Non-UK Domiciled Individuals – the Importance of Pre-arrival UK Tax Planning

Introduction

Due to the impact it can have on an individual’s UK tax liability, it is vital that domicile is fully understood by those wishing to relocate to the UK permanently.

In general terms, if a non-domiciled individual wishes to move to the UK permanently and has no intention to return to their previous country, then there is a strong case they will be considered UK domiciled for tax purposes.

Effective tax planning, pre-UK arrival is therefore critical to avoid potential costly surprises in the future.

UK Domiciled vs Non-domiciled Impact

Firstly, let us briefly look at the UK tax implications for a person who is UK domiciled versus non-domiciled. Please note that both individuals are UK tax resident in the year for this illustration.

Mr UK Domiciled

  • Liable to tax on worldwide income and gains
  • Worldwide assets are subject to UK inheritance tax

Miss Non-domiciled

  • Worldwide income and gains are taxable on the arising basis
  • A claim for the remittance basis can be made which will mean Miss Non-domiciled will only be taxed on her foreign income and gains if she remits it to the UK. If it is kept offshore, she will not be subject to UK tax
  • Non-UK situs assets are excluded from UK inheritance tax

From this, we can see that Miss Non-domiciled position is usually more advantageous from a UK tax perspective. 

Determining your Domicile

In establishing whether a new domicile of choice has been created, careful consideration must be taken for the following points before making a decision to move to the UK:

  • the intentions of the individual;
  • their permanent residence;
  • their business interests;
  • their social and family interests;
  • ownership of property; and
  • the form of any Will that they have made.

This list is by no means exhaustive and there is no single criteria which determines whether an individual is or is not domiciled in the UK. Instead, a ‘balance of probabilities’ approach is taken.

Defend your Domicile

Taking into account the above, it is therefore essential to have provisions in place before arriving in the UK, to defend any potential challenge from HMRC.

Domicile enquires can be lengthy and intrusive should HMRC doubt an individual’s non-domicile claim. This can involve months or even years of correspondence involving various questions into; background, lifestyle and family and social connections, both from a historic perspective and to establish future intentions.   

Acquiring and maintaining evidence of strong, ongoing links to the country of domicile is crucial for those claiming non-domiciled status, and so is evidence of an intention to leave the UK at a future date. This can be particularly problematic on death, potentially bringing a foreign estate within the scope of UK inheritance tax.

To avoid any hiccups in the future, it may be worth considering having a domicile statement prepared, to provide contemporaneous evidence supporting the claim . 

Case Law

IRC v Bullock: Mr Bullock had a domicile of origin in Nova Scotia. He lived in England for 40 years. His wife did not want to live in Nova Scotia. Mr Bullock hoped to return there should he persuade his wife to change her mind or should he survive her. It was held by the Courts that he had a real determination to return rather than a vague aspiration. Accordingly he retained his Nova Scotian domicile of origin and had not acquired an English domicile of choice.

In contrast:

Furse v IRC: Mr Furse expressed a wish to live in England for the rest of his life save only for a contingency that he would return to the USA, should he cease to be physically able to take an active interest in his farm (situated in England). The Courts decided that this intention was so vague as to impose no limit on his intention to remain in England. Accordingly he had acquired an English domicile of choice.

Summary 

From the above we can see it is difficult to make a judgement without fully examining an individual’s position in detail.

An individual’s domicile status is a fundamental factor in determining his/her liability to UK tax. It also has implications for other branches of the law.

Due to HMRC’s increased number of investigations into the tax affairs of non-domiciled individuals, you should be prepared to present a robust defence in the event of any challenge from HMRC. A domicile statement can greatly assist, to provide evidence of an individual’s intentions, where it is supported by the facts, and can be particularly useful in situations where enquiries are opened by HMRC after death.

Additional Information

If you require additional information on this topic and further guidance regarding your domicile status, please contact your usual Dixcart adviser or speak to the Dixcart office in the UK: advice.uk@dixcart.com

UK High Potential Individual (HPI) Visa – What You Need to Know

The High Potential Individual (HPI) visa is designed to attract top global graduates from prestigious universities around the work, who want to work, or look for work in the UK, following the successful completion of an eligible course of study equivalent to a UK bachelor’s degree level or above. The study must have been with an institution listed on the Global Universities List, the table of global universities that will be accepted for this visa route as awarding institutions, which is updated regularly.

The new High Potential Individual route, launched on 30 May 2022, is an unsponsored route, granted for 2 years (Bachelors and Masters holders), or 3 years (holders of a PhD).

