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Home > Services > For Wealth Owners > U.K. Tax Planning
U.K. Tax Planning
Planning for Non-U.K. Domiciled Persons
Individuals who are resident but not domiciled in the U.K. are subject to preferential taxation rules. The application of the law in this area can be difficult, and it is crucial for any effective planning, to correctly establish at the outset, the domicile of the different family members.
U.K. resident non-domiciled individuals can choose to have their income and capital gains taxed on the remittance basis, so that, broadly, only money and property brought into or used in the U.K., or earned there, is subject to U.K. taxation. We advise clients on the use of the remittance basis of taxation, including its availability and appropriateness, the £30,000 charge, when a remittance to the UK occurs, avoiding inadvertent remittances, elections for capital losses and the segregation of offshore capital and income accounts.
Those who are U.K. domiciled, wherever they live, are generally subject to U.K. inheritance tax on their worldwide estate. Although U.K. resident non-domiciled individuals are not subject to U.K inheritance tax in this way (they pay inheritance tax only on that part of their estate which is situated in the U.K.), they will become so if they remain for many years. We advise on the timely making of excluded property settlements, which as long as they are in place before the individual is deemed to be domiciled in the U.K. for inheritance tax purposes, will avoid U.K. IHT being payable on the worldwide estate. There are also particular dangers for non-domiciled individuals who receive property under the terms of their spouse’s will, since they do not benefit from the full inheritance tax exemption normally available for spouses and civil partners. Finally, an individual may find him or herself subject to inheritance tax in more than one country. We provide multi-jurisdictional, comprehensive succession planning in respect of a family’s worldwide estates, to avoid potential pitfalls.
We also advise on the tax-efficient purchase of U.K. and foreign property by U.K. resident non-domiciled individuals, including the treatment of secured debts and interest payments for the purposes of the remittance basis of taxation. We provide advice on the U.K. tax treatment of existing offshore pension schemes, life insurance, holding and operating companies, trusts, foundations, partnerships and investments, including when these may benefit from restructuring. It is our philosophy always to give our clients user-friendly explanations for those who are not familiar with the U.K. system, tailored to their desired level of detail.
Couples in which one is U.K. domiciled but the other is not face particular issues. For example, the inheritance tax exemption for spouses and civil partners is subject to a ceiling in respect of gifts from the U.K. domiciled to the non-U.K. domiciled party. Whilst there is no such ceiling when the gift is received by the U.K. domiciled partner, there may be estate duty issues in the non-domiciled party’s home country. As this implies, the fact that one spouse or civil party is U.K. domiciled does not mean that the other is, and this has implications for the remittance basis users. Important issues of home-country estate, wealth and income tax may also need to be addressed, in particular as regards potential double taxation, and the domicile of children. There are potential planning opportunities available to mixed-domicile couples. We work to provide tailored, multi-jurisdictional solutions to optimize and maintain families’ wealth across generations.
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U.K. Immigration Planning
We advise on the applicability of EU rules on free movement, in particular the extent to which individuals and their families are able to reside, work and set up a business in the U.K. as of right. For families who are not nationals of an EU member state, we provide advice and assistance on the availability of residence visas.
Both EU and non-EU nationals may be non-U.K. domiciled, and with some very specific exceptions, the U.K. taxation options will be the same for both categories. Non-U.K. domiciled individuals who intend to move to the U.K. are well-advised to seek tax planning advice. Relevant issues include understanding the nature, extent and benefits of the remittance basis of taxation and how to stay within the rules, inheritance tax planning, tax efficient purchase of UK property and investment in the U.K., the treatment of existing offshore companies, partnerships, foundations and trusts, including how these might be utilized effectively. We also advise on the tax implications of the transfer of foreign pension assets to U.K. registered pensions and the ability to maintain overseas pensions whilst residing in the U.K.
Depending on the client’s nationality, country of residence, intended duration of stay, and the nature of the assets held offshore, there are a number of simple steps which may be taken to significantly reduce post-immigration tax liabilities, and to simplify the family’s financial affairs in advance of settling in the U.K.
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U.K. Outbound Planning
We assist families who intend to leave the U.K. either temporarily or permanently, as well as those who have already relocated. Whilst it is generally preferable to plan in advance, this is not always possible, and many families do not have the luxury of basing decisions about the timing of a move on its financial implications.
Generally, the first step will be to assess with our clients their domicile status, and plan accordingly. The sorts of issues we look at are the transfer of U.K. pension rights to a suitable overseas pension whilst avoiding penalties and benefiting from increased flexibility, taking out life insurance abroad, and the appropriate timing of the sale of real estate and other assets for capital gains purposes. Whether a family will continue to be subject to U.K. inheritance tax on their worldwide estate is often of particular concern, and we provide advice in respect of cross-jurisdictional inheritance tax and succession issues, including conflicts of law, forced heirship rules, settling trusts and making one or more wills. We have particular experience of assisting families moving from the U.K. to the U.S. and Switzerland. We also advise families on the tax treatment of investments which remain in the U.K., how best to structure them, and issues of double taxation which may arise.
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