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National Insurance Contributions’ Relief for Employees with Car Allowances

Accountancy

Car allowances come with tax and national insurance contributions (NIC) implications. A recent Upper Tribunal decision has introduced mandatory NIC relief for qualifying car allowances, altering the landscape of tax and NIC calculations. In this article, we explore this important development, its implications, and how employers and employees can navigate the new tax and NIC relief landscape for car allowances.

Standard Practice

Car Allowances

Car allowances are often provided to employees, where they use their personal car for business purposes. These are subject to  both income tax and national insurance contributions through the normal payroll.

Approved Mileage Allowance Payment

HMRC has set an approved mileage allowance of 45p per mile up to 10,000 miles and 25p per mile above 10,000 miles. This can be claimed by an employee and reimbursed by the employer for business mileage in their personal car.

Income Tax relief for a lower rate

Where an employer reimburses an amount less than the above approved rate then a claim can be made by the employee for income tax relief for this value. This is optional and is considered to be claimed by only 40% of tax payers

Latest Development for NIC relief

There has been an Upper Tribunal decision Laing O’Rourke Services Ltd v HMRC[2023]UKUT 155T, which confirmed that there is a similar relief for national insurance contributions.

It further confirmed that this ‘NIC disregard’ is mandatory.

This means employers MUST give relief for the Qualifying Amount (QA) =value of miles x 45p against a car allowance before calculating the primary and secondary NIC due.

There are differences between the values for Income tax and NIC:

 Income TaxNIC
Rate45p for the first 10,000 business miles 45p even above and 25p thereafter           45p even above 10,000 business miles
What can relief be set againstThe entire salaryThe car allowance (as held to be relevant motoring expenditure (RME) by the courts)

How to make a claim for historic business mileage

Employees

  • Make their own claim with HMRC
  • Ask employer to claim on their behalf and for colleagues.

Employers

  • Advise staff if they intend to put in a protective claim , under error or mistake provisions, for a refund of NIC paid in error, which would cover current and six full tax years
  • If immaterial from the company view, advise staff they can make their own claims

Advisers

  • Alert clients that claims are possible. It may not be beneficial if there are few cases and low mileage.

Going Forward

Advisers

  • Review for payroll calculations and advise that the Qualifying Allowance (QA) – (business miles x45p) must reduce the value of the relevant motoring expenditure (RME) for NI including at 45p for mileage above the 10,000 miles
  • Ensure employers keep monthly records to enable the adjustments to be made.
  • Review with software provider to ensure correct relief made.

Additional Information

If you require additional information regarding NIC Relief for employees with Car Allowances, please contact Paul Webb: advice.uk@dixcart.com or speak to your usual Dixcart contact.


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The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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Key accounting considerations when establishing a company in the UK

Legal Accountancy

You have made the decision to incorporate a limited company in the UK and you now need to understand the legal and reporting requirements for your company each year.  Failure to meet the reporting requirements can result in penalties, disqualification as directors or even the limited company being struck off the register at Companies House.

Know your reporting requirements

Statutory accounts

A limited company ordinarily needs to file statutory accounts at Companies House within 9 months of the end of the company’s financial year*.  A copy of the full accounts must also be sent to each shareholder member.

The accounts are required to be prepared under relevant UK GAAP (Generally Accepted Accounting Practice) applicable to the entity, which will depend on factors such as; turnover, assets and number of employees.

Most UK companies report under Financial Reporting Standard FRS 102, FRS 102 1A or FRS 105 (micro-entity), but can also report under FRS 100, FRS 101 or IFRS.  Dixcart can guide you as to which standard is appropriate for your limited company.

If your company reaches the audit thresholds, or if is part of a group, the accounts may need to be audited.  A standalone company may qualify for audit exemption if it has at least 2 of the following:

  • an annual turnover of no more than £10.2 million
  • assets worth no more than £5.1 million
  • 50 or fewer employees on average

A full set of accounts would normally include:

  • A balance sheet
  • A profit and loss account
  • Notes about the balance sheet and profit and loss account
  • A directors’ report

Dixcart can help with the preparation of the relevant annual statutory accounts from your bookkeeping records, the audit (if required) and submission of the statutory accounts to Companies House.

