Residents - Foreign Citizens Living in the UK
Our textbooks are full of definitions of wonderful terms like domicile. Our library of double taxation treaties is massive.
More (but not all) UK taxation depends upon the residence status of the taxpayer. Assessing where a taxpayer is resident is by no means simple. In 2013 a complex set of statutory tests replaced the old common law rules, but international treaties still overrule domestic law.
There are two methods by which overseas income is deemed to be taxable in the UK. The first is the arising basis, whereby overseas income is taxed as it arises irrespective of when or even whether it is brought into the UK. This applies to all UK domiciled residents. The second is the remittance basis, whereby any income brought into the UK is taxable at the date it is remitted. This is only an option for non-domiciled UK residents.
However the remittance basis has become more and more complex in recent years. In most cases individuals who have been resident for at least 7 of the preceding 9 tax years with unremitted income in excess of £2,000 will be liable to a minimum £30,000 flat charge if they wish to claim the remittance basis.
For Non Domiciled Persons of less than 7 years residence or those who have paid the charge:
The manner in which any income from employment will be taxed depends on many factors, including where the employer is based, whether the duties are performed in the UK, and the precise residence position of the employee. There are also different National Insurance provisions, depending on the double taxation treaty in force with the country of domicile.
Pensions and investment income (apart from UK government securities which depend on the residence position year on year) paid in the UK are liable to UK tax, while those paid abroad are liable to tax when the income is brought into the UK.
Income from self-employment is taxable in the UK if any part of it is carried on here, while profits from a trade carried on wholly outside the UK are again only taxable when they are brought in to the UK.
Capital gains tax works in the same way with gains on UK assets being liable to tax while overseas assets are only liable if the proceeds are received in the UK.
Hornbeam can advise on the liability to UK tax of income arising worldwide, and of course prepare your UK tax return, as well as provide details of methods of arranging your affairs so that monies brought into the country can be identified as capital rather than income liable to tax.