Residence and immigration
Tax rules change on a yearly basis and with recent major changes, residence and domiciled rules have been affected.
Before April 2008 both not ordinarily resident and non domiciled enjoyed favourable rules based on tax paid using the remittance basis.
There are two terms used to define the status of the person; resident and ordinary resident
Residence
The basic test of residence is whether the taxpayer has been present in the UK for more than 183 days in that year. There are no exceptions to this rule and days of arrival and departure are normally excluded.
You may also be UK resident without 183 days presence if:
- You make regular visits to the UK and after four tax years the visits during those years average 91 days or more a tax year
- You come to work as an employee in the UK for at least 2 years. You will be resident from the day of arrival to the day of departure; those coming for less than two years will only be treated as resident for a tax year if the person has spend 183 days or more in the UK in the tax year.
There have been some landmark cases recently and HMRC are seeking to tighten these rules further to ensure that they keep as many people as possible taxed within the UK!
Ordinarily resident
This implies a greater degree of permanence than mere residence. You will be ordinarily resident if your residence is of habitual nature. This has been taken to mean a regular choice of abode which forms a degree of settled purpose and part of the regular order of an individual’s life.
A person who has been ordinarily resident in the UK is treated as remaining resident and ordinarily resident if he/she goes abroad for a short period e.g holiday or business trips.
There is a concession by which a person can split the tax year for income tax purposes.
Remittance basis (old rules)
Non domicile people previously only used to pay tax on foreign income on an arising basis thus if they earned interest or have property income they would not pay any tax unless they bring the money into UK.
Arising basis
If an individual pays tax on the arising basis, they pay tax on their worldwide income and gains.
It is called the arising basis because you pay the tax when the income and/or gains arise. This means that you pay tax on income in the year that you earn it and you pay tax on the capital gain in the year that you make the gain.
New rules
All Non Domicile and Non Ordinary Residents will now have an option to be charged on the arising or remittance basis.
If the arising basis is used the individuals will be taxed on worldwide income as above.
If the remittance basis is used then there is a £30,000 charge. Therefore, if a high rate tax payer has foreign income of more than £75,000 then it’s better to go for remittance basis.
As this is a very complex area of tax planning for further information and question please contact us.
We are so confident we can make tax savings for you and your business, we are pleased to offer a 'no strings' review of your current arrangements without charge 