Eligibility Requirements

  • The HPI is based on a points-based system. The applicant needs to obtain 70 points:
    • 50 points: The applicant must, in the 5 years immediately before the date of the application, have been awarded an overseas degree level academic qualification which ECCTIS confirms meets, or exceeds, the recognised standard of a UK bachelor’s or UK postgraduate degree. From an institution listed on the Global Universities List.
    • 10 points: English Language requirement, in all 4 components (reading, writing, speaking and listening), of at least level B1.
    • 10 points: Financial requirement, applicants must be able to demonstrate that they can support themselves within the UK, with a minimum cash fund of £1,270. Applicants who have lived in the UK for at least 12 months under another immigration category, do not have to meet the financial requirement.
  • If the applicant has, in the last 12 months before the date of application, received an award from a Government or international scholarship agency covering both fees and living costs for study in the UK, they must provide written consent to the application from that Government or agency.
  • The applicant must not have been previously granted permission under the Student Doctorate Extension Scheme, as a Graduate or as a High Potential Individual.

Dependants

A High Potential Individual can bring their dependant partner and children (under the age of 18) to the UK.

Staying Longer in the UK

The High Potential Individual route is not a route to settlement. A High Potential Individual is not able to extend their visa. However, they may be able to switch to a different visa instead, for example a Skilled Worker visa, Start-up visa, Innovator visa, or Exceptional Talent visa.

Additional Information

If you have any questions and/or would like tailored advice on any UK immigration matter, please speak to us at: advice.uk@dixcart.com, or to your usual Dixcart contact.

Ceasing to be UK Tax Resident – Don’t Get it Wrong!

Routes to UK Residence and Citizenship

Introduction

It is March 2022 and two people are sitting at the departure gate at Heathrow waiting for their (inevitably) delayed flight to the Bahamas. They start a conversation and talk about why they are flying to this Caribbean island. 

Person A, Mrs Sunseeker, explains to Person B, that she had lived in the UK for a long time as a resident “non-dom,” but that changes to the tax rules for longer term residents had meant that she had decided to leave the UK and cease being tax resident; “My friend told me I just had to spend fewer than 90 days each year in the UK.” she declares.

Fortunately for Mrs Sunseeker, Person B, Mrs Tax, is, by nominative determinism, a tax adviser and explains that the old ‘90 day’ rule does not apply anymore and suggests that she takes a look at the UK Statutory Resident Test.

Background for Mrs Sunseeker

Mrs Sunseeker moved to the UK in the early 2000s, as a student.  After graduating, she was offered a job in the financial services industry. She has been very successful and accumulated significant personal wealth. 

In 2010, she inherited the shares of a large family business, back home in Dubai, which started to generate a regular dividend income of around £5 million a year which she has kept in her bank account in Dubai. As a UK remittance basis of taxation user, the Dubai dividends have not been taxed in the UK, as Mrs Sunseeker never remitted them into the UK. 

However, with the UK non-dom rules changing in 2017 (link to relevant article), remaining in the UK was going to be just too expensive.  She has therefore decided to move to a warm country.  Mrs Sunseeker is planning to carry on working for the same employer (taking advantage the fact that her firm realises she can work remotely) and, indeed, is likely to be working very hard on the days that she returns to the UK.

She is married. Her husband is British and does not want to spend as much time outside of the UK as his wife. His only source of income is in the UK and he still enjoys his work.  As he is going to stay, they will keep their home and Mrs Sunseeker will live there when she returns to visit him.

What is Mrs Sunseeker’s Tax Status and Why?

While waiting for the flight, Mrs Sunseeker takes a look at the residence test rules.  She realises that the first two parts of the test, the ‘Automatic Tests’ do not apply to her and reads on to the ‘Sufficient Ties’ section. Mrs Sunseeker has four such ties, or connections:

  • Spent more than 90 days in the UK in both of the previous two tax years;
  • Will have available accommodation in the UK;
  • Has a UK tax resident spouse and will continue to do so;
  • Will work in the UK for more than 40 days under the definition of the test.

What Will the Tax Impact Be?

As she has four ties, Mrs Sunseeker will be tax resident in the UK, for at least the first two years after she leaves, by spending just 16 days per annum in the UK, far lower than the 90 she had anticipated.

The next time she receives her large dividend, she would still be considered UK tax resident and will suffer UK income tax. It may be even worse, if she has not paid this tax on time she would receive a late payment penalty, which is quite likely because she no longer believed she was UK tax resident and she could be liable for penalties under the ‘offshore assets’ rules too.

The problem would become further compounded were Mrs Sunseeker to sell her shares in the family business in Dubai for a large gain, while she believed she was not UK resident.

Other Considerations

Please note for completeness, that the UK ‘split year rules’ are not being considered, nor are the tax implications of Mrs Sunseeker continuing to receive a salary for work she undertakes when in the UK. Dixcart, would of course advise on these, where relevant.  The Bahamas does not have a double tax treaty with the UK, and there is therefore no tie breaker clause to consider in this scenario either.