*the filing deadlines can change in the event of a change of accounting year end or for the first period.

Corporation Tax Returns

A limited company is also required to submit a corporation tax return to HM Revenue & Customs [HMRC] each year and pay corporation tax if it is due.

The corporation tax return mut be submitted within 12 months of the accounting year end, but if corporation tax is due this needs to be paid within 9 months and 1 day of the accounting year end.

Corporation tax is currently charged at 25% if your company makes profit in excess of £250,000, 19% for profit of £50,000 or less, or you may be entitled to marginal relief if your profits are between £50,000 and £250,000.

Dixcart can help with the preparation of tax computations and reducing your liability where possible, advising you on tax liabilities due and submitting the Corporation Tax Returns to HMRC.

Companies House requirements

Not only do limited companies need to submit statutory accounts to Companies House each year, they are also required to complete an annual Confirmation Statement, which includes a Statement of Persons of Significant Control – the person or entity which controls the business.

Directors are also obliged to inform Companies House of any changes to the company, for example, changes in directorships, share capital, share ownership, registered office address, to name a few.

VAT

If your company makes taxable supplies, you may be required to submit VAT returns.

Currently if your taxable supply turnover reaches the VAT threshold of £85,000, you will be required to submit VAT returns.

Usually VAT returns are submitted quarterly, and all new businesses are automatically signed up for Making Tax Digital for VAT.  Essentially this means that the digital accounting records need to be kept, to enable the submission of the VAT returns.

There are various accounting schemes such as; the flat rate scheme, cash accounting scheme or annual accounting scheme that could be applicable, but Dixcart can advise you here.

Other

If you are running a limited company in the UK, there are other potential reporting requirements that may be applicable to you.  For example:

  • Payroll – if you employ workers in the UK, you may be required to submit Real Time Information (RTI) payroll reports to HM Revenue & Customs each month.
  • P11Ds – if you provide your employees with benefits such as cars or health insurance, these may need to be reported annually to HM Revenue & Customs
  • Annual Tax on Enveloped Dwellings (ATED) – if your limited company owns UK residential property, you may be required to submit an ATED return to HM Revenue & Customs
  • Employee Related Securities Return (ERS) – if your company offers employees share options or shares, you may be required to make an annual return submission.

Running the business – day to day

Bookkeeping

There are many software packages out there to assist with setting up and running your business and will ensure you are Making Tax Digital compliant.  We recommend and partner with Xero online accounting software.  You can either use Xero yourself or we can do this for you, so you can concentrate on growing your business.

Xero automates tasks that used to take up a lot of time. From reconciling bank transactions to sending invoice reminders, it works for you.  Data is protected and stored in one place so it’s easy to see how business is tracking with analytics and to collaborate with your accountant.

  • Everything in one place – See all your invoices, contacts, balances, financial information and accounts online.
  • Connect to your bank – Easily and automatically sync your bank with your financials in Xero online accounting, for easy reconciliation. Xero supports multi-currency businesses too
  • Collaborate online in real time – Invite your advisor to work with you on the online accounts anywhere, anytime
  • Customise to suit your needs – Make Xero your own by connecting other apps to the Xero accounting software.  

And to make Xero work even better for you, we also recommend Dext digital receipt management.

Dext connects seamlessly with the world’s leading accounting software, including Xero, and can help your business automate everyday financial operations, giving you the platform to grow.

Simplify your business accounting process by publishing your sales and business expenses paperwork, such as invoices and receipts, into Dext.

  • Simply snap a picture of your receipt with the Dext app and all the data you need is instantly extracted with market-leading accuracy
  • Submit documents via email, drag & drop, bank fetch – to name just a few ways you can drip-feed invoices and receipts whenever you need
  • Publish your receipts and business expenses straight into your accounting software automatically and keep them safely stored
  • Save time and improve the accuracy of your records with Dext’s expense and invoice management software
  • Quickly create and approve expense reports and set rules to automatically categorise new ones as they come in
  • Have a full overview of your performance with real-time data and make your business more efficient.

