Uk Citizens - Non-Resident Or Not?

[w11guy]

This HMRC leaflet explains the various terms regarding residence, and also how it affects your tax:-

http://www.hmrc.gov.uk/cnr/hmrc6.pdf

As regards a credit card application, I guess if it's an entirely new application you may well be stuffed. Before I left I told my cc providers I was going to be abroad for an extended period. One of them was a bit sniffy and said the abroad notification would last three months - the account still works after 2.1/2 years. The other, HSBC Visa, were totally obliging and I use their card virtually every month for something or other. Both have my address here, although the easiest thing is to do everything online. The HSBC card was renewed last year with no problem. Everybody, HMRC, DSS, pension providers, UK bank etc, all know I'm here, and that works for me.

Having said that, I'm not 'Non-resident' for tax purposes, because it seems that most UK-derived pensions are subject to UK tax, so I can't see any advantage. The leaflet says that 'Most UK pensions' are subject to tax, but I couldn't see anything which clarifies which pensions are not.

As a general point anyone who just gets on a plane and leaves without thinking through everything to do with your bank account, income sources, tax, credit cards etc and making suitable arrangements is likely to run into trouble after a while.

Edit:- I see that whilst I was stumbling through my post others have posted appropriate links

I've had the same experience with my credit cards. I told them I will be here for a few years and they were fine. But the odd thing is that one of the companies that is fine with me using my card and living here won't let me apply for a different card. But I think in general that they want to keep you as a customer if you spend money and pay on time. They are making a profit from you, so they have no reason to stop you using your card.

There are some major advantages to being non-resident. You are not liable to CGT and not liable to tax on many types of earnings. I have money from affiliate marketing being paid to my UK bank account. That is not subject to tax because I'm non-resident. And when I sell my assets there won't be any tax to pay. It all depends on your individual circumstances though. If I go back to UK on holiday and get ill and need to see a doctor, then I will have to pay, as you can't get NHS treatment for free if you're non-resident. Although I can't see how they would possibly know this. I can't really imagine HMRC passing the info to the NHS and it actually getting onto a system that every doctor and hospital has access to.

As at the last budget, assets such as properties are now liable to CGT for non-residents when sold.

This is simply not true, so please check your facts before writing such nonsense.

[Darrel]

I am considered non-resident by HMRC (unsurprisingly, as the last time I lived or worked in the UK was nearly 40 years ago).

This doesn't stop me having a UK credit card and various UK bank accounts, some of which have my Thai address and some of which have a UK address.

Given that the banks give no definition of "being resident in the UK", and given that they have no access to HMRC's opinion of my tax residency status which is none of their business anyway, I have no qualms at all about telling them that I am resident in the UK if it suits me to do so. I take it to mean "having a UK address", which I do.

Residency has nothing to do with right of abode.

Non-residency carries several benefits (ie no CGT, exemptions on some interest income) and some penalties (ie no free NHS treatment and the loss of index-linking on your state pension in some countries, like Thailand).

There is no advantage in being non-resident in relation to normal dividend payments, though you can claim a rebate for some REITS.

[wordchild]

If I inform HMRC tomorrow that I left UK permanently (actually I haven't been there since February) which tax year can I stop paying tax on my UK sourced income (dividends from business in London)?... I do not own any property in UK (I was renting a flat in London for which the contract will expire before the end of this year) and I don't mind limiting my visits to less than 90 days per year (and when I am there I will not be conducting any business)... do I have to wait 3 years for the tax saving?

The only savings is that your income that arises in the UK may be paid to you free of tax, up to your annual personal exemption limit, anything over that and you will still be taxed, either by deduction at source or via the annual return., in many respects that's not really a savings as such since it nets out to the same ammount both ways..Your real savings are is you can move the investment outside of the UK, in that event it becomes free of all UK tax.

As for the timeframe, difficult to tell what HMRC might say, they may give you non-residency this year or they may make you wait, they are pretty much a law unto themselves, my guess is that they will make you wait.

What you say is wrong. Income that arises in the UK is not taxed, unless it's from an asset such as property. If you are non-resident you don't get an annual allowance, so you are wrong about that as well. None of the pay I receive in the UK is taxable.

