Coming to UK - Structure your affairs

Organise your assets tax-efficiently before coming to UK

All UK resident individuals who are not domiciled here or who are ‘not ordinarily resident in the UK’ can claim the benefit of the ‘remittance’ basis of taxation on their overseas income. This means that income from overseas assets is not taxable in the UK.

However, from 6 April 2008, making such a claim means that  UK tax allowances are lost – increasing the tax bill on your UK income. Where a non-UK domiciled individual’s overseas income and capital gains are less than £2,000 in a tax year, the remittance basis will apply automatically but without loss of allowances. Non-UK domiciled couples who organise their assets efficiently between them may be able to keep their annual individual overseas income and gains below £2,000 or put it all into one spouse’s name to maximise the UK tax allowances available.

Consider how long you are going to stay


The date from which you are treated as ordinarily resident depends upon your intentions when you arrive in the UK and whether you actually carry them out. If, after 6 April 2008, you have been resident in the UK in more than seven of the previous nine tax years, to claim the remittance basis described above, you will be required to pay a flat tax charge of £30,000 each year. If you do not claim the remittance basis, all of your worldwide income will be taxable in the UK.

Close offshore bank accounts & set up new income and capital accounts


Foreign domiciled individuals are only taxable in the UK on remittances of offshore income and capital gains arising after they become resident in the UK. It is important to be able to clearly identify these sources, so any offshore accounts should be closed shortly before your arrival in the UK and new income and capital accounts set up. Arrangements should then be put in place so that any interest arising on the capital account should be credited directly to the income account. Remittances to the UK can then be made from the capital account without additional UK tax charges.

Owning an offshore company

If you own 10% or more of the shares of an offshore company, any capital gains it makes while you are resident in the UK will be taxable on you in the UK. Transferring your shares to an offshore trust before you come to the UK will ensure that such gains are only taxable in the UK if the trustees make a capital payment to you in the UK.

Are you entitled to temporary relocation expenses for employees seconded to the UK?

If you have been seconded to the UK by a non-UK resident employer for a period of two years or less, your employer (or the employer to whom you have been seconded) can provide "reasonable" accommodation expenses, and pay the associated utility costs tax free. This relief is available until it becomes clear that the two year period will be exceeded, but in this event, the relief will not be withdrawn retrospectively.

Minimise your taxable accommodation benefit, if you do not qualify for tax-free temporary relocation expenses


If your employer provides you with rent-free accommodation, a taxable benefit will normally arise based on the rent paid to an independent landlord by your employer. The benefit may be substantially reduced, if instead of renting the property, a short lease is acquired from the landlord at a peppercorn rent, although this may be subject to challenge by UK taxing authorities.

If the property is owned by your employer the size of the benefit you are taxed on will depend on factors such as the cost of the property, when it was bought and the current market value.

Maximise your tax free travel allowance


Foreign domiciled individuals, who do not have a recent history of UK residence prior to their arrival in the UK, are allowed an unlimited number of journeys between the UK and their normal country of residence, tax free, providing that the cost is met by their employer. In addition, the employer can also meet the cost of two journeys per tax year for the spouse and children, tax free.

If your employer is unwilling to pay for your trips home, but does provide other taxable benefits, consider asking your employer if he will agree to allow you to "swap benefits". This save you tax and your employer may also save National Insurance Contributions (NIC).

Separate capital gains and losses

For individuals claiming the remittance basis, overseas capital gains are only taxable if the proceeds are remitted to the UK but relief for overseas capital losses is limited. Such losses must be set against gains remitted to the UK and unremitted overseas gains before any balance can be used against UK gains. It is therefore important to keep the proceeds of transactions which have produced the capital losses completely separate. The proceeds from such transactions can then be remitted to the UK with no additional UK tax consequences.

Keep your assets outside the UK inheritance tax net

Once you become resident in the UK, any assets that you own in the UK would fall into the UK inheritance tax net if you were to die whilst here (or within 3 calendar years of leaving if you had stayed here long-term). Therefore, consider renting a property to live in rather than buying a UK home. You might also consider setting up a trust to hold your foreign assets outside the UK inheritance tax net, although there may be other tax implications so expert advice should be taken.

Take advantage of reciprocal social security agreements

The UK has reciprocal social security agreements with all EEC, and most other developed, countries. Under the terms of such agreements social security contributions are only payable in one of the contracting states. In certain circumstances, it is possible to obtain a certificate of coverage from your normal country of residence, and avoid both NIC and overseas social security liabilities on overseas earnings carried out under an overseas contract of employment. You should check if such an arrangement can be effective in your particular personal circumstances.