Our team at Dixcart can assist you with the above, by taking it all off your hands or alternatively, you can choose how much to want to do yourself with our help along the way, be it implementing, training, maintaining and online filings, as necessary.  

Payroll

Payroll in in the UK is the process of paying employees and collecting taxes from their salaries.  The main taxes are Income Tax and National Insurance, which are paid via the Pay As You Earn (PAYE) system.  Employers need to register as an employer with HMRC, and will need to use HMRC recognised payroll software to manage their PAYE payments and deductions.  Real-Time information (RTI) is the system the UK uses to report payroll information.  Under RTI, employers have to report their payroll data to HMRC online.

Some additional steps for running payroll in the UK are:

  • Record the pay of each employee, including salary, wages and any other pay
  • Calculate deductions from their pay, such as tax, National Insurance, student loan repayments, pension contributions, etc.
  • Report their pay and deductions to HMRC on or before each payday using a Full Payment Submission (FPS)
  • Pay HMRC the tax and National Insurance you owe by the 22nd (or the 19th if paying by post) of the next tax month
  • Consider pension obligations under auto-enrolment – a UK government initiative to automatically enrol qualifying employees into a workplace pension scheme.

We can help you register and set up a payroll (and pension) scheme, run your payroll on our compliant software, and assist you with your legal and filing obligations relating to payroll and pension contributions.

All UK employees should have contracts of employment, and our team at Dixcart Legal can assist with advising on and drafting those and dealing with other employment related legal matters.

Company Secretarial

Corporate identity theft is a major problem for UK incorporated businesses.  Companies House reports around 50 to 100 cases every month, but of course cannot quantify those it has not discovered.

Company identity theft or company hijacking can involve:

  • Changing the registered office. Fraudsters file a form to change the company’s registered office to an alternative address. Once this is done any communications from Companies House will be sent to the company at the new registered office.
  • Changing the officers. Fraudsters file forms to notify Companies House of the appointment of one or more officers of their own. At the same time they will notify Companies House that the company’s true officers have all resigned.
  • Obtaining company documentation. Once these notifications have been registered at Companies House the fraudsters are now effectively in control of the company. In order to give credibility in their subsequent dealings with third-parties the fraudsters may request a Certificate of Good Standing from Companies House. This official document confirms the status of the individuals as being the company’s officers.

The company itself may not discover the changes at Companies House until the fraudsters have obtained goods or services using the stolen company identity and vanished, leaving the company with substantial debts.

As a deterrent, Companies House offer a free service called the ‘Protected Online Filing (PROOF)’ scheme.  By signing up to this service certain filings, including changes to the registered office address, officer details and company name, can only be submitted online using an authentication code provided to the company.

At Dixcart we are also continuously seeking to develop our services in the best interests of our clients, recognising that often they do not wish their home address to be disclosed on the company’s public record.  We have therefore created a comprehensive company secretarial package, being the Company Secretarial and Identity Assurance Service, which includes:

  1. Providing our address as the registered office
  2. Providing our address as the officers’ and people with significant control service address
  3. Filing the annual confirmation statement at Companies House
  4. Filing the statutory accounts at Companies House
  5. Maintaining the statutory registers of the company
  6. Companies House monitoring service – as an alternative to the PROOF scheme, we receive notification of all filings made at Companies House for the company and will advise the officers of any filings that we have not been submitted on their behalf.

How we can help you

Dixcart UK provides solutions and assistance to the business community in the UK and worldwide. 

We can:

  • Assist with incorporating your business
  • Assist with tax compliance and planning, including the aspects of UK tax covered in this note
  • Offer bookkeeping, accounting and auditing services
  • Offer employment and payroll advice and compliance
  • Provide immigration advice, if you are looking to relocate yourself or staff to the UK
  • Support all of the accounting and company secretarial activities of running a business
  • Advise in relation to commercial legal matters including contractual matters and commercial property.