I left the UK in May and HMRC agreed that I was non-resident for the next tax year. I think they grant it for the first full year that you're not there, but I'm sure this can vary based on circumstances. You don't have to wait for 3 years.

there is different treatment depending on why you leave. If you leave for work then you are treated as non resident from the day after the day you leave the UK. During your first tax year away (if not a full tax year) you will be considered non-res for a "split year" , thereafter you will be fully non resident.

If you leave for other reasons HMRC may still consider you as potentialy resident unless you are away for at least 3 full tax years . If you return within that period HMRC may consider you as having only been temporarily non-res during the period away and you could be liable for tax retrospectively.

Its important to remember that the UK tax system is based on self assessment (incl for residency) so HMRC will take what you say at face value and treat you accordingly. However if they feel a false declaration has been made (even going back many years) then they may challenge your assessment.

Edited May 4, 2012 by wordchild

[topt]

If I inform HMRC tomorrow that I left UK permanently (actually I haven't been there since February) which tax year can I stop paying tax on my UK sourced income (dividends from business in London)?... I do not own any property in UK (I was renting a flat in London for which the contract will expire before the end of this year) and I don't mind limiting my visits to less than 90 days per year (and when I am there I will not be conducting any business)... do I have to wait 3 years for the tax saving?

The only savings is that your income that arises in the UK may be paid to you free of tax, up to your annual personal exemption limit, anything over that and you will still be taxed, either by deduction at source or via the annual return., in many respects that's not really a savings as such since it nets out to the same ammount both ways..Your real savings are is you can move the investment outside of the UK, in that event it becomes free of all UK tax.

As for the timeframe, difficult to tell what HMRC might say, they may give you non-residency this year or they may make you wait, they are pretty much a law unto themselves, my guess is that they will make you wait.

What you say is wrong. Income that arises in the UK is not taxed, unless it's from an asset such as property. If you are non-resident you don't get an annual allowance, so you are wrong about that as well. None of the pay I receive in the UK is taxable.

I left the UK in May and HMRC agreed that I was non-resident for the next tax year. I think they grant it for the first full year that you're not there, but I'm sure this can vary based on circumstances. You don't have to wait for 3 years.

Actually this is not 100% correct. I have been non resident for four years and for the first three claimed back interest on savings that had been taxed at the basic rate against my personnal allowance. Also if you have pensions paid from the UK they are also liable to tax. I am not sure if the personal alowance can be claimed forever but I am sure someone can confirm?

[cardholder]

If I inform HMRC tomorrow that I left UK permanently (actually I haven't been there since February) which tax year can I stop paying tax on my UK sourced income (dividends from business in London)?... I do not own any property in UK (I was renting a flat in London for which the contract will expire before the end of this year) and I don't mind limiting my visits to less than 90 days per year (and when I am there I will not be conducting any business)... do I have to wait 3 years for the tax saving?

The only savings is that your income that arises in the UK may be paid to you free of tax, up to your annual personal exemption limit, anything over that and you will still be taxed, either by deduction at source or via the annual return., in many respects that's not really a savings as such since it nets out to the same ammount both ways..Your real savings are is you can move the investment outside of the UK, in that event it becomes free of all UK tax.

As for the timeframe, difficult to tell what HMRC might say, they may give you non-residency this year or they may make you wait, they are pretty much a law unto themselves, my guess is that they will make you wait.

What you say is wrong. Income that arises in the UK is not taxed, unless it's from an asset such as property. If you are non-resident you don't get an annual allowance, so you are wrong about that as well. None of the pay I receive in the UK is taxable.

I left the UK in May and HMRC agreed that I was non-resident for the next tax year. I think they grant it for the first full year that you're not there, but I'm sure this can vary based on circumstances. You don't have to wait for 3 years.

Actually this is not 100% correct. I have been non resident for four years and for the first three claimed back interest on savings that had been taxed at the basic rate against my personnal allowance. Also if you have pensions paid from the UK they are also liable to tax. I am not sure if the personal alowance can be claimed forever but I am sure someone can confirm?

If you are subject to UK tax then you also acquire the published allowances.

[letitbe]

re credit cards just lie no problem ?? what are they going to do take the card away ?? advantage is no CGT tax etc disadvantage is your not meant to be able to use DHS but again never asked and government departments dont talk to each other or just claim ignorance works every time. Ive paid millions in Uk tax and same in USA so dont have any conscience about it at all but then I dont need NHS or rest.

