Showing posts with label Liam Ohm. Show all posts
Showing posts with label Liam Ohm. Show all posts

Thursday, January 10, 2013

How Can International Tax Affect Me?

Taxes
Taxes (Photo credit: Tax Credits)
International tax can have a significant impact on you and your income. For UK taxpayers, it’s important to remember that how you’re taxed, and at what rate, is determined by whether you’re a resident of the UK, or a domicile, which affects your worldwide taxation. Other factors can involve how much businesses have to pay in terms of capital gains and remittance, as well as how investments and offshore accounts are handled. It’s also worth remembering that there are options for protecting foreign income, or using offshore accounts to manage income from within the UK. 

Anyone who’s a UK citizen, and is resident in the UK for half or more of the year, and pays income tax and National Insurance Contributions, is considered to be resident, and pays tax on their worldwide income. You can also be ordinarily resident, where you spend around 91 days a year in the UK over four tax years, and can be liable to more tax. By comparison, you can be domiciled in a particular country if you move between them, whereby you can be born in the UK, but domiciled somewhere else for tax purposes - this is typically defined by your parents’ domiciled at your birth, or by moving abroad and choosing a new country as your ‘domicile of choice’. How this is defined is often dependent on your personal situation and HMRC’s judgement. 

People that can be resident in the UK can therefore be domiciled elsewhere, and avoid paying UK tax on income or capital gains that are made outside the country, so long as it is not brought into the UK. Being non domiciled means that you avoid paying inheritance tax at UK rates on non-UK assets. There are situations where you can pay double tax on income brought into the UK, at which point it’s important to register your residency and domicile of choice with HMRC. Businesses can take advantage of not being taxed on their international income by registering as non domiciled, as long as it is not remitted into the UK. When this occurs, high earners often pay a fixed remittance charge for this income. In the last few years, HMRC and the UK Government have been trying to make it harder for individuals and businesses to claim non domiciled tax registration without justification. 

Other ways of protecting international earnings include making investments from abroad into the UK, whereby a remittance charge may not apply. Some exemptions might also be made on securities in European bonds. Moreover, there are cases where UK income can be invested in overseas schemes and tax havens through registered foreign companies, meaning that income does not technically be paid out within the UK tax systems. Whether you have a domicile in the UK, as well as whether you or a business are considered a resident or ordinary resident will affect eligibility here. It’s clear, then, that you stand to be affected by international tax if a proportion of your income is made outside the UK, with your legal status as a taxpaying individual or business having perhaps the strongest impact on whether you will pay more. It’s recommended that you seek advice on how your non-UK income can be handled, and whether you can benefit from both exemptions on remitted income, and from legal offshore accounts. 

Author Bio: Liam Ohm writes about tax. He highly recommends Faulkner International for information on company formation. In his spare time he enjoys reading and networking.



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