Further Information

If you have any questions regarding the above, or require any assistance, please do not hesitate to contact us at: hello@dixcartuk.com


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The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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Enterprise Management Incentives (“EMI”)

Accountancy Accountancy

EMI options are an effective way of retaining and incentivising key employees and are particularly helpful for growing companies.

The Enterprise Management Incentive (EMI) is a share option scheme with generous tax advantages, designed for smaller companies.  Selected employees can be granted options to acquire shares, based on conditions chosen by the company, such as time or performance based measures, or a sale or exit of the company.

EMI options are an effective way of motivating and retaining key employees, particularly at the early stage of company growth where valuation is likely to be low or where there are not sufficient profits to incentivise employees through bonuses. Options must be granted for commercial reasons and not as part of a tax avoidance scheme.

Tax Advantages of EMI Share Schemes

There is no tax charge when granting of the option and, providing the option was not granted at less than market value, there should be no tax charge on exercise. Valuations can be agreed in advance with HMRC: this differs from other share schemes and, as such, is a particular benefit of EMI.  Advance assurance can be obtained that HMRC consider the company to qualify for the scheme.  This is illustrated in the graphic below:

EMI v’s Unapproved Options

Any increase in valuation from when the option is granted to when it is exercised is not subject to income tax. There will be a Capital Gains Tax (CGT) charge on sale of the shares if proceeds exceed the exercise price.

There are no minimum shareholding requirements for shares held under EMI to qualify for Business Asset Disposal Relief to reduce the rate of CGT applied on sale to 10%. The normal 12 month minimum holding period requirement for Entrepreneurs’ Relief is specified to include the period the option is held; e.g. if the option is held for two years, the 24 month holding period is met.

Disqualifying Events

Where circumstances change so that the company or the employee are no longer eligible for EMI, this is known as a disqualifying event.  Where options are not exercised within 90 days of a disqualifying event, tax benefits are lost. 

Disqualifying events may include the company coming under control of another company following a takeover, trading activities changing, or the employee reducing his/her working hours to below the minimum requirement. 

Criteria

  • The company must have fewer than 250 employees and gross assets of less than £30million. 
  • It must be independent and not a subsidiary of another company, or controlled by another company.
  • It must have only ‘qualifying subsidiaries’.
  • There are some ‘excluded trades’.
  • There must be a permanent establishment in the UK.
  • The company must exist for the purposes of carrying on a qualifying trade or preparing to do so.
  • The employee must work for the company for at least 25 hours per week, or 75% of their working time.
  • Anyone who controls more than 30% of the ordinary share capital cannot benefit from EMI.
  • An individual cannot be granted share options with a value of more than £250,000 in a three year period.
  • The limit on the total value of options granted under EMI is £3million.

Reporting Requirements

An option must be reported electronically to HMRC within 92 days of grant. An annual return must also be sent electronically to HMRC.

Next Steps

As a combined accounting and legal firm, Dixcart UK can assist with the entire process of establishing an EMI scheme, from share valuations to the design of the scheme and drafting of the options agreements. For further information please contact your usual Dixcart adviser or a member of our tax team, using the contact details below:

Paul Webb – Director

Karen Dyerson – Tax Manager


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The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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UK Remittance Basis of Taxation – Don’t Get It Wrong!

Accountancy Tax

Background

UK tax resident, non-domiciled, individuals who are claiming the remittance basis of taxation, do not pay UK tax on foreign income and gains, as long as these are not remitted to the UK.

It is, however, crucial to ensure that this tax benefit is properly planned for and claimed. For more information regarding formally claiming the remittance basis, please see article UK Remittance Basis – It Needs to be Formally Claimed.

Failure to plan properly, before arriving in the UK and becoming UK tax resident, could mean that the benefits available are lost and an unwelcome letter from HM Revenue & Customs (HMRC) might be received.

