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Tax Advantages of Non-Domicile Status
Newsletter issue - October 07.
Your domicile is broadly the country that is your natural home. This is normally the country where you live permanently such as the UK, but if you were born in another country, or your parents were born in another country, your domicile may be that other country. In this case you are treated as not having a UK domicile, i.e. be non-domiciled in the UK.
There are advantages to being non-domiciled while living in the UK...
- Income and Capital Gains. If you have income or capital gains that arise outside of the UK, those amounts will not be taxable in the UK unless you bring the money into the UK. This process of bringing funds into the UK is called a making a remittance. It is easy to accidentally remit money to the UK from off-shore sources, for example when a cheque passes through the UK banking system it is treated as being remitted to the UK, even if the funds are immediately paid out of the country again. If you do have non-domiciled status you need to fully understand the remittance rules to ensure you keep your off-shore funds completely separate from any UK earnings.
- Inheritance Tax. If you have lived in the UK for less than 17 tax years, and you are non-domiciled in the UK, any assets you have which are located outside of the UK are not subject to UK inheritance tax, although they may be taxed in the country where they exist. This advantage for inheritance tax disappears once you have been resident in the UK for more than 17 tax years out of the previous 20 years, so any action required to protect those off-shore assets from UK tax needs to be taken before that 17 year deadline is reached.
It is possible to change your domicile, but it is not a straightforward process. Say you emigrate to France, and cut all your ties with the UK, you could be said to have given up your UK domicile and taken on a French domicile. However, if you later express a desire to return to live in the UK, the Taxman will argue that you never gave up your UK domicile. This has implications for inheritance tax as your worldwide estate is subject to UK inheritance tax if you die with a UK Domicile, even if you have lived outside of the UK for many years.
If you believe you could be not domiciled in the UK please talk to us about tax planning as soon as possible.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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