist Expat Tax Planning Services

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com.