Case Study

To clearly highlight the risks of not taking the right advice, at the right time, please see a case study below regarding an individual moving to the UK.

  • 1 March 2021 (Day 1)

Mr and Mrs Non-dom decide to leave their current home in Australia and move to the UK during the summer of 2021, so that their two minor children can start school early in September 2021. 

They speak to their Australian tax adviser and make sure that they carry out local tax planning in preparation for leaving Australia.  They have been told by a friend, who had already moved the previous year, that “as they are not originally from the UK, they will be taxed on the ‘remittance basis’, and therefore their non-UK source income will not be taxed in the UK”.

They are pleased as they believe this means:

Assumed: NONE of the following would be taxed in the UK:
income from the rental property they have in Australia; and
dividends (from their large share portfolio) held in a Hong Kong bank; and
interest on the equivalent of £2million cash savings, currently sitting on long term deposit (until the summer of 2022), at the same Hong Kong bank as above.

At this point, they do not seek any UK tax advice. 

What a shame! 

  • 10 August 2021 (Day 2)

Having arranged the correct visas, they move to the UK ready for the new school term. 

They had £50,000 of cash in an Australian current account, that they now remit to their new UK bank account.  They use this for rent and living expenses.

  • 10 August 2022

Having lived in the UK for a year, and with the children now well settled in school, they decide that they will be staying in the UK until such time as both children have completed their education.  They therefore decide to purchase a house.

Since Day 2, they have continued to receive rental income from their Australian rental property, as well as from the family home that they left behind. This income has been paid into an Australian bank account.

The dividend income has carried on being received into the Hong Kong bank account. The long-term deposit of £2million, plus accrued interest, has expired and this income is now earning very little interest in the Hong Kong current account.  They therefore decide to put these monies back on deposit for a further three years.

  • They need £1million to buy the new home in the UK, along with a further £250,000 for stamp duty, renovation costs and school fees.

They therefore sell the rental property in Australia.  The sale proceeds of £1.1million (which includes £100,000 capital gain), are placed in the same Australian bank account as the rental income.  Their dividend income, held in the Hong Kong bank account total £150,000.  They decide to remit the money in both of these accounts to the UK, in order to purchase the property.

  • 10 April 2023

Mr and Mrs Non-dom awake one morning to find a brown envelope, sitting ominously on their doorstep, from the UK tax authority, HMRC.

That afternoon, they visit a local chartered accountant who has the rather difficult task of informing the couple that they owe £28,000 of UK capital gains tax and more than £300,000 in income tax.  This could partially be reduced by double tax relief, but there would still be a substantial unnecessary tax liability. On top of this, they were late filing their UK tax returns for the tax year 2021/2022 and have therefore also incurred fines and penalties.

Turn Back Time: The Potential Positive Effects of Good Planning

The above unfortunate chain of events started on Day 1, in March 2021.

The outcome could have been so different and could have resulted in a UK tax liability of ZERO.

When Mr and Mrs Non-dom heard about the ‘remittance basis’ from a friend and looked up some articles online, they should have taken advice from a UK adviser, as well as taking advice from their Australian tax advisor.

The UK tax advisor would have told them:

they would become tax resident in the UK from 6 April 2021 (having moved to the UK on 10 August 2021), and would therefore have been liable to file a tax return by 31 January 2023 and pay any taxes due; and
on Day 1, they should have instructed their Australian bank to pay new rental income into a new bank account (with the same bank); and
on Day 1, they should have instructed the Hong Kong bank to keep dividend income and interest from that cash deposit, in new separate accounts; and
when they sold the Australian rental property, they should not have remitted this income to the UK.

Instead, they should have remitted £1,250,000 of the £2million, from their original cash savings, to purchase their new home in the UK and to cover the stamp duty, renovation costs and school fees. 

  • Had they taken the final step detailed above, they would have retained the same value of investments in Australia and Hong Kong as if they had not taken the UK advice. 
  • However, they would have remitted capital that they had PRIOR to becoming UK tax resident, which would NOT therefore have been taxable.

