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Establishing whether someone is domiciled or a resident in the UK is crucial when working out where they are liable to pay tax and assessing how much tax is payable and on which sources of income.
Tax and residency rules are complex, and it can be difficult to work out exactly what liabilities exist and what the most tax-efficient way of dealing with matters is.
Glanvilles’ domicile and residence solicitors have a high level of expertise in the areas of tax law, domicile and residence and will work with you to establish your best course of action.
We specialise in complex cases and matters where disputes have arisen over issues such as habitual residence and tax residency. We can advise and represent you to avoid ongoing difficulties and prevent you from falling foul of UK tax laws.
We can also advise you in respect of domicile and residence where this arises in other cases such as child arrangements and divorce.
Our services include the following:
Our team will take the time to gain a thorough understanding of your situation and how you would like your affairs to be structured. We will offer clear and pragmatic advice and work with you to put the right framework in place for your tax, domicile and residency affairs.
Domicile is a UK concept and refers to the place where your permanent home is. An individual can only have one domicile at any one time. There are three types of domicile:
Domicile of origin is acquired at birth and is generally the same as the domicile of an individual’s father, unless the parents were not married, in which case the mother’s domicile is used. The mother’s country of domicile is also used where an individual’s father is deceased.
This is the domicile given to children and individuals who are not capable of managing their own affairs. Domicile of dependency is the same as the domicile of the individual’s parent or carer on whom they rely.
Domicile of choice can replace domicile of origin. It can be acquired by living in a country with the intention of remaining there. HM Revenue & Customs consider someone to still be domiciled in the UK for three years after leaving the UK to live overseas. Where an individual has been resident in the UK for 15 of the previous 20 years, they will be deemed to be domiciled in the UK.
This is where an individual lives and is decided according to the statutory residence test or SRT. This is a complex process but is vitally important in defining your tax residence status and whether all of your worldwide income will be subject to UK tax.
Where you are present in a country for 183 days or more per tax year, HM Revenue & Customs, as well as other overseas tax authorities, will consider you to be resident in that country. It is possible to have residence in more than one country, referred to as dual residence.
Tax residency is also assessed on the basis of where you work, whether you own a property in the country in question, where your family live, where you work, where your assets are based and where the centre of your activities is.
Assessing and planning your tax residency can be important in ensuring that your tax affairs are as efficient as possible. It is a difficult area of law, and advice from an expert in tax residency is highly recommended as there can be stringent penalties for failure to comply with tax rules or pay adequate tax. It should be noted that residency can easily change, so you are advised to be aware of the length of time you spend in the UK and overseas each year.
If you are resident in the UK for tax purposes, you will be liable for tax on income and gains made in the UK as well as overseas.
For those who do not have habitual residence in the UK, they will still be required to pay UK tax on UK income and gains, but not on overseas income and gains.
Where an individual is classed as UK non-domiciled, UK Inheritance Tax is only payable in respect of UK-based assets. This excludes overseas holdings such as foreign bank accounts and investments.
If you hold foreign assets, you may find you are liable for an equivalent tax in that country, meaning you could be paying Inheritance Tax in more than one jurisdiction. Ideally, you should take planning advice to ensure that the process is clear and as tax-efficient as possible.
A double taxation agreement also referred to as a double tax treaty, is an agreement between two countries intended to ensure that an individual only pays tax in one jurisdiction.
It will be necessary to determine in which country someone is resident for the purposes of the treaty. That is the country that will generally apply tax, while the other country will not impose tax.
To start the process of working out where you are a tax resident, you will generally need to complete a UK self-assessment tax return and tax treaty relief claim.
In some circumstances, tax paid overseas can be offset against tax due in the UK.
Our team have in-depth experience in the complex area of domicile and residency law and can work with you to deal with a full range of tax issues. We can also advise you on the best way of setting up your finances and residency to ensure that your tax situation is as advantageous as possible.
Our domicile and residence experts can offer:
When you use our domicile and residence service, we promise: