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Offshore tax issues
The rules around offshore tax can be complex, but effective planning can result in savings. Read our guide to offshore matters:
- The tax rules are changing and you will need to take care if you are hoping to leave the UK and relinquish UK residence for tax purposes. From 6 April 2013, a statutory residence test is to be introduced which should help clarify matters, but a number of cases over the last few years have shown that it is a lot more difficult to relinquish UK residence than was previously thought.
- Generally speaking, unless you are leaving the UK to take up full time employment abroad, you will need to show that you have made a complete break with the UK to establish non residence. This might mean selling all properties here (including investment properties), resigning from all UK directorships, and even relinquishing membership of UK clubs and societies. We can advise you if you need help with this.
- As the test of residence normally applies for a whole tax year, if you are planning to leave the UK then ensuring that you go in the last few months of the tax year might provide an extra year of non residence once you have established non UK status.
- Planning your visits to the UK in advance is also a good point to start, so that you have some days ‘in hand' for emergencies such as an unexpected family event. In some cases visits to the UK can be ignored, but it is wise to plan carefully in the early years after departure.
- You should also be aware that although leaving the UK takes effect for income tax purposes almost immediately, any capital gains realised during the first 5 years abroad can end up being taxed in the UK if you have to relinquish your non resident status.
- If you are not UK domiciled, you will only benefit from the remittance basis if your unremitted overseas income and gains are less than £2,000 or you make a claim. This claim will deny you a personal allowance and a capital gains tax annual exemption, and might also trigger a tax charge of up to £50,000, depending on how long you have been UK resident.
- All income remitted to the UK by UK residents is liable to tax in the UK, irrespective of the basis on which you are taxed. An exception, however, since 6 April 2012 is the remittance of funds to the UK to make a ‘qualifying' investment. As this can be a complex area, you may wish to discuss what constitutes a qualifying investment with us.
- You might wish to review your tax position in the light of this, especially if you have been resident in the UK for several years. A remittance basis charge of £30,000 will apply to those individuals who have been resident in the UK for at least 7 out of the previous 9 tax years and who are claiming the remittance basis. Similarly, a higher charge of £50,000 will apply to remittance basis claimants who have been resident for 12 out of the previous 14 tax years.