Tax  

What if your client wants to do a 'Megxit'?

  • Describe the challenges for those planning to move abroad
  • Explain what domicile means
  • Describe the other issues relating to those moving abroad
CPD
Approx.30min

If an individual acquires a domicile of choice elsewhere but then subsequently leaves, losing the intention to reside there permanently, the individual’s domicile of origin will revive until such time as a new domicile of choice is acquired.

Quite apart from the concept of domicile under the general law, HMRC treats longstanding UK tax residents as domiciled in the UK for tax purposes; this is known as deemed domicile.

Since April 2017, individuals who have been tax resident in the UK for at least 15 out of the last 20 tax years will become deemed domiciled in the following tax year.

And what is UK tax residency?

Whether an individual is tax resident in the UK is determined by the number of days he/she spends in the UK in a given tax year.

Presence in the UK on 183 or more days in the year guarantees tax residency but individuals can become resident with less days depending on the number of ‘connecting factors’ they have to the UK.

It is possible to spend as few as 46 days in the UK and still be UK tax resident, particularly when, as in Harry’s case, leaving the UK after a long period of residence.

So just because an individual decides to move abroad, it does not automatically follow that he/she will no longer be UK domiciled or UK tax resident.

Indeed, it seems likely that Prince Harry will remain UK tax resident as he splits his time between Canada and the UK.

The new life abroad

Unless one of the lucky ones, taking up some form of employment abroad seems inevitable.

This is just as true for the Sussexes as it is for the average departer; having decided to move towards financial independence from the royal family, Harry and Meghan will need to consider opportunities to earn an income in some form or another.

For the leaver, advice will need to be taken in the new jurisdiction to understand the basis on which the individual’s salary and other earnings/gains will be taxed and to ensure the individual is compliant with the new regime.

Just as important however will be an analysis of how the UK may continue to tax the individual’s income and gains and whether credit will be given in the UK for tax paid abroad under one of many double tax treaties.

Broadly, if the individual remains UK resident, HMRC will tax foreign source income and gains on an arising basis unless the individual is non-domiciled, claims the remittance basis and the funds are not remitted to the UK.

A new job may well go hand in hand with accommodation.