UK tax rules applying to UK non-dom’s and expatriates have been subject to significant change since 6 April 2008. These changes have resulted in key pieces of legislation being introduced namely the remittance basis charge and more recently a formal test to determine residence. The aim of such changes was to increase the tax take of Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC) is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.... by making it easier to enter the UK tax ‘net’ and crucially for non-UK domiciled individuals, to be taxed in a fashion which is more akin to a UK resident and domiciled individual.
Recent press reports analysing the effects of these changes have suggested increased tax revenues have been collected from expats, despite the depressive financial climate in recent years. This increase was in particular reference to the tax collected from the population of expats who have UK taxable employment duties and is likely to continue due to legislative changes concerning UK tax residence.
If you are an expat with UK taxable employment duties there are UK tax reliefs/claims that could be made in order to ensure you pay the correct amount of tax and reduce your UK tax bill. The major considerations are outlined below:
- Overseas workday relief – If you moved to the UK and provided you meet specific criteria your foreign workdays could be exempted from UK tax.
- Relief for qualifying travel expenses – If you have been seconded to work in the UK you may be entitled to valuable tax reliefs which could compensate you for costs associate with attending a temporary workplace.
- Business Investment Relief (“BIR”) – If you have funds which would otherwise be subject to UK tax implications if brought into the UK, you could use BIR to make certain investments in the UK thus avoiding such implications.
- Are you UK resident – If you are not permanently based in the UK and only travel here for short term business visits you may be a non-resident and subject to UK tax on UK source earnings only.
- Double tax relief – If you have income arising from overseas (e.g. a foreign rental property) it is important to take steps to ensure you are not double taxed and mitigate tax exposure in accordance with any applicable tax treaty.
- Tax efficient investments – Have you made or are you considering making significant investments in UK companies? Did you know that you could make tax efficient investments that reduce your tax bill on investment and are potentially exempt from Capital Gains Tax ("CGT") applies in certain cases when an asset is sold for more than it was originally purchased. The taxable gain (profit) may be triggered following the transfer of an asset, although commonly this would follow a sale. A number of tax reliefs are available to exempt or reduce the tax that may apply. Basic tax planning may... on a later disposal.
- Entrepreneur’s relief for disposing of a stake in an overseas business – If you dispose of an interest in a business that you personally worked in you could be entitled to a favourable capital gains tax rate of 10% (on a maximum value of £10m of gains) provided certain criteria are met.
Note that the above list is not exhaustive and some of the above mentioned reliefs are available to UK domiciled taxpayers also. If you are a UK non-dom living and working in the UK please contact us for a free no obligation consultation to discuss how you can optimise and reduce your UK tax bill.