Tax for Overseas Business Owners

For UK residents not domiciled in the UK, there are special rules that apply to your overseas income and capital gains. Companies999 are here to help you understand the terms and conditions, while also explaining how the tax system works for company owners in and out the UK.

DOMICILED

Your place of residence e.g. the company owner is domiciled in the UK.

Some choose to be taxed according to the special rules, also known as: Remittance Basis.

REMITTANCE BASIS
You only pay UK tax on the overseas income and gains you bring to the UK.

However, you lose tax-free allowances for Income Tax and Capital Gains Tax. You will also still have to pay UK tax on your UK income and capital gains.

What if I have no overseas income or capital gains?

Then your domicile status has no significance on the amount of income tax or capital gains tax you pay.

So, if all your income and gains come from UK sources, you will pay UK tax.

I want to make a claim to pay tax under the remittance basis!

You can make a claim, however, unfortunately it will come at a rather large cost.

  • You will lose your personal allowance and capital gains tax exemption.
  • You may also have to pay the hefty £30, 000 or £60, 000 charge.

Just to clarify, Number 2 is only if you have been living in the UK for a particular period of time.

If you cannot afford to pay the charge, there are useful exemptions for non-domiciled individuals to benefit from their special tax status.

How about an Alternative?

You can allow yourself to be taxed on the arising basis.

Under the arising basis, the tax is payed on all your UK and overseas income and capital gains as they arise.

This is how most UK residents are taxed.

Inheritance Tax

This depends on your domicile status, and especially the location of your assets.

If you are UK domiciled you will be subject to UK inheritance tax on your international assets, this even applies for non-residents.

If you are treated as non-domiciled, your assets in the UK will still be subject to inheritance tax.

However, your overseas assets are classed as ‘excluded property’ and so not subject to inheritance tax.

Are you deemed UK Domiciled?

  • UK resident for 15 out of the last 20 tax years
  • Non-doms who are long-term residents
  • Children born and raised in the UK but not domiciled there (before adulthood)

These three categories are deemed UK domiciled for income tax, capital gains tax and inheritance tax purposes.

Once deemed, you cannot use the remittance basis for overseas income and capital gains, they are taxed as they arise.

Unremitted income and capital gains from previous tax years will still be taxed on the remittance basis: tax-free if kept outside the UK and taxed if remitted to the UK.

Both UK and overseas assets will be subject to UK inheritance tax.

The Government is taking action against those who were born with a UK domicile and then emigrate to acquire a domicile elsewhere before returning to the UK.

For more information, we provide a Business Consultation to fulfill all your business needs.

For any assistance contact Companies999, we will be happy to help you!

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