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Domicile
and residence
Domicile, ordinary
residence and residence are the main determinants of liability to UK tax. The
issues are complex and the rules are under review.
- Basically
a person's domicile is the country that the
individual regards as his or her natural home. Each person has only
one domicile which is normally, but not always the country of birth;
it can be changed, usually with some difficulty.
- Ordinary
residence
is the country where a person normally lives or makes habitual visits,
ie visits of three months or more a year over four consecutive years.
- Residence in the UK is normally established
by someone who visits the UK for at least six months in any one tax
year, or three months a year over four consecutive years.
Non-UK income
- UK
residents pay tax on income from overseas trades, professions,
property and investments. Income is calculated similarly to UK income.
UK residents who are non-UK domiciled or are UK or Eire citizens not
ordinarily resident in the UK, pay tax only on income brought into the
UK (remittance basis).
- Employees
who are UK resident and ordinarily resident pay tax under the earnings
rules on their remuneration wherever the duties of their employment
are carried out. Employees who are not ordinarily resident in the UK,
and UK resident non-domiciled employees working wholly abroad for a
non-resident employer, pay tax on their overseas remuneration on the
remittance basis.
- Non-UK
residents are not normally liable to UK tax on overseas income.
Non-UK residents generally pay
tax on their UK income. Tax may be deducted at source from property income.
Only certain non-residents are entitled to personal allowances. They
include all Commonwealth citizens, all nationals of European Union states,
Norway, Iceland and Liechtenstein and all residents of the Channel Islands
and Isle of Man. The UK income tax liability of a non-resident is subject
to an upper limit. The calculation is complex but the broad effect is that
no tax is charged on UK bank and building society interest and state
pensions paid to non-residents provided they do not claim any personal
allowances.
The Dyer Partnership, 17
Westminster Court, Hipley Street, Old Woking, Surrey GU22 9LG
Copyright © 2002 - 2005 The Dyer Partnership
Limited
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