The world is shrinking, and ‘globe-trotting’ is no longer the privilege of the super-rich. People of relatively modest means are increasingly choosing to live, work and retire in places that may be vastly different from where they were born. The tax and social security implications for such individuals and their trailing families can be complicated. Sound tax planning at the outset is invaluable.
For those leaving or coming to the UK, determining UK tax residence is arguably the starting point for any further international tax planning.
Tax residence is a concept that does not rely upon a person’s nationality, place of birth or the location of their home. However, these factors amongst others may be considered in determining a person’s tax residence.
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Determining residence status (2013/14 onwards)IntroductionResidence is one of the key factors you should consider when deciding whether, or to what extent, an individual is liable to tax in the UK. The other key factor is domicile.Residence refers to the individual’s tax status on a year by year basis and domicile is the place which a person regards as their true home. See the Domicile guidance note.This guidance note explains the statutory residence test (also known as the SRT), which applies from 6 April 2013. It applies for income tax, capital gains tax, inheritance tax and corporation tax (to the extent that the residence status of individuals is relevant to the latter two taxes). The statutory residence test is not used for national insurance purposes.For the implications of residence status on UK taxation, see the Residence ― overview guidance note.If the individual comes to the UK or leaves the UK but is classed as resident in that tax year under the statutory residence test, it may be possible to split the tax year into periods of UK residence and non-residence. For a discussion of split year treatment, see the Residence ― issues on coming to the UK (2013/14 onwards) and Residence ― issues on leaving the UK (2013/14 onwards) guidance notes.Residence is also discussed in detail in Simon’s Taxes Division E6.1. You may also find Tolley’s Statutory Residence Test useful.HMRC online indicatorHMRC has published an online tool that gives an ‘indicator’ of an individual’s residence position. The link to this
Residence ― issues on leaving the UK (2013/14 onwards)IntroductionThe impact of residency status on the liability to UK tax is discussed in the Residence ― overview guidance note.The rules on determining residency status changed on 6 April 2013 with the introduction of the statutory residence test (also known as the SRT). This guidance note considers the impact of departure on the UK residence position under the new rules in place from 6 April 2013 onwards. For guidance on determining residence status under the statutory residence test, see the Determining residence status (2013/14 onwards) guidance note.It is recommended that you read both of these guidance notes before continuing. The position before 6 April 2013 is covered in the Residence ― issues on leaving the UK up to 5 April 2013 guidance note.As noted above, this guidance note deals with those who left the UK on or after 6 April 2013. The position for those coming to the UK after this date can be found in the Residence ― issues on coming to the UK (2013/14 onwards) guidance note.This note deals only with income tax. The rules for capital gains tax (CGT) are covered in the UK capital gains tax liability of temporary non-residents guidance note.Inheritance tax (IHT) is based on domicile, not residence. However, a long-term resident may be deemed domiciled for IHT. A carefully timed departure may protect a non-domiciliary from IHT, see the Domicile and Deemed domicile for income tax and capital gains tax (2017/18 onwards) guidance notes.This
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