Overseas Aspects for Individuals (General & IHT)

Question 1

how do you determine if an individual is UK resident or not?

Answer 1

• do they satisfy the automatic non-UK residence test?
• do they satisfy the automatic UK residence test?
• do they satisfy the sufficient ties test?

Question 2

if individual satisfies automatic non-UK resident test…

Answer 2

they’re not UK resident

Question 3

if an individual satisfies the automatic UK residence test…

Answer 3

they are UK resident

Question 4

if individual satisfies the sufficient ties test…

Answer 4

they are UK resident

if not, they are not UK resident

Question 5

automatic overseas test?

Answer 5

if individual satisfies any of the automatic tests, individual is not UK resident

Question 6

what does automatic overseas test consist of?

Answer 6

refer to tax tables

Question 7

automatic UK tests?

Answer 7

if individual satisfies any of the automatic UK residence tests, they’re automatically UK resident

Question 8

automatic UK residence test consists of…

Answer 8

refer to tax tables

Question 9

what classes as ‘working full time’?

Answer 9

working on average 35hrs per week in UK over a 365-day period

during the period:
- no periods of 30+ days not working in UK
- 75%+ of working days spent in UK
- 1 day when working 3+ hrs in UK that falls into this tax year and the 365-day period

Question 10

sufficient ties test?

Answer 10

if non of the automatic overseas/UK residence tests are satisfied, individual must use sufficient ties table

Question 11

what is classed as a relevant UK tie?

Answer 11

• family tie
• work tie
• accommodation tie
• 90-day tie
• country tie

Question 12

domicile?

Answer 12

an individual’s domicile is the country which is their permanent home

Question 13

domicile of origin?

Answer 13

an individual acquires a domicile of origin at birth

usually the domicile of their father (if parents are married)

otherwise it’s the mother’s domicile

Question 14

the domicile of origin is retained unless…

Answer 14

individual acquires a different:
- domicile of dependency
- domicile of choice

Question 15

domicile of dependency?

Answer 15

if while under 16, the domicile of the person whom the individual is dependent on changes

e.g., if father changes his domicile

Question 16

domicile of choice?

Answer 16

from age of 16, individual can change domicile from one country to another

if an intention is shown to change the country to their permanent home and sever ties with previous country of domicile

Question 17

UK deemed domicile?

Answer 17

individual is treated as being domiciled in UK for tax purposes

Question 18

conditions for an individual to be ‘UK deemed domicile’?

CGT & IT

Answer 18

• individual has been resident in UK for at least 15 of the previous 20 tax years
• individual was born in UK, had a domicile of origin in UK and is UK resident in tax year (formerly domiciled resident)

Question 19

conditions for an individual to be ‘UK deemed domicile’?

IHT

Answer 19

• individual was UK resident for at least 15 of the previous 20 tax years including 1 of the last 4 years ending with the current tax year
• individual is formerly domiciled resident (or returning UK dom)

Question 20

when is an individual a formerly domiciled resident?

Answer 20

if they:
- were born in the UK with a UK domicile of origin
- are resident in current tax year
- were resident in UK in at least 1 of the 2 tax years prior to the current year

Question 21

for IHT, is domicile of donor key to determining which assets are taxable?

Answer 21

yes

Question 22

if an individual is domiciled in UK…

(for IHT)

Answer 22

IHT charged on worldwide assets

Question 23

if individual is non-UK domiciled…

Answer 23

IHT charged on UK assets only

Question 24

how is the location of land & buildings determined?

Answer 24

physical location

Question 25

how is the location of shares determined?

Answer 25

where company is registered

Question 26

how is the location of chattels determined?

Answer 26

physical location

Question 27

how is the location of debt determined?

Answer 27

where the debtor resides

Question 28

how is the location of cash determined?

Answer 28

branch location

Question 29

how is the location of life policies determined?

Answer 29

where proceeds are payable

Question 30

how is the location of interest in partnership/goodwill determined?

Answer 30

where business is carried on

Question 31

how are overseas assets valued?

Answer 31

should be translated to sterling£££ at date of death using the exchange rate which gives the LOWEST value

Question 32

where assets in a death estate are situated abroad, what is the rule for additional expenses?

Answer 32

additional expenses incurred are capped at 5% of the value of the asset only 5% is deductible

Question 33

how are transfers between spouses treated for IHT?

Answer 33

transfers between spouses are exempt if transferring to a non-UK dom spouse, exemption is capped at £325,000

Question 34

how does spouse exemption change if spouse elects to be UK domiciled?

Answer 34

325,000 cap may be removed unless individual isn't UK resident for 4 consecutive tax years

Question 35

double tax relief (DTR)?

Answer 35

available against UK IHT liability where assets have been subject to double tax

Question 36

DTR is valued at...

Answer 36

the lower of: - overseas tax liability - UK IHT on the asset at the average rate

Question 37

'average rate' for DTR?

Answer 37

UK IHT / chargeable amount