Dont worry about it but if you have potontial CGT liability better to be officially non resident.

Actually its not really your choice if your here long term legally your non resident but up to you if you want to try and claim otherwise

[letitbe]

re credit cards just lie no problem ?? what are they going to do take the card away ?? advantage is no CGT tax etc disadvantage is your not meant to be able to use DHS but again never asked and government departments dont talk to each other or just claim ignorance works every time. Ive paid millions in Uk tax and same in USA so dont have any conscience about it at all but then I dont need NHS or rest.

Dont worry about it but if you have potontial CGT liability better to be officially non resident.

Actually its not really your choice if your here long term legally your non resident but up to you if you want to try and claim otherwise

[phutoie2]

On the credit card front, I have not experienced any difficulties in continuing to use my UK card following my move to Thailand - or even to have it replaced following its fraudulent use here. Sure the exchange rate may not be favourable as 1 or 2 respondents have pointed out, but this needs to be weighed against an annual fee of at least 300 THB for a Thai credit card (my UK card has no such fee).

Are you sure you mean Thai Credit Card? (Very hard to get without a work permit)

What is wrong with the normal Thai ATM (VISA) cards, I can assure you there is no annual fee for such a card.

There usually is a fee with the thai ATM card, the ones I have seen anyway.

There in no fee at all on my Thai ATM card. If you are charged a fee I suggest you change banks, as you are likely in a very small minority of people that pay a fee.

Bangkok Bank charge 200 THB annually for the use of their BE 1st debit card. I always notice the charge when I update my savings account bank book, I can live with that and cannot be ar*ed to change banks.

[Darrel]

What you say is wrong. Income that arises in the UK is not taxed, unless it's from an asset such as property. If you are non-resident you don't get an annual allowance, so you are wrong about that as well. None of the pay I receive in the UK is taxable.

Earned income arising in the UK certainly is taxable there regardless of whether you are resident or not. There are some exemptions and special cases but the principle is valid.

In principle non-residents are not subject to CGT though.

Unearned income (interest, dividends etc.) is also taxable in principle but there are also several generous exceptions and special cases. I benefit from these every year.

Non-residents do qualify for all UK personal allowances, as long as they are EEC member citizens (ie British, European etc.) or in some other special groups.

[Darrel]

Bangkok Bank charge 200 THB annually for the use of their BE 1st debit card.

Kbank also charge 200B annually.

[Rinrada]

Would confirm Bank Krungthrep i200Bt a year (can live with that ) but just had a shufti at my bank books and would verify that fees of 15 Bt are charged for non branch withdrawals and 20 Bt for other banks ATMs.

Needless to say when using my N/W ATM I never bypass EAON...luvly joints....Must visit Central Airport P prun-nee...Night market...wifee gotta stall there/helps out..........while I hit the bars.....

[PattayaParent]

Bangkok Bank charge 200 THB annually for the use of their BE 1st debit card.

Kbank also charge 200B annually.

TMB also

[wordchild]

What you say is wrong. Income that arises in the UK is not taxed, unless it's from an asset such as property. If you are non-resident you don't get an annual allowance, so you are wrong about that as well. None of the pay I receive in the UK is taxable.

Earned income arising in the UK certainly is taxable there regardless of whether you are resident or not. There are some exemptions and special cases but the principle is valid.

In principle non-residents are not subject to CGT though.

Unearned income (interest, dividends etc.) is also taxable in principle but there are also several generous exceptions and special cases. I benefit from these every year.

Non-residents do qualify for all UK personal allowances, as long as they are EEC member citizens (ie British, European etc.) or in some other special groups.

Non residents are not subject to further tax on dividends from uk companies beyond the dividend tax credit.

Non residents can become subject to cgt for gains taken whilst non- res if they return to the UK as resident within 5 years

Edited May 5, 2012 by wordchild

[wordchild]

Sorry I should have made clear above, in most circumstances for a non res there should be no liability to any further tax on dividends beyond the deemed tax credit. There can be certain (rare) situations when there is a liability . For most people dividends from uk companies can either be treated as income forming part of your personal allowance or, if greater than that,treated as excluded income, and not subject to further tax.