So, What Could Mrs Sunseeker Do?

Can you believe it, the flight is still delayed!

Mrs Sunseeker picks up her phone and calls Mr Sunseeker. Whilst he loves his job, he now understands that there will be a high tax cost if his wife does not properly exit UK tax residence.  He packs his things and heads to the airport. While on his way, he calls his employer and resigns, and then calls an estate agent to list the home for immediate rental.

The repercussions of the two actions above, would be to reduce the number of UK ties that Mrs Sunseeker has, from four to two:

  • 90 days in both of the previous two tax years; and
  • Work tie (assuming she still works, when back in the UK).

Now she would be able to spend up to 90 days in the UK per annum and lose her UK tax residence status.

Very lucky!

Whilst everyone else on the flight was cursing the delay, Mrs Sunseeker had struck lucky.  However, had Mr and Mrs Sunseeker started to plan earlier than at the airport departure lounge, there would have been more options to consider around their employment situation and their home status, and they might have avoided having to take such extreme steps.

How Can Dixcart Help?

Dixcart’steam of lawyers, accountants, immigration and tax professionals would have assisted Mr and Mrs Sunseeker with:

  • Pre-departure tax planning;
  • Ongoing tax planning, to ensure that UK tax residence is not accidentally acquired again in the future;
  • Employment law advice for both individuals in relation to their ongoing employment contracts, should they wish to continue to work, as well as related UK tax advice regarding the income being earned;
  • Application for Indefinite Leave to Remain before they leave the UK, so they can be sure that they can return in the future.

Additional Information

If you require additional information on this topic, please contact your usual Dixcart adviser or speak to Paul Webb or Peter Robertson in the UK office: advice.uk@dixcart.com.

Dixcart UK, is a combined accounting, legal, tax and immigration firm.  We are well placed to provide these services to international groups and families with members in the UK. The combined expertise that we provide from one building, means that we work efficiently and coordinate a variety of professional advisers, which is key for families and businesses with cross-border activities.

By working as one professional team, the information we obtain from providing a service, can be shared appropriately with other members of the team, so that you do not need to have the same conversation twice!  We are ideally placed to assist in situations as detailed in the case study above. We can provide cost effective professional services for companies and individuals and also offer in-house expertise to provide assistance with more complex legal and tax matters.

Fundamental Changes to UK Immigration Rules – April 2022

Background

As of 6th April 2022  a number of new UK immigration rules came into effect.

The Tier 1 (investor) visa had already been closed to new applicants on 17 February 2022.

A summary of the key changes is detailed below.

Overseas Representatives Business Category

The Overseas Representative Businessperson category, commonly known as Sole Representative will no longer exist. The Overseas Media Person category will remain unaffected. Those currently holding permission under the Sole Representative category will be unaffected.

Global Business Mobility Routes

The Intra-Company Transfer routes have been revamped and will be known as the Global Business Mobility routes. Those under this category will not be eligible for permanent residence.

The new Global Business Mobility route creates 5 sub-categories as set out below. It means that a sponsor licence holder will need to hold licences under the relevant sub-categories to be able to be a sponsor:

  1. The Senior or Specialist Worker which replaces the Intra-Company route and is applicable to senior managers or specialist employees who are being assigned to a UK linked entity for a temporary assignment.
  2. Graduate Trainee which replaces the Graduate Trainee Intra-Company route and is designed for those on a dedicated Graduate programme outside of the UK, and who are required to be assigned to the UK for part of the programme.
  3. UK Expansion Worker which is for senior managers or specialist workers being assigned temporarily to the UK to establish an UK entity or to undertake work related to a business expansion to the UK. The applicant would need to meet the points criteria (60 points) and be granted a Certificate of Sponsorship. This will mean that the employer must obtain a sponsor licence by requesting a provisional rating, with the applicant holding the role of authorising officer. The maximum stay allowed would be 5 years in any 6-year period.
  4. Service Supplier which is for overseas workers who are undertaking temporary work assignments in the UK, where the worker is either a contractual service supplier employee or a self-employed independent professional. The applicant would need to meet the points criteria (40 points) and be granted a Certificate of Sponsorship. There are no requirements to meet the salary point requirements. The maximum stay allowed would be 5 years in any 6-year period.
  5. Secondment Worker which is for overseas workers who are undertaking temporary work assignments, where the assignment is part of a high value contract or investment by their overseas employer. The applicant would need to meet the points criteria (40 points) and be granted a Certificate of Sponsorship. There are no requirements to meet the salary point requirements, but the contract must have been registered with the Home Office. The maximum stay allowed would be 5 years in any 6-year period.

