What is Domicile? Domicile is a concept of common law in the UK and each individual has only one domicile. Many people are unsure as to what this nebulous concept means; it is not the same as nationality, residence, or citizenship. Your domicile status is best defined as the country where your ‘homeland’ is, whereby the country in which you have a permanent home and where you plan to live indefinitely are two of the predominant contributing factors in determining this. Why is Domicile Important? Many people are internationally mobile; therefore, domicile helps to establish which UK tax rules are applicable to these individuals. The legal system where you are considered to be domiciled works alongside your residence status to ...

In the latest of a series of concessions made in light of COVID-19, HMRC has announced that taxpayers will not be issued with a late-filing penalty if they fail to submit their 2019/20 tax return by the 31 January deadline - provided that it is submitted by 28 February 2021. Whilst taxpayers who can submit their tax return by 31 January are encouraged to do so, the £100 automatic late filing penalty will not apply if the return is filed by the new deadline. It is important to note that taxpayers are still required to pay their tax bill by 31 January 2021, therefore interest will be charged from 1 February on any outstanding liabilities. Taxpayers who are unable to pay their tax bill on time can apply to spread the bill over a numb...

Only/Main Residences If you sell a property which is your only residence and has been your only home throughout your period of ownership, you will not be required to pay Capital Gains Tax ("CGT") if a capital gain arises on the disposal. This is because Private Residence Relief ("PRR') is available for the full period of ownership, reducing any chargeable capital gains to nil. This also applies if you own several residences and have elected for one to be your main residence for PRR purposes (please see our previous article Principle Private Residence "PRR" Elections: Your Options for further details of this). Additional Residences Furthermore, if you sell a property which is not your main residence at the date of disposal but...

What is The Statutory Residence Test? The Statutory Residence Test (SRT) was introduced from 6 April 2013, to allow individuals (such as UK expats) to determine their UK tax residence status. Where an individual is a UK tax resident, they are subject to UK tax on their worldwide income and gains. Where they are non-UK tax resident, then broadly, they will only be subject to UK income tax on their UK source income, such as income from UK property, interest from UK bank accounts, dividends from UK companies etc. Specific rules apply for capital gains tax, and in particular on disposals of UK land/property. The Statutory Residence Test – Necessary Steps The SRT is made up of 3 sets of tests, which are considered in order. The...

What is Principle Private Residence “PPR” Relief? If you sell a property which is your only or main residence or has been at some point during your period of ownership, Principle Private Residence (“PPR”) Relief will be available. This means that if a capital gain arises on the sale, PPR will exempt either all or part of the gain from Capital Gains Tax (“CGT”).  PPR elections for individuals with more than one residence   If you have more than one private residence, you can make an election to nominate one of your residences as your PPR. This election must be made within two years of the date that you have a new combination of residences; for example, if you already have one residence and you purchase a second pro...

HMRC has issued "nudge" letters targeting wealthy taxpayers who: have become deemed UK domiciled for tax purposes in the UK (see below); and received a Notice to File a tax return for the 2017/18 tax year, but did not file it despite having submitted returns for 2016/17 and 2018/19. These letters prompt the taxpayer to review their tax position and respond to HMRC either confirming that their tax affairs are in order, or to commence the disclosure process. Over the last couple of years, we have seen "nudge" letters from HMRC asking taxpayers to review their income from rental properties, their offshore assets, income or gains, and the sale of a second home and/or rental property. Deemed Domicile These letters target lon...

Every tax year, a taxpayer is entitled to accrue pension contributions in accordance with their annual allowance (AA). The standard AA currently stands at £40,000 per year, however if you are a “high-income taxpayer” (i.e. adjusted income of £240,000 or more p/a, and threshold income exceeding £200,000 p/a), this AA will be restricted by £1 for every £2 in excess of the £240,000 limit, to a minimum AA of £4,000 (2020/21). These allowances apply across all schemes a taxpayer belongs to and includes all contributions i.e. those made by the taxpayer, their employer and any third party who pays on the taxpayer’s behalf. Where a taxpayer’s contributions exceed the aforementioned AA (whether standard or tapered) they will no lon...

Boris Johnson addressed the nation last Saturday evening (31.10.20) to confirm a second national lockdown as a result of the failure of the tiered local approach to contain the soaring infection rates of Covid-19. The lockdown calls for restaurants, pubs, gyms and non-essential retail shops to remain closed during the period of the four week national lockdown which commences today (05.11.20) and is due to expire on 2 December 2020. Unlike the first lockdown, schools and universities will remain open. Due to this aforementioned announcement, the Government has also announced further support to help afflicted business and households which can be summarised as follows: Furlough Scheme The Coronavirus Job Retention Scheme (CJRS) or f...

On the sale of a house that you have lived in as a main residence, Principal Private Residence (PPR) Relief is typically available to reduce the gain by reference to your ownership period and the length of time that the house has been occupied as your main residence. PPR Relief applies to both the site of property and its surrounding gardens and grounds, provided that the total area does not exceed 0.5 hectares. Should the site exceed 0.5 hectares, relief may still nevertheless be available if it can be demonstrated that the larger area is required for "the reasonable enjoyment of the dwelling house . . . as a residence, having regard to the size and character of the dwelling house". In the recent case of Leslie and Catherine Phillip...

HMRC plans to send 14,000 "nudge" letters to individuals it believes may have made a taxable residential property disposal in 2018/19 but did not report it on their self-assessment tax return, thereby encouraging taxpayers to come forward and bring their affairs up to date. On the sale of residential property, capital gains tax may become payable on the gain. The taxable gain is calculated by taking the sale proceeds and deducting the original cost, the associated costs of disposal/acquisition, any costs incurred on enhancing the value of the property, and the annual exempt amount (£11,700 for 2018/19). If the taxpayer had lived in the property as their main residence throughout their period of ownership, then Principal Private Resid...