Edited May 5, 2012 by wordchild

[GuestHouse]

There's no clear evidence that this place won't go tits up when the inevitable occurs.

Why would anyone want to burn their bridges back to a place where they have inalienable rights to reside, to own property in their own name and where they have a right to welfare, pensions and health care free at the point of need.

OK ..... I know, cold beer and luke warm pussy at a price you can afford.... for now.

[wordchild]

BTW if you opt to have dividends treated as excluded income then you forego any personal allowance.

Edited May 5, 2012 by wordchild

[Darrel]

Non residents can become subject to cgt for gains taken whilst non- res if they return to the UK as resident within 5 years

Indeed, but this to do with being resident rather than non-resident. As long as you stay non-resident it does not apply. There are some other similar rules affecting people who stop being resident, but they are complex and probably not very relevant to the question here which I understand relates to people who are permanently non-resident.

I think it is beyond the scope of this forum to go into the minute detail of the UK tax code.

[Darrel]

Sorry I should have made clear above, in most circumstances for a non res there should be no liability to any further tax on dividends beyond the deemed tax credit. There can be certain (rare) situations when there is a liability . For most people dividends from uk companies can either be treated as income forming part of your personal allowance or, if greater than that,treated as excluded income, and not subject to further tax.

Indeed, but this is the exemption that I mentioned. The same applies to interest, the tax on which is limited to that deducted at source and no further tax is due. The liability is still there but exemptions and special exceptions reduce it.

It doesnt do to make people think that all these things are automatically and totally free of tax to non-residents, though in most cases they are to a great extent.

[wordchild]

i think the point is an important one. It is perfectly possible and completely legal (as an expat in Thailand) to have a very considerable income from certain UK assets (excluding property) without paying any personal income tax (on this income) in the UK.

Edited May 7, 2012 by wordchild

[wordchild]

This month should see the UK Govt publication of its response to its consultation on the introduction of a statutory residence test. This will give us the first look at the shape of the legislation on this and, the rules that will then apply from 4/13. This should bring some welcome clarity incl to many of the issues raised on this thread.

[Darrel]

i think the point is an important one. It is perfectly possible and completely legal (as an expat in Thailand) to have a very considerable income from certain UK assets (excluding property) without paying any personal income tax (on this income) in the UK.

I certainly wont argue with this. Indeed I benefit from it every year.

But this should not be confused with tax on earned income, nor should anyone assume that all UK interest and dividends will automatically be paid without tax to non-residents; it wont.

[PattayaParent]

This month should see the UK Govt publication of its response to its consultation on the introduction of a statutory residence test. This will give us the first look at the shape of the legislation on this and, the rules that will then apply from 4/13. This should bring some welcome clarity incl to many of the issues raised on this thread.

They previously published some guidelines that could be used to check your possible future status, of course they could have been changed in the final draft.

[wordchild]

This month should see the UK Govt publication of its response to its consultation on the introduction of a statutory residence test. This will give us the first look at the shape of the legislation on this and, the rules that will then apply from 4/13. This should bring some welcome clarity incl to many of the issues raised on this thread.

They previously published some guidelines that could be used to check your possible future status, of course they could have been changed in the final draft.

yes they did but there are mixed views on the extent the legislation when we see it will differ from the consultation with some commentators expecting changes in response to the issues raised. In any event clarity on the factors that matter in considering ones residency position is welcome,

[Arkady]

HMRC rules on UK residency are currently under review and there's avery interesting discussion paper on the subject, the rules, soon to be changed, will incude a residency test that involves a series of criteris that must be rated as pass or fail, it's worth digging around to try and find it. If somebody doesn't post that document then I can.

As far as credit cards are concerned: it's easily possible to keep existing UK credit cards and change the mailing address, I have done that with HSBC Master Card and Barclaycard, both of whom bill me and correspond with me at my address here and both organisations are well aware I don't live in the UK, this being true for the past seven years.

Finally, I'm not UK resident and want to keep it that way for tax reasons and eventually because of domicile.

Could you post the discussion document? I have not seen it, although heard something was afoot, and I am sure many here would be interested.

