· Determine the residence and domicile of an individual, and the residence of a company
· Define the scope of corporation tax for a resident and non-resident company
· Explain the purpose of double tax treaties and apply the provisions of a treaty based on the OECD model to determine the t...
The extent to which an individual is chargeable to UK tax depends on that person’s residence
and domicile status
NB nationality is generally not an important concept for tax purposes
Generally an individual is taxable on their world-wide income and gains if they are resident in
the UK
Individuals who are not resident in the UK are liable to pay income tax only on their UK source
income
For example if a non-resident owns property in the UK, they are taxable on rental profits
RESIDENCE
An individual is resident in the UK for a tax year if they satisfy the ‘automatic residence test’.
This is satisfied if the individual meets any of the ‘automatic UK tests’ and none of the
‘automatic overseas tests’
The most important ‘automatic UK tests’ are:
1. the individual spends at least 183 days in the UK during the tax year
2. the individual has a home in the UK and spends at least 30 days in that UK home during the
year
3. working full-time in the UK
An individual can also be resident in the UK if the person meets the ‘sufficient ties test’. This
looks at a number of factors such as family ties
Residence is normally determined for a whole tax year but the year of arrival and the year of
departure can be split in certain circumstances
RESIDENCE: THE FIRST AUTOMATIC UK RESIDENCE TEST
Consider whether you spend at least 183 days in the UK in the relevant tax year.
If yes, you will be automatically resident in the UK for that year.
If no, consider whether you satisfy one of the three automatic overseas tests
RESIDENCE: THE THREE AUTOMATIC OVERSEAS TESTS
The most important ‘automatic overseas tests’ are:
The individual spends less than 16 days in the UK during the tax year and was UK resident for
one or more of the previous three tax years
The individual spends less than 46 days in the UK during the tax year and was UK resident for
none of the previous three tax years
The individual works full-time overseas during the tax year, there are less than 31 days in the tax
year on which the individual works for more than 3 hours in the UK and the individual spends
less than 91 days in the UK during the tax year.
Meeting any one of these means automatic non-residence.
If you have not met any of these you must consider the other 2 UK residence tests
, RESIDENCE: THE OTHER TWO UK RESIDENCE TESTS
You will be resident in the UK if you have a home in the UK and you spend at least 30 days there
during the tax year.
You will be resident in the UK if you work full time in the UK during a period of 365 days part of
all of which falls within the tax year.
RESIDENCE: SUFFICIENT NUMBER OF TIES
If you do not meet any of the automatic tests then residence is determined by the number of
ties (connections with the UK)
These are (and you will not have to apply them in the exam)
Family tie
Accommodation tie
Work tie
90-day tie
EXAMPLE
Priti has always been UK resident and maintains a home in the UK. During 2021/22,Priti went
travelling around the world. She only spent 43 days in the UK.
Apply the first automatic UK residence test (the 183 day test). This does not apply to Priti.
Consider the automatic overseas tests: none apply
Back to the other two automatic UK tests: Priti satisfies the second automatic UK test.
She is UK resident for the whole of 2021/22.
CAPITAL GAINS TAX
UK residents are chargeable to CGT on the disposal of assets, no matter where in the world they
may be situated.
But see later for non-doms
In principle, individuals who are not resident in the UK are not liable to CGT, even if the assets
are in the UK
However……
NON-RESIDENT CAPITAL GAINS TAX (NRCGT)
NRCGT came into effect on 6 April 2015.
It applies to gains made by a non-resident on the disposal of UK residential property.
Only that proportion of the gain that relates to the period after April 2015 is subject to NRCGT.
The value of the property is re-based to its market value at 6 April 2015 for the purposes of
computing the gain.
Alternatively, the taxpayer may elect for the gain to be time-apportioned to the period after
April 2015.
The rates of NRCGT are the same as would apply if the taxpayer had been UK resident.
From April 2019 NRCGT was extended to commercial property.
DOMICILE
An individual’s domicile is where they have their permanent home
Individuals acquire a domicile of origin at birth. This is usually the domicile of the father
irrespective of the country of birth.
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