Tax Planning for UK residents (and Non UK Domiciled Individuals)

The Basic Idea

To identify UK resident, Non UK domiciled taxpayers with an existing UK property portfolio and restructure in a tax efficient


A UK resident, Non UK domiciled taxpayer is entitled to claim the Remittance Basis of taxation. Broadly this means that UK chargeable gains are taxed on an arising basis (when they are realised), whilst foreign chargeable gains are taxed on a remittance basis (when the gains are subsequently brought back to the UK).

An opportunity therefore arises in the situation highlighted above to restructure UK assets into foreign assets (shares in IoM newco’s).

Capital Gains Tax Implications (CGT)

If the taxpayer disposes of the UK properties, the chargeable gain will be subject to UK CGT immediately at 28%.

Following the restructure the taxpayer now holds foreign shares. On the disposal of these shares, the taxpayer may claim the remittance basis applies.

The gain is only subject to UK CGT if funds are remitted to the UK. Any funds applied abroad will escape UK taxation.

Inheritance Tax Implications (IHT)

On basic principles the taxpayer is subject to IHT on UK assets only. This is subject to the deemed domicile rules which state that if UK resident for 17 out of 20 tax years then the taxpayer will be treated as UK domiciled for IHT purposes and subject to IHT on worldwide assets.

Therefore to be effective for IHT planning purposes, the taxpayer must not have been UK resident for 17 years or more OR must be domiciled under general principles in a country with a favourable double tax treaty with the UK, such as India or Pakistan.

As the domicile position of the taxpayer is crucial to the planning any planning of this nature is to be consulted on and advice provided by Smith & Brown Accountants.

Jul 2, 2015