CheckLists.Tax (beta)
P1. Individual becoming UK resident
INCOME TAX
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Qualifying new residents
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- Relevant foreign income not taxed
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Transfer of assets abroad income
- The income deemed to arise to the transferor is treated as relevant foreign income to the extent that the income of the person abroad that the transferor has power to enjoy would be relevant foreign income if the individual received it (ITA s.726).
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Legislation: ITTOIA s.845H;
Cases:
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Pre-arrival investment management services​
Income based carried interest received in year of UK residence taxed as profit of trade
Where an individual has provided investment management services whilst non-resident and a disguised management investment fee consisting of an income based carried interest arises in one of the first five tax years of residence, the disguised fee is treated as the individual's profits of a trade (in the year in which it arises). To the extent that the pre-arrival services were performed outside the UK, the trade is treated as carried on outside the UK.
Legislation: ITA 2007, s.809EZA(2A) - (2C)
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Temporarily non-resident
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- Deemed release of loan to participator upon return of temporarily non-resident individual
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- Where loan etc. is released/written off while the debtor is temporarily non-resident, the release/writing off is treated as occurring upon return (ITTOIA s.420A).
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Legislation: ITTOIA s.420A;
Cases:
HMRC manuals: CTM61657;
Commentary:
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- Loan to employee who later becomes UK resident or starts working in the UK
- The charge will apply if made in contemplation of the employee working or living in the UK and are in respect of that period (EIM26105).
- The charge will apply to a loan made when the employee was not chargeable to UK tax if, after the employee's earnings are chargeable to UK income tax, the employer in any way facilitates the continuation of an existing loan (EIM26105).
- HMRC say that the employer does not facilitate the loan merely because it is conditional on the employee continuing in employment, but would if the loan was conditional on the employer making regular payments to subsidise the interest, which it might cease (EIM26105).
Legislation: ITEPA s.16(2); s.173(2)(a);
Cases:
HMRC manuals: (EIM26105);
Commentary:
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CAPITAL GAINS TAX
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Section 87: matching benefits to gains
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- Gains arising whilst settlor/beneficiaries non-resident
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- Gains arising within a non-resident trust whilst the settlor and all beneficiaries are non-resident will still be in the trust gains pool if they become resident (even though the individual would not have been taxable if the gain had arisen to them instead).
- Pre-arrival precautions should, therefore, be taken in respect of such trusts.
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Legislation:
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- Gains matched to benefits in a split year: gain accrues in UK resident part
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- Where gains are treated as accruing to an individual in a split year, they are treated as accruing in the UK part of the tax year (s.87(2A)).
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Legislation: TCGA s.87;
Cases:
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