[Arkady]

quite correct but in reality the UK tax people cant do much if youve taken most of your assets out and given them to your Thai wife and our children as I have. One advantage of being non res is no capital gains tax which I wish id done many years ago since it would have saved me around 250k gbp

This is an interesting point. If the HMRC decides you were still UK domiciled after you have gone but all your assets and heirs are outside the UK, what can they do to force your estate into UK probate? I can see that avoiding probate might be a problem for any presumed heir and/or executor who later travels to or goes to live in the UK.

HMRC is particularly churlish in refusing to publish meaningful guidelines on domicile or allow the living to apply for a ruling, presumably because it wants to reserve the right to make decisions on a whim. There are also many rulings on domicile based on childishly petty criteria that makes HMRC appear disgustingly spiteful and greedy. In the reverse case of foreign residents of the UK who wish to avoid tax on their overseas incomes, while enjoying all the benefits of living in the UK, as well as avoid inheritance tax, they seem able to make things crystal clear. I wonder why.

At some expense it is possible to set up a trust structure that forces HMRC to make a decision on your domicile, although I don't know how foolproof this is or how much it costs in lawyers' fees to set up.

Edited May 9, 2012 by Arkady

[PattayaParent]

This is an interesting point. If the HMRC decides you were still UK domiciled after you have gone but all your assets and heirs are outside the UK, what can they do to force your estate into UK probate? I can see that avoiding probate might be a problem for any presumed heir and/or executor who later travels to or goes to live in the UK.

HMRC is particularly churlish in refusing to publish meaningful guidelines on domicile or allow the living to apply for a ruling, presumably because it wants to reserve the right to make decisions on a whim. There are also many rulings on domicile based on childishly petty criteria that makes HMRC appear disgustingly spiteful and greedy. In the reverse case of foreign residents of the UK who wish to avoid tax on their overseas incomes, while enjoying all the benefits of living in the UK, as well as avoid inheritance tax, they seem able to make things crystal clear. I wonder why.

At some expense it is possible to set up a trust structure that forces HMRC to make a decision on your domicile, although I don't know how foolproof this is or how much it costs in lawyers' fees to set up.

On your first point of probate it would just be declared that you have no assets or heirs in UK and no assets overseas and probate would be cleared.

On trusts I had looked into this with a company that sets up and manages trusts. Off hand I can't remember the set up fee but there was also a management fee which was a couple of thousand GBP a year or % of the trust.

But speaking with an IFA I was advised that this is not a guarantee that you will be declared non-domiciled. HMRC may not make any declaration and leave the door open to apply IHT (or tax on the trust) at a later date, or they could challenge your non-domiciled status at a later date if your circumstances change.

The best hopes at the moment for non-doms is that they raise the nil band rate and/or give the same nil band allowance to foreign spouses as they do to UK spouses.

[jonw8uk]

There's no clear evidence that this place won't go tits up when the inevitable occurs.

Why would anyone want to burn their bridges back to a place where they have inalienable rights to reside, to own property in their own name and where they have a right to welfare, pensions and health care free at the point of need.

OK ..... I know, cold beer and luke warm pussy at a price you can afford.... for now.

What bridges are being burnt?

I can return to the UK at anytime to live and work. As soon as I start work, all my entitlements (NHS) come back. Infact, as I'm still paying NI whilst I'm non-resident, then my pension will be the full quota also.

I'm not giving up anything, only I'm not paying income tax to a country that has no connection to my earnings. I don't see why I should either....

[PattayaParent]

There's no clear evidence that this place won't go tits up when the inevitable occurs.

Why would anyone want to burn their bridges back to a place where they have inalienable rights to reside, to own property in their own name and where they have a right to welfare, pensions and health care free at the point of need.

OK ..... I know, cold beer and luke warm pussy at a price you can afford.... for now.

What bridges are being burnt?

I can return to the UK at anytime to live and work. As soon as I start work, all my entitlements (NHS) come back. Infact, as I'm still paying NI whilst I'm non-resident, then my pension will be the full quota also.

I'm not giving up anything, only I'm not paying income tax to a country that has no connection to my earnings. I don't see why I should either....

Your NHS entitlements come back as soon as you return if you intend to stay permanently, no need to do anything so drastic as go to work.