Introduction of the High Potential Individual (HPI) and Scale-up Routes

The HPI introduces an elite points-based route to attract the brightest and best to the UK to maintain the UK’s status as a leading international hub for emerging technologies. Applicants must have a bachelor’s or postgraduate degree from one of the Global Universities, listed by the Home Office, within 5 years of the date of application.

The Scale-up route introduces an elite points-based route to attract the brightest and best to the UK, to maintain our status as a leading international hub for emerging technologies. A job offer must be received from an authorised UK scale-up company. The scale-up company would need to demonstrate that they have an annualised growth of at least 20% for the previous 3-year period in terms of turnover or staffing, as well as having a minimum of 10 employees at the start of the 3-year period.

Additional Changes

Changes have been made to the rules relating to Settlement based on Family Life and Private Life, to make the requirements simpler to understand.

Policy Guidance

A further update will be provided once the policy guidance has been released.

Further Information and Advice

If any of the changes above affect you and/or you need assistance regarding immigration to the UK, as an individual or as an employer, please speak to Peter Robertson at: advice.uk@dixcart.com.

Bridget Carman

Bridget Carman
BSc – Group Project Manager, Dixcart

Profile


Bridget Carman has worked for the Dixcart Group for over twenty years. Her role has evolved considerably, and she has two dedicated members of staff reporting to her.

Bridget’s role focuses on the development and implementation of marketing strategy for the Dixcart Group and she is also heavily involved in formalising business development objectives and putting in place metrics to measure performance versus goals. 

The objective of the Marketing Team at Dixcart is to understand the priorities of each of the nine Dixcart offices and to ensure that these are reflected within the Group Marketing Strategy. Key marketing responsibilities include corporate image, website: design, content and SEO, brand messaging internally and externally, and on-going development of the Social Media strategy. 

In addition to Dixcart Domiciles, the Dixcart Group also provides a variety of professional services that have been extended over the years and the marketing department are involved in each of these business sectors. The roots of the company are private wealth and corporate advice, with additional expertise being added in terms of aircraft, ship and yacht registration and the expansion of structuring and legal services. The Group also offers serviced offices, under the name Dixcart Business Centres, each of which, in addition provides professional support services to clients, in six different countries. 

Find out more about Dixcart Domiciles.

Popular UK Visa Options: The UK Start-up, Innovator and Sole Rep Visa Categories

The UK offers several popular visa options for entrepreneurs and businesses based outside the UK, who are looking to set-up and run a business in the UK.

The Sole Rep Visa Category – Key Points

The Sole Rep visa allows an overseas parent company to send a senior employee to the UK to establish its first UK branch or wholly owned subsidiary. To be eligible, some of the key requirements to be met include:

  • the main applicant cannot have a majority stake, own or control the overseas business under any arrangement – this also applies to the main applicant’s dependent partner (if also applying)
  • only genuine applicants can apply
  • the overseas parent company will need to continue to have its headquarters and principal place of business outside the UK
  • both the overseas parent company and the intended UK branch or wholly-owned subsidiary must be actively trading in the same type of business
  • the applicant needs to have the skills, experience and knowledge of the business necessary to undertake the role and have full authority to negotiate and take the operational decisions on behalf of the business
  • the applicant will not engage in business of their own nor represent any other business’ interest in the UK

A Snapshot of the Start-up and Innovator Visa Categories

The Start-up and Innovator visas (which replaced the former Tier 1 (Entrepreneur) visa category on 29 March 2019), allows entrepreneurial applicants, who have had their business idea assessed and approved by an endorsing body as being innovative, viable, and scalable, to set-up and run their business or businesses in the UK. Some of the key requirements include:

  • applicants must be the sole founder or an instrumental member of the founding team, relying on their own business plan, and responsible for executing the plan
  • an Innovator visa applicant’s business, may have already started trading, but the applicant must be the sole founder or an instrumental member of the founding team
  • the “viability” criteria requires the applicant’s business plan to be realistic and achievable based on the applicant’s available resources
  • those applying for an Innovator visa must have initial capital of £50,000

Permanent Settlement in the UK

Although the Start-up visa does not permit applicants to apply for permanent settlement, the Innovator visa does allow this option after 3 years. Similarly, the Sole Rep category is a route to permanent settlement, but after 5 years.

Are There Any Other Changes on the Horizon?

A number of new visa announcements were made in the UK Budget of March 2021, to encourage investment into, and growth for business – particularly in the fields of academia, science, research and technology. These include:

  • the introduction of an elite points-based visa by March 2022
  • the launch of the new Global Business Mobility visa category (which may be a replacement of the Sole Rep route) by spring 2022 for overseas businesses to establish a presence or transfer staff to the UK

Summary

The above is a general overview of some of the popular options and key requirements. If you have any questions and/or would like tailored advice on any UK immigration matter, please speak to Dixcart Legal at: advice.uk@dixcart.com or to your usual Dixcart contact.