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Considering a move to the UK?

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By Imogen Lea, Wilsons Solicitors – The UK has a rich and diverse history which is reflected in the make up of our population. From the start of the Roman conquest in 43AD to developing a long history of trade across the globe, the UK now boasts a huge variety and depth of cultures and languages.

More recently, our time zone has given a competitive advantage for businesses. At 9.00 GMT it is 18.00 in Tokyo and 17.00 in Hong Kong, while at 17.00 GMT it is midday in New York and 9.00 in San Francisco. That, along with our temperate climate!

The result is that the UK remains a popular destination for people seeking to work here temporarily to those who often choose to stay longer term or for those who decide to make it their permanent home.

When reading the below it should be noted that the four countries within the UK (England, Scotland, Wales & Northern Ireland) all have slightly different tax rates/regimes (and cultural identities). Unless advised specifically the below will tend to focus on the English system and you should always seek advice for your individual circumstances.

Residence

The UK tax system tends to be based on a person’s country of residence. Certainly the longer you remain here (and if it is more than 183 days in a UK tax year) you are more likely to be regarded as resident. However there are other factors which can also have an impact on whether the UK is your residence, for example other connections to the UK, availability of accommodation or how many days you are working here in a year. It may sound minor but residence does differ from domicile as a concept and it is important to take professional advice on this point.

It is worth noting that the UK is also unusual in that the tax year runs from 6 April to 5 April, rather than on a calendar year. There are historical reasons for this quirk – the British New Years Day under the Julian calendar being 25 March (Lady Day) so the financial year ran from then until the UK adopted the Gregorian calendar in 1752 and then adjusted the tax year dates to April to ensure no tax revenue was lost.

One potential advantage if you are not domiciled in the UK, but resident here is that at least for the first seven years whilst your UK source income and gains is subject to UK tax, any foreign income and gains you receive will not be liable to UK tax – unless you remit to the UK.

For example if you have $30,000 of bank interest from a US account in a year, if it is not brought into the UK then it will not be subject to UK tax.

Further, although it does require a little planning, if you remit income or gains to the UK that were acquired before you became UK resident, these are also potentially outside the scope of UK tax even if remitted when you are UK resident.

Buying a property in the UK

This is where the four countries in the UK do differ. For example, in three of the nations properties are effectively sold at a fixed price – what you see on Rightmove (other property websites are available) is what you expect to pay. However, in Scotland many houses are sold through a blind bidding system whereby the seller asks for offers in excess of an amount.

The main costs that are incurred when purchasing a property tend to be solicitors and surveyors fees, together with the costs of moving. However, Stamp Duty Land Tax (SDLT) is the other often most notable expense when purchasing a property in England and Northern Ireland. At similar rates Scotland has Land and Buildings Transaction Tax, while Wales has Land Transactions Tax.

There are different rates of SDLT depending on whether the property being bought is residential or commercial property and for the purchase price. For example, a GBP3,000,000 residential property in London will normally incur an SDLT charge of £273,750 (nb there are various SDLT holidays that are in place until 1 October 2021 which are not taken into account here).

What also needs to be added into the mix is that if an individual owns another residential property anywhere in the world, there is likely to be a 3 per cent surcharge based on the cost of the property. There are limited exceptions where this may not be due or may be recoverable. In England and Northern Ireland, from 1 April 2021, a further 2 per cent surcharge has been introduced for people who are non-UK resident. However, there is some flexibility if they become UK resident within 12 months of the date of purchase.

Disposal of a property

When someone sells a property in the UK and there is a gain it may be subject to capital gains tax. Here the net gain would be calculated by deducting the original cost, professional fees and SDLT from the sale proceeds.

If the property has been your only or main residence then a specific relief (principal private residence relief) should be available for at least your period of occupation of the property.

The above being said, if there is a taxable gain on a property then depending on the circumstances there may well be a need to report the gain and pay any capital gains tax within 30 days of completion. While this has been an issue for non-UK residents for a few years now, it only started applying to UK residents in April 2020.

Buying a property via a company

The examples above have tended to assume that the purchaser/seller is an individual or individuals. Historically however, some property has been purchased via a company or another alternative entity.

If this route is to be considered it is highly recommended that professional advice is sought. In recent years various measures have been introduced to curb the purchase of residential property via companies.

As well as higher rates of SDLT (15p per cent) from 2012 there is a catchily titled “Annual Tax on Enveloped Dwellings” (ATED) which (as the name suggests) imposes an annual tax charge on a residential property owned by a Non-Natural Person (for the most part this means companies).

From 2016, this annual tax is due where a property is purchased for over GBP500,000.

Summary

There is no doubt that the UK has something for everyone. If you are considering a move to the UK, whether for family or business or for a short period or longer term, we would always recommend that you seek professional advice on the UK system and how it may affect you, together with any planning opportunities that need to be considered.


Imogen Lea is a Tax and Trust Consultant at Wilsons Solicitors LLP

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