Do you dream of living without a home? | Editorial

During the pandemic, many people got used to remote working and for some it gave birth to the dream of living and working abroad. While moving to a new tax jurisdiction may allow some people to enjoy the best of both worlds – better weather conditions and better tax efficiency – there are a number of considerations they should keep in mind to ensure a smooth transition.

During the pandemic, many people got used to remote working and for some it gave birth to the dream of living and working abroad. Growing concerns about potential tax hikes in the UK are another reason individuals are considering raising their rates and heading to warmer, more tax-efficient climates. However, when you move to another tax jurisdiction, there are a few important practicalities to consider.

The increase in flexible working in the wake of COVID-19 has meant that many people are no longer tied to a particular workplace. Other factors that have surfaced in recent months, such as the desire to be closer to friends and family, to enjoy more green spaces or a better quality of life, can also make people think about the idea of ​​living and working abroad.

As the Chancellor explores ways to pay for the pandemic, there could be an increase in the number of people seeking to become non-residents or even non-domiciled. In addition to increasing the corporate tax rate to 25% effective April 1, 2023, the Office for Tax Simplification published its review of the Capital Gains Tax (CGT) in November 2020. The report recommended that the government align CGT rates. income tax and that the CGT allowance should also be reduced, while potentially increasing the number of people subject to inheritance tax (IHT). Such changes have yet to be implemented; however, they seem to remain firmly on the agenda.

While moving to a new tax jurisdiction may allow some people to enjoy the best of both worlds – better weather conditions and better tax efficiency – there are a number of considerations they should keep in mind to ensure a smooth transition.

What is the difference between “non-residence” and “non-domicile”?

First, it is important to understand the distinction between “non-residence” and “non-domicile”, which have different implications from a personal tax point of view. While a person’s residence is considered to be the country in which they reside and pays taxes from year to year, a person will remain domiciled in the UK unless they have completely severed ties with the UK -United. A natural person domiciled and resident in the UK is subject to UK tax on their worldwide income and earnings on a resulting basis. A person’s domicile also has implications for their exposure to the UK IHT, as the global assets of UK residents are subject to UK inheritance tax.

The process of applying for a change of domicile status essentially involves the individual declaring that they have acquired a domicile of their choice elsewhere and solid evidence would be required to support this request. Their status can be reported to HMRC on their individual tax return, if applicable, but the difficulty is that domicile is often not contested until an individual has died and their estate position is reported to HMRC; it is then up to HMRC to contest and analyze the requests for non-domicile.

Evidence of acquiring a home of choice outside the UK should involve regular documentation of their future plans and tracking of those intentions. The person seeking to lose his domicile in the UK will also have to show strong and numerous ties to his new jurisdiction, as well as a severed link with the UK. A statement demonstrating their intentions and the actions taken at any one time can be invaluable in providing the necessary evidence to HMRC in the years to come – perhaps for the family when defending the tax position taken by their late relative in the past. with regard to the legacies left behind. It should be noted that a return to the UK for a person formerly domiciled will restore their original UK domicile with resulting tax consequences for income, capital gains and inheritance tax.

Seek help from a local advisor as soon as possible

People moving to a new tax jurisdiction should seek the help of a local advisor as early in the process as possible, and certainly before moving abroad. This may involve seeking expert support on how best to structure their income, investments, and retirement plan. Other complex areas may involve scenarios where a natural person is tax resident in two different jurisdictions for a period of time, and therefore may need to clarify how to report their position to the jurisdictions in question. They may also need support to comply with local tax legislation or, for example, to set up payroll abroad.

Other considerations

Other more practical considerations might include applying for the right visas, taking steps to overcome language barriers, and making arrangements for family and living conditions. Often, individuals may make the decision to move abroad at a key stage in their professional life, for example, during a major business transaction. As such, choosing the right time for their move can make a huge difference in getting the most out of the deal.

The increased flexibility allowed by working remotely means that there has never been a better time to move the virtual office to sunnier, more tax-efficient destinations. By seeking the right advice from local experts and planning the move wisely, individuals can reap all the benefits of being a non-UK resident or non-UK resident, while avoiding potential tax traps.Helen Cuthbert is a director in the private client team of the accounting firm, Menzies LLP.


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