[letitbe]

quite correct but in reality the UK tax people cant do much if youve taken most of your assets out and given them to your Thai wife and our children as I have. One advantage of being non res is no capital gains tax which I wish id done many years ago since it would have saved me around 250k gbp

This is an interesting point. If the HMRC decides you were still UK domiciled after you have gone but all your assets and heirs are outside the UK, what can they do to force your estate into UK probate? I can see that avoiding probate might be a problem for any presumed heir and/or executor who later travels to or goes to live in the UK.

HMRC is particularly churlish in refusing to publish meaningful guidelines on domicile or allow the living to apply for a ruling, presumably because it wants to reserve the right to make decisions on a whim. There are also many rulings on domicile based on childishly petty criteria that makes HMRC appear disgustingly spiteful and greedy. In the reverse case of foreign residents of the UK who wish to avoid tax on their overseas incomes, while enjoying all the benefits of living in the UK, as well as avoid inheritance tax, they seem able to make things crystal clear. I wonder why.

At some expense it is possible to set up a trust structure that forces HMRC to make a decision on your domicile, although I don't know how foolproof this is or how much it costs in lawyers' fees to set up.

quite correct but in reality the UK tax people cant do much if youve taken most of your assets out and given them to your Thai wife and our children as I have. One advantage of being non res is no capital gains tax which I wish id done many years ago since it would have saved me around 250k gbp

This is an interesting point. If the HMRC decides you were still UK domiciled after you have gone but all your assets and heirs are outside the UK, what can they do to force your estate into UK probate? I can see that avoiding probate might be a problem for any presumed heir and/or executor who later travels to or goes to live in the UK.

HMRC is particularly churlish in refusing to publish meaningful guidelines on domicile or allow the living to apply for a ruling, presumably because it wants to reserve the right to make decisions on a whim. There are also many rulings on domicile based on childishly petty criteria that makes HMRC appear disgustingly spiteful and greedy. In the reverse case of foreign residents of the UK who wish to avoid tax on their overseas incomes, while enjoying all the benefits of living in the UK, as well as avoid inheritance tax, they seem able to make things crystal clear. I wonder why.

At some expense it is possible to set up a trust structure that forces HMRC to make a decision on your domicile, although I don't know how foolproof this is or how much it costs in lawyers' fees to set up.

i dont think you can ever get HMRC to say you are non domiciled although I have a letter rom them accepting I am non resident. I cant see any problem with any heirs entering UK at all. In fact ive taken enough out of UK to put my estate below the IH threshold and sold some bits to my wife here to ensure its fine since wifes who are not in UK only get a measly 55,000 gbp allowance on top of 325,000 free allowance. Also I gifted most in fact nearly all assets id taken our of UK to my Thai wife 8-10 years ago so even if they6 knew anything about it and I cant see how they could since assets are here in Singapore and in Hong Kong and im pretty sure theirs no reporting from those countries authorities back to UK and in any case since its in my Thai wifes name for last 8+ years no problem. I still have some assets in my name but they dont amount to more than around 150-200,000 gbp and im getting rid of those as well by using them for living expenses.

But my main point is if you take out enough to put your estate below threshold and invest it in a non EEC or western country then I really think its certain the HMRC wont even know about it or bother. Id strongly advise anyone with substantial wealth in UK to get most out ASAP and if like me you did it many years ago and spread over years it simply IMO will be impossible to trace. Of course if you leave it till 2-3 years before your demise then their is a slim chance HMRC discover you used to have say 2 million in Uk and now only 300,000 and they might try and make a claim so unless your fairly sure you will survive 7 years id probably advise get it all out. Their will be no problem for any heir or executer since how on earth would they know who your heirs were. They might assume your wife and children here but proving it would be impossible and im sure they would have no power to stop or do anything to anyone who was not the original owner of assets and in this case that person would be in another place.

[Darrel]

Id strongly advise anyone with substantial wealth in UK to get most out ASAP....

And give up decent deposit protection, decent interest rates, no tax on interest and a currency that is likely to appreciate in the medium term? No thanks.

Personally domicile and IHT dont bother me at all; I have no immediate family and dont want any. When I die I will be leaving an amount below the IHT theshold to some fairly distant nephews and nieces whom I rarely see, and the rest of my wealth (which is many times the IHT threshold) will be going to charity. I dont expect a penny of IHT to be paid when I die so my domicile really doesnt matter a jot.

Horses for courses.