The steps recommended above, are not complicated, and many international banks are capable of implementing this account segregation for their UK resident clients.

Summary and Additional Information

The remittance basis of taxation, which is available for non-UK domiciled individuals, can be a very attractive and tax efficient position, but it is crucial that it is properly planned for and formally claimed.  Mr and Mrs Non-dom did not take appropriate UK advice and paid the price.

If you require additional information on this topic, further guidance regarding your possible entitlement to use the UK remittance basis of taxation, and how to properly claim it, please contact your usual Dixcart adviser or speak to Paul Webb or Peter Robertson in the UK office: advice.uk@dixcart.com.

Dixcart UK, is a combined accounting, legal, tax and immigration firm.  We are well placed to provide these services to international groups and families with members in the UK. The combined expertise that we provide, from one building, means that we work efficiently and coordinate a variety of professional advisers, which is key for families and businesses with cross-border activities.

By working as one professional team, the information we obtain from providing one service, can be shared appropriately with other members of the team, so that you do not need to have the same conversation twice!  We are ideally placed to assist in situations as detailed in the case study above. We can provide cost effective individual and company administration services and also offer in-house expertise to aid with more complex legal and tax matters.


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The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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Forming a UK Company: Professional Director Services

Director services Accountancy

Forming a UK Company

The UK is as an attractive market for many overseas businesses forming a holding company. Special Purpose Vehicles (“SPVs”) are also set up in the UK for joint investments into specific projects, often where investors want to speak with one voice.

The UK is chosen for forming a company because of its low tax environment for non-UK investors and its high reputation for corporate governance, well-developed legal system and its holding company regime.

We help clients with UK domiciliation services and professional director service needs. Our directors are UK resident, professionally qualified accountants and lawyers

As directors, we are mindful that we must manage the companies under our control and ensure they remain legally compliant and solvent. When acting as directors, we have a duty of care to do our best to benefit the company. This involves:

  • Taking advice to determine the company’s strategy and policies.
  • Monitoring ongoing progress of those strategies and policies.
  • Accounting for the company’s activities to relevant parties, including shareholders and authorities.

Appointing a UK Director

Clients typically appoint us because they initially do not have the resources in the UK to provide the management and control of the proposed company in the UK. If management and control were to be exercised from a client’s home jurisdiction there would be a danger that jurisdiction would seek to tax the profits of the UK company. The question therefore is: where is a company managed and controlled, and what factors will tax authorities consider when accessing where management and control rests?

The central management and control of a company would normally be the place where directors meet to manage the company’s business. Generally, this is the place where board meetings are conducted. This is only relevant if central management and control is in fact exercised by the directors in those meetings. It is essential to show that directors have authority and make independent and informed decisions concerning the central business policy of the company and not seen to be ‘rubber stamping’ decisions of others.

As a result, it is important foreign shareholders appoint UK resident directors who are aware of these risks and ensure that they carry out their duties correctly, but also properly minute and evidence their actions in order to be able to demonstrate management and control in the UK, if called upon to do so.

Where a UK entity is being used as an SPV for a number of different shareholders, we are often appointed because the shareholders want independent directors to run the company, who will familiarise themselves with any shareholder agreement, and ensure the controls and mechanisms put in place to govern the relationship between the shareholders and protect minorities, are observed.

Dixcart directors are supported by a team of professionals enabling us to provide a complete business management and administration service. This includes:

Get in touch

Clients wishing to establish a business in the UK are advised to contact us early on so that we can get a comprehensive understanding of the proposed business. This will enable us to give relevant pre-arrival advice and demonstrate how our directors would add value, should you decide to form a company in the UK. Please contact Laurence Binge or Peter Robertson for more information: hello@dixcartuk.com.


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The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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UK Statutory Residence Test – Don’t Get It Wrong!

Accountancy

Background

“Don’t worry, I never spend more than 90 days in the UK”.

