Pre UK residency planning – 10 key considerations

25/05/2020

By David Snelling

Have you been offered an opportunity to work or set up a business in the United Kingdom? Or, are you planning, for whatever reason, to become a UK resident in the future? If yes, it is important to understand the implications of moving to the UK, ideally well in advance of setting foot on UK soil. For help with this, please read on.

It is likely to be a slightly daunting and busy experience. In some cases, you may be moving your entire family to the UK which can add to the stress of the situation. To help you, here is an overview of some crucial financial planning considerations for your attention before you move to the UK.

  1. Establish your domicile position
    There are similarities in the pre-UK residency planning opportunities for both ‘UK-doms’ as well as ‘non-doms’. However, there are also some clear differences with more planning opportunities available for non-doms including not least the ability to claim the Remittance Basis of taxation. Learn more about the remittance basis of taxation here. The key concepts regarding domicile covered in more detail in our article: 4 key types of UK domicile you need to understand.
  2. Review your existing investments
    Obtain a clear picture of your investment portfolio, including gathering details on acquisition dates, prices, and current values to ascertain your capital gains position. The nature of investment holding structure(s) is important, whether direct through an investment account or platform, through insurance-based investment bonds, or through corporate or trust-based investments. Even individual investment funds may be unsuitable: for example, if they do not have UK reporting fund status. Some of your existing investment structures may be well-suited for continued use when becoming a UK tax resident. Others may be detrimental and need changing.
  3. Consider and implement any planning in the UK tax year before you arrive.
    This will help provide clarity over which jurisdiction has taxing rights, although depending upon the specific individual circumstances, split year treatment may be available.
  4. Rebase your investment gains
    This is important to ensure that large investment gains, the majority of which may have accumulated during a period of non-UK residency, are not inadvertently subjected to the higher rates of taxation associated with the UK.
  5. Set up an investment account that segregates income from gains and capital
    This is one for the non-doms who are likely to claim the Remittance Basis. Any remittances into the UK from ‘mixed funds’ (essentially where income/capital gains/capital have not been segregated) will be taxed in a prescribed order. Not surprisingly, the rules applied are not to the advantage of the taxpayer, therefore being able to remit clean capital into the UK will be advantageous.
  6. Send money to the UK ahead of arrival
    Whilst this seems like a simple step, this will negate any of the complexities described in the previous point around whether capital is clean or mixed. A common situation is that relatively soon after acquiring UK residency, funds will need to be brought onshore for a significant purchase such as a home. It may be better to send money to a UK account ahead of acquiring UK tax residency.
  7. Make use of your spousal or civil partner allowances
    Depending upon your individual circumstances, asset ownership in the name of one spouse or civil partner over the other could be more beneficial from a tax perspective. For example, it may be a consideration to consider holding assets in the name of a spouse who is a non-dom and therefore able to claim the Remittance Basis.
  8. Consider how long you are likely to reside in the UK
    This is another important consideration if you are a non-dom. The longer you are UK tax resident, the more chance you have of becoming Deemed Domicile for tax purposes. This could be a very costly problem as it will bring your worldwide estate into the scope of UK Inheritance Tax. With careful planning, you may be able to ring-fence overseas assets, but the key is to plan ahead.
  9. Understand your UK tax position and planning options once resident
    Whilst the UK tax system is possibly more complex than you are used to, there are many different options available for effective planning. This includes various available UK tax allowances as well as tax relief available by investing in Individual Savings Accounts (ISAs) and pensions.
  10. Take advice from a financial planner who specialises in working with non-UK residents and UK residents
    UK tax is notoriously complex with many pitfalls even for those who are wary. A professional will be able to understand your personal and financial situation as well as your objectives and work with you to set up a suitable plan for your future.

UK tax and the considerations around your financial planning can be complicated.

Having moved countries myself, I’m aware that you are likely to be busy with the non-financial elements of your move to the UK. However, it is important that you seek the advice of a specialist financial planner with experience in pre-UK residency tax planning before you move to the UK.

For more information regarding pre-UK residency tax planning and any related matters, please contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.

 

Note – This article does not constitute financial advice and you should always consult a qualified financial professional before undertaking any financial planning. The information in this article is based solely on our understanding as at the date of the article. Government legislation can change at any time.

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