Income when domiciled outside the UK

[paye-help]

When domiciled outside the UK do you still receive the annual personal allowance? This is for property income.

 

[paye-help]

Any ideas on this? Would someone be considered a British citizen still if born in the UK but moved away and are domiciled outside the UK for tax?

 

[SteveHa]

Domicile and residence are two different things. Do you mean domiciled, or do you mean resident?

 

[paye-help]

I mean if domiciled outside the UK for tax as move abroad 8 years ago can the UK personal allowance be used for UK income still (as they would be classed as British citizen as was born there)? Thanks

 

[SteveHa]

That's still not particularly enlightening. Merely living abroad (even for 8 years) is not of itself sufficient to displace your domicile of origin, and certain acts and conscious decisions must be taken to achieve this.

Whilst you still have a UK domicile, then you will be entitled to UK personal allowances against income arising and assessable in the UK. Have a read of https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm22300 onwards for more information.

Beyond that, and if you lose or have lost your UK domicile, then entitlement to the tax-free allowance will be dependent upon where you are domiciled (if you are in the EEA then you are automatically entitled) and the terms of the double taxation treaty.

 

[paye-help]

Ok I see, the country is Hong Kong.

So basically if deemed domiciled outside the UK for tax purposes the Personal Allowance cannot be used (even if born and been resident in the UK)?

 

[SteveHa]

If you become non-domiciled because you adopt a domicile of choice in Hong Kong then you are subject to the same rules regarding tax-free allowances as any other non-domiciled person.

You can find the double taxation treaty between Hong Kong and the UK at https://assets.publishing.service.g...a/file/498359/hong-kong-uk-dta_-_in_force.pdf, which should answer all of you questions.

 

[KyushuTravelAgent]

As far as I understand it you are still likely to be UK domiciled (though of course i don't know your personal circumstances in detail). When I looked into this I'm still considered UK domiciled even though I haven't lived there for more than 20 years, live overseas with a foreign wife, don't have any UK property and have a foreign business. Many people are uk domiciled but non-uk resident for tax purposes. Basically, if you were born in the UK and spent time growing up there, you are likely to be UK domicile for the rest of the life wherever you live unless you take some specific actions.

Happy to be corrected by someone more knowledgeable if I'm wrong.

 

[SteveHa]

As far as I understand it you are still likely to be UK domiciled (though of course i don't know your personal circumstances in detail). When I looked into this I'm still considered UK domiciled even though I haven't lived there for more than 20 years, live overseas with a foreign wife.

Happy to be corrected by someone more knowledgeable if I'm wrong.

There have been changes to residence and domicile law in recent years (more in favour of UK Government than not). However, what has always been an enduring feature is the concept of "Domicile of Choice", which can override your domicile of origin.

It can all get very complicated.

 

[KyushuTravelAgent]

It can all get very complicated.

I bet it can.

I'm looking for a professional who can give cross-border (UK-Japan) tax advice. I already have a Japanese company and plan to setup a UK company to work in conjunction. I want to get advice before I set up my UK company. Can I send you a PM about it, or are you able to point me to someone who may be able to help?

BTW I'm not setting up the UK company specifically for purpose of tax efficiency however I do want the most tax efficient arrangement.

 

[SteveHa]

If you are not resident in the UK, setting up a UK limited company may not actually meet your aims. The residence of a limited company follows management and control of the company. If you represent management and control, then the company will be resident wherever you are, and subject to local taxes.

Even worse, you may find that there is some liability to UK corporation tax, too (this would depend on a number of things), and all the headaches that working to the double taxation treaty brings.

Ideally, for the structure that you are considering a dedicated international tax specialist would be the better option (I'm more of a tax generalist, and whilst I know where to find answers to most problems, there tend to be nuances that a specialist will be acutely aware of.

 

[KyushuTravelAgent]

I'm not setting up the UK company for any reason related to tax but your points are useful anyway. Thanks for the info.