Chapter 1 - Introduction
This guide is designed to help those living or working abroad pay less tax on their UK income and investments. It also contains important information for those who live in the UK but wish to use the offshore tax rules to shelter their income and gains from the taxman.
This is an important and sophisticated area of tax planning. Moving yourself or your assets abroad is in many respects the ultimate form of tax avoidance and in some cases it is possible to reduce your tax bill to zero. However, there are traps to avoid and pitfalls to negotiate.
This publication highlights some of the key tax-planning opportunities and dangers, focusing on the UK's four major taxes: income tax, capital gains tax, inheritance tax and corporation tax.
Throughout we have tried to keep tax jargon to a minimum and illustrate the main points with examples.
A significant portion of the guide is devoted to the potential non-resident -- individuals who are considering moving overseas and have heard that this may bring with it substantial tax benefits.
We look at the tax-saving opportunities, as well as the practical steps and dangers to bear in mind, when considering a move abroad.
In Chapter 2 we explain the concept of 'non residence' which has a huge effect on the amount of income tax and capital gains tax you pay. Details are provided of the proposed new statutory residence test that will be introduced in 2013. We also explain the concept of 'domicile', as there are a number of special rules for individuals who are UK resident but not UK domiciled. Domicile is also crucial when it comes to inheritance tax planning.
In Chapter 3 we list the steps you need to take to convince the taxman that you are non-resident and discuss some of the traps the authorities have set to catch 'phoney emigrants'. Chapters 4, 5 and 6 take a detailed look at income tax, capital gains tax and inheritance tax-planning strategies for non-residents. The information contained in these chapters is extremely important for any would-be tax exile or emigrant and should be read carefully.
In Chapter 7 we focus our attention on non-domiciled people living and working in the UK and explain how they can use their special status to obtain tax savings. There have been a lot of changes in this area in recent years. We look in detail at how these changes affect the tax position of non-domiciliaries living in the UK.
In Chapter 8 we look at the income tax, capital gains tax and inheritance tax implications of working and travelling overseas because, aside from the 'permanent emigrant', many reading this guide may be considering working abroad at some point. After reading this guide you should have a clear understanding of how working abroad will affect your UK tax position.
Chapter 9 explains how you can use a number of reliefs to avoid being taxed twice -- once in the UK and again in another country.
Offshore trusts and offshore companies are sometimes viewed as the preserve of the very wealthy. This is not necessarily the case. We have outlined in Chapters 10 and 11 how these structures can help you save tax and how to avoid the detailed tax anti-avoidance rules.
Reducing tax on property investments is a top priority for many UK residents and non-residents. The guide contains numerous examples with a 'property theme.' In Chapter 12 we take a closer look at how non-resident and non-domiciled investors may structure their property purchases.
Your residence status is often the critical factor when it comes to paying both UK and foreign taxes. But what if you can avoid being resident in ANY country? In Chapter 13 we take a brief look at how you can become a 'tax nomad' and avoid both UK and overseas taxes.
Throughout this guide we attempt to identify practical steps that can be taken to mitigate UK tax, although the tax regime of any relevant overseas country should also be borne in mind. This is where double tax treaties come in. In Chapter 14 we explain the importance of these treaties in further detail.
Finally, Chapter 15 takes an in-depth look at buying property abroad and how to plan your affairs to avoid both UK and overseas income tax and capital gains tax.
We occasionally use some abbreviations. In particular, capital gains tax may be referred to as CGT, inheritance tax as IHT and HM Revenue and Customs as HMRC.
A lot of expat and offshore tax planning depends on getting dates and timing right, so many of the examples are based on specific tax years.
Remember that the UK tax year runs from April 6th one year through April 5th the following year.
The tax year running from April 6th 2013 to April 5th 2014 may be referred to as the 2013/2014 tax year or just 2013/14.
Finally, remember that offshore tax planning is an extremely complex area and the relevant tax legislation, as well as HMRC's practices, can change quickly. You should never take any action until you have spoken to a suitably qualified professional who can advise you based on your personal circumstances.