This test for UK tax residence was replaced with a statutory residence test, but it is still commonly believed that the above statement is correct.

It is not and, whilst in many cases, the test might result in an individual triggering UK tax residency without expecting it, in many other circumstances, they might have been limiting themselves to the wrong number of days.

For anyone renting or buying property in the UK and starting to spend more and more time in the UK, they should seek advice to be clear what their day pattern in the UK should or can be.

This note considers a couple who have not previously been tax resident in the UK.  For more information about correctly losing UK tax residence, please see – https://www.dixcart.com/tax-residence-planning-opportunities-case-studies-and-how-to-get-it-right/ . It also does not consider immigration but more information on how Dixcart can assist with UK Immigration can be found here – https://www.dixcartuk.com/immigration/

Case Study

Mr Overseas has lived in Europe his whole life.  Having sold his successful overseas business a number of years ago, he took early retirement. He is not married.

Having retired, he wants to spend more time in the UK as he has nephews and nieces whom he enjoys seeing more of.

He also feels that the UK real estate market might be a good investment, so he purchases an apartment that he lives in when he is here.  It is empty the rest of the time.

Thinking he is doing some clever tax planning, he chooses to limit his days in the UK to 85-89 days, because everyone tells him that if he stays in the UK for fewer than 90 days, he won’t become tax resident. 

Mr O Should Take Some Advice!

The part of the UK statutory resident test (Test) relevant to him is part 3, the Connecting Factors.  In the first year he starts spending time in the UK, he does not have a tax resident family member, he has not exceeded 90 days in the UK in either of the two previous tax years, and he does not work in the UK for more than 40 days each tax year.  He does have available accommodation though, so he has just one Connecting Factor.  In the first year, he could spend up to 182 days in the UK without becoming UK tax resident, double what he had originally thought.

In the second year, he would still have available accommodation but also now would have spent more than 90 days in one of the previous two tax years.  His day limit is now 120 days, still more than the “90 days rule” he had been told about.

Once he discovers this, he starts spending up to 115-119 days in the UK

However – The Rules Need Constant Review

As Mr O is now spending more time in the UK, he meets someone special and gets married.  He also gets bored of early retirement and starts a consulting role for most of the days he is in the UK.

Thinking that he has now taken his UK tax advice about residence, he doesn’t think to check it again.

Mr O now has a tax resident spouse, he works for more than 40 days in the UK, he has spent more than 90 days in the UK in at least one of the last two previous tax years and he still has available accommodation.

His tax circumstances have changed dramatically and, in fact, if he wants to still remain non-resident in the UK, his day count would be capped at 45 days!

There is still planning to do though as he might be able to claim the remittance basis as a non-domiciled individual, and, like the residence rules, “Don’t Get it Wrong!”  https://www.dixcartuk.com/uk-remittance-basis-of-taxation-dont-get-it-wrong/

Summary and Additional Information

Whilst Mr O’s circumstances shifted during the course of this case study, it is interesting to note that at no point in time was Mr O’s day count cap at 90 days, despite the common belief that those are the rules for UK residence.

The remittance basis of taxation, which is available for non-UK domiciled individuals, can be a very attractive and tax efficient position, but it is crucial that it is properly planned for and properly claimed at the right time. 

If you require additional information on this topic, further guidance regarding your possible entitlement to use the UK remittance basis of taxation, and how to properly claim it, please contact your usual Dixcart adviser in the UK office: advice.uk@dixcart.com.

Dixcart UK, is a combined accounting, legal, tax and immigration firm.  We are well placed to provide these services to international groups and families with members in the UK. The combined expertise that we provide, from one building, means that we work efficiently and coordinate a variety of professional advisers, which is key for families and businesses with cross-border activities.

By working as one professional team, the information we obtain from providing one service, can be shared appropriately with other members of the team, so that you do not need to have the same conversation twice!  We are ideally placed to assist in situations as detailed in the case study above. We can provide cost effective individual and company administration services and also offer in-house expertise to provide assistance with more complex legal and tax matters.


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The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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