Adam Thompson, tax manager of The Fry Group, says that your liability and exposure to UK tax will depend on both your residence and domicile status.
“Residence for UK tax purposes is now a clearly defined concept, and is determined via the statutory residence test, which has been effective since 6 April 2013. We will be able to easily determine your residence status for UK tax purposes as well as the date upon which you became resident and liable to UK tax.
“The complexity with residence stems from the fact that it is possible to be tax resident in two countries simultaneously under the laws of each jurisdiction. In these circumstances, double taxation treaties are used to determine which country or countries have the taxing right over particular sources of income. Again, we will be able to determine where tax should be paid on your income sources.
“Domicile is a legal concept, which is very British, and does not really have any bearing in other countries. Your country of domicile, which is ordinarily taken from your father at birth, can have an impact on your liability to UK tax. I would advise that we review your domicile as part of any tax advice that we provide to you.
“The reason why domicile is so important for UK tax, is that a non-domiciled UK tax resident individual is able to choose whether to pay UK income and capital gains tax on the arising or the remittance basis. Under each of these, you are liable to UK income and capital gains tax on all of your UK source income and gains. However, for any overseas income and gains, under the remittance basis, you are taxable only on the amounts physically remitted to the UK. Under the arising basis you are liable to UK income tax on your worldwide income and gains as they arise.
“This may therefore sound like a rather straightforward choice, but unfortunately it is not. After being UK tax resident for seven tax years, you would need to pay an annual charge starting at £30,000 in order to claim the remittance basis of taxation. Furthermore, if you chose the remittance basis of taxation, you would not be entitled to a UK tax free personal allowance, which is currently £10,600.
“There are also rules governing the liability of offshore companies to UK corporation tax. If your holding company, based in Canada, is managed and controlled from the UK, then the UK tax authorities would seek to tax the profits of that company as if it were a UK company.
“As I am sure you can appreciate from the above, this is far from a simple exercise, and I would need to consider your own circumstances in full in order to provide any meaningful advice.”