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Has Brexit affected UK tax residence rules?

Joe Alderson

Joe Alderson | Tax Compliance Lead

Thursday 4th Nov, 2021

The simple answer here is no. The UK’s tax rules, both for its residents and working visitors are complex but they haven’t been modified with the advent of the country’s departure from the EU.

In common with most countries around the world the UK government seeks to tax its individuals on their worldwide income.

So, if you usually live and work in the UK, you’ll be taxed on your earnings here. If you own a property or investments overseas from which you receive income, you’ll also be taxed here on that income.

The exception to this general rule occurred if the individual was ‘not domiciled’, usually taken as being not born or ‘originating’ in the UK and not treating the UK as home but still living here. In those circumstances the ‘non-dom’ would only be taxed in the UK on their overseas income if it was sent or ‘remitted’ to the UK.


What changed for the ‘non-dom’?

Being a non-dom gave clear tax advantages to wealthy individuals able to leave their income and assets offshore and the rules have changed over the past few years to limit the time for which non-dom status can be held.

There is no doubt that these changes and the announcement of Brexit caused many non-doms to consider where they wanted to live and the altered tax consequences of doing so.

An individual can only have one domicile at any time, usually stemming from their father’s origin but capable of being changed to an origin of choice after the age of 16. It tends to be the country which you consider to be your permanent home. Seeking to prove a change of domicile for tax advantages, however, can be fraught with difficulties!


Tax residence vs tax domicile

Tax residence is different from tax domicile. It is possible to be tax resident in more than one country. However, in our experience it is the area with which contractors have the most frequent issues.

Whether you are treated as tax resident in the UK will depend upon how your situation scores against the Statutory Residence Test (SRT) applied by HMRC.

The test looks at factual information so things like the number of days present in the UK is the starting point then matters such as where property is owned, where the family resides and work commitments all play a part.

Your answers may result in a simple ‘UK tax resident / Non-UK tax resident’ conclusion but more often than not the result will be less easily defined.


How to avoid double taxation

Similar types of tests are applied by overseas tax authorities for UK ex-patriates and working contractors and there can be a risk of ‘double taxation’ on the same income. However, international agreements between the UK and most countries, including the EU member countries exist to provide the appropriate credit for tax paid/deducted in one country where the liability rests in another country.

Being a tax resident in two countries (being ‘dual resident) often means that tax returns have to be filed in both countries and it’s important to establish before moving abroad permanently or working overseas temporarily, what those obligations are.

In the UK, income from property let by non-residents is still taxed here. For example, a contractor may take a 3 year overseas contract in Germany and move his family there but decide to let rather than sell the UK family home. The contractor will need to register for the HMRC’s Non-Resident Landlord Scheme, make a UK tax return each year and pay tax on the rental profits.

There are a number of online guidance resources provided by HMRC to help taxpayers understand issues such as domicile, the SRT and the obligations of being a non-resident landlord but, depending upon your circumstances, we recommend that you take professional advice on these issues. It can be very expensive getting it wrong.

If you are or will be affected by any of these issues and feel that you would like further advice or guidance, please contact PayStream’s Tax Team by emailing, calling 0161 923 0201 or viewing our full range of specialist tax services.

Related content - Specialist Tax Services 

We've created our range of Specialist Tax Services to help you navigate the complexities of the UK tax system, which can be both time consuming and confusing.

Each service is designed to help with the more sensitive or complex of situations. All with the end goal of ensuring that your tax affairs are dealt with in the most tax efficient way.

View our Specialist Tax Services here
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