Posted by Nick Day on 03 Mar 2016

Year End Tax Planning for Non-Doms and Expats

There are always as number of factors for “expats” to consider when it comes to year end tax planning, whether this relates to non-domiciled individuals (“non-doms”) living/working in the UK or Brits leaving the UK and seeking to establish non-residence status. 

The Issues for Expats

You can click here for more detailed information on our services for Expatriates – but in summary possible year end planning issues include:

  • Reviewing the impact of the Statutory Residence Test that determines your UK tax residence status from 6 April 2013 onwards.
  • Reviewing whether “non-doms” should file on the Arising or Remittance Basis for 2015-16, and if tax resident in the UK for several years, whether the Remittance Basis Charge (of £30,000, £60,000 or £90,000 for 2015-16 depending on how long you have been tax resident in the UK) should be paid.
  • For non-domiciled expats who have arrived to work in the UK and who may benefit from “Overseas Work Days Relief”, whether a fresh compliant offshore account should be opened to receive salary after 5 April 2016. Click here for a more detailed article.
  • Inheritance Tax (IHT). If you are non-domiciled and have been UK tax resident in any part of 17 out of the previous 20 UK tax years, you will become “deemed-domiciled” in the UK for IHT purposes, meaning that both UK and non-UK assets are liable to IHT.  If you are to become deemed domiciled in the UK you should consider taking advance planning action.
  • “Business Investment Relief” is a way for non-doms to bring funds to the UK that would otherwise be taxed on the Remittance Basis, by investing them in a qualifying UK trade (which can be their own UK trading company). The tax otherwise payable on taxable remittances typically would be 45%.

All non-doms should also review the impact of the Treasury announcement that from 6 April 2017 onwards, anyone that has been UK tax resident for at least 15 of the past 20 tax years will be “deemed domiciled” for all UK tax purposes – i.e. for income tax, capital gains tax and Inheritance Tax purposes.

Also, individuals who return to the UK will be deemed domiciled in the UK from 6 April 2017, if they were born in the UK and had a UK “domicile of origin”.  

UK Resident

If you are UK tax resident and deemed domiciled in the UK you will not be able to claim the “Remittance Basis” of taxation in respect of your non-UK income and gains.  Furthermore, if you are deemed domiciled in the UK you will be liable to UK Inheritance Tax on your world-wide assets and not just your UK assets.

Individuals

Individuals with non-UK company and trust structures in place may want to consider becoming non-resident by 5 April 2016 so that restructuring of offshore companies/trusts can take place before the new rules come into play.

Non Domiciles

If you are a non-dom and likely to become deemed domiciled in the UK from 6 April 2017 onwards, you could consider the merits of setting up an “Excluded Property” trust to reduce exposure to UK Inheritance Tax.  However, whilst this may ultimately prove to be a beneficial planning exercise it would be a leap in the dark as it is not known how the new rules will apply at this point.

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.