Reply to: tax efficiency options for non-domicile

[Peoplesoft bloke]

You have made 2 fatal errors.

1. Being born here
2. Assuming your government gives a tulip about you.

HTH

3. Forgetting the zillions of Brits who are, even as we speak, ruining Australia.

[jonasB]

not sure if it helps but...

there has been a simplification of GST regs on non-residents in Australia. So maybe ask your employer how this benefits you and maybe can them to fill out all stuff for you? I got this news from this EU VAT website (link here, don't wanna infringe copyrighting).

[backagain]

I have the potential to be non resident in the UK, but the thing is the rates are very good here (especially in London) and are much better than in Europe. Also there is always the option of needing to come back to top up the coffers or just to build up the nestegg for old age (and I am not convinced about these pension companies really being able to payout, but thats another story). So I guess I will be back in the UK every six months or so. What I am trying to say is that its not a feasible long term option to make some money here and then leave, unless you are quite old and nearing retirement (or wanting early retirement) or if you genuinely wish to permanently return to OZ or SA or wherever you come from. Also the problem mentioned earlier about getting the specialist advise you need for an offshoring arrangement; getting this help may not be cheap, or they may get it wrong in which case it will cost you. So Ltd seems to be the easiest way to go with maximum flexibility for expensing and tax. I would say as a Brit I will always need to come back until I really do retire; its a case of the UK being good for work and money but not necessarily a good place to enjoy life.

[ASB]

Good mate cos upton (whoever they are) wil tel you that if you earned it in the UK and worked in the UK then you pay UK tax.

A sound principle. But not necessarily the absolute case. But then Mr Al-Fayed for example can spend a lot arranging his affairs as a non dom 'cos the sums make it worth his while.

[Troll]

The point is not about you nicking our work (honest!), it's about being asked how to walk around the tax rules we have to abide by, being asked about how to walk around visa rules that some of us (naming no names...) have spent 5 years campaigning to get fairly applied and to close off the assorted loopholes that allowed in unqualified non-EU people at £5 an hour, and, with 15% of contractors on the bench at any one time, positions mysteriously going unfilled for three months ("Gosh, you will have to import some overseas resource then , since we clearly haven't got it in the UK, Mr BigCo...").

Nothing against aussies, who I find to be universally likeable people, it's all about the mess HMG, the agencies and some companies are making of the market I try to work in.

& you were doing so well!

[autodial]

ok thanks. i will bear that in mind, but it should be a good 2+ years away. i'm going with upton & co so hopefully they can advise me.

Good mate cos upton (whoever they are) wil tel you that if you earned it in the UK and worked in the UK then you pay UK tax.

[facboy]

ok thanks. i will bear that in mind, but it should be a good 2+ years away. i'm going with upton & co so hopefully they can advise me.

[ASB]

Facboy,

If you can live on < the higher rate threshold (about 38k) don't fraw divis that will take you into it. This is because up to the higher rate threshold there is no more tax to pay. Once in it there is 25% of the gross dividend.

Now comes a slighly tricky bit. By the time you leve the UK you need to not have control of the company but still own the shares. You liquidate the company and apply for concession C16. If granted you pay all the retained funds to yourself as a capital distribution. Now if you happen to be non resident at this point there is no capital gains tax.

But you will have to be careful as to the order you do it in. This is bacuse of a thing called the corporation tax exit charge. Basically this happens when a company ceases to be UK resident. The IR may argue that this happens when you yourself because non resident so it will be especially important to do everything in the right order. Of course whether there are any issues or not will depend on the level of retained funds.

[facboy]

i have decided to go with the limited company for now. it has good returns (if not the absolute best) and no dodginess.

the offshore entity certainly has its attractions, i may explore what i can do with that at a later time. there's any number of schemes that will take your money offshore, the trick, as always, is in getting it from there to somewhere that it's useful without paying tax on it. most of the schemes revolve around pulling dodgies, or making yourself non-resident for a time so that they can pay it back to you (which can be a difficult thing to manage in and of itself).

not super keen on having 'my' money sitting in somebody else's control while i wait for it to come back to me. i'd prefer to get a bit less and have it all under my control, and all above board with no legal/taxation concerns hanging over my head in the future.

[beermeister]

Let me know when you find out

As an expat living in the UK, all I can say is to choose wisely and cough up for a specialist accountant. I tried going down this sort of line but gave up after finding most accountants just don't have the specialist knowledge or, if they say they do, give you a bum steer. Unfortunately, these bum steers have cost me a lot so I said bollocks to the lot of them and did what every other UK resident does. The only thing I can offer you is Australia does not collect tax on dividends for companies that don't have the necessary connection with Australia and as a UK non-dom, the UK isn't interested in taxing these PROVIDED it is isn't remitted to the UK.

Sorry to sound pessimistic, but when you find out, let me know as well, albeit probably too late for me.

[max]

i checked out the limited company with working holiday visa (rung up borders and immigration) and after much checking and being on hold they said it was fine provided i wasn't employing anybody else, setting up premises, investing heavily in capital etc. so that sounds like it might be the way to go, all above board.

Good work. Going down the ltd co is the way to go. Other things you can do, so you are not disadvantaged by being an Australian, include "contracting out" your state pension, and applying to confirm your non-domcile status.

Contracting out will allow you to move any state pension you will pay into via your NI(national insurance), to an Australian pension when you return.

Non-domcile status will allow you to move any cash you know you don't need to spend in the UK, offshore, where you can earn good interest with no tax to pay. If this is returned to the UK, it will be taxed.

Your accountant should be able to help here.

[ASB]

i think that's the fundamental bit i don't understand with all the 'offshore' options - if i am doing the work here, and the income is produced as a result of that work, it's uk-sourced income isn't it? i've not come across any structures which didn't involve some sort of 'dodge' in that area.

The question is whose income is it being generated. Just because you generate the fees doesn't make it your income.

Ultimately if you are not domiciled here then there *may* be ways to exploit this. But you will need specialist advice appropriate to your exact circumstance.

[facboy]

Assuming you are non domiciled (and it's not just a matter of claiming to be, there are if I recall certain claims that have to be made) you are taxed on a remittance basis. Essentially this means UK sourced income or income remitted to the UK.

You have to ensure the income is not yours or attributable to you and is sent to an offshore entiry. The structure needed is something like:-

You - Agency - Uk front - offshore entity. If the offshore entity (or UK front) is able to pay you a small salary or similar and the balance is payable to the offshore entity as compensation payments then you might just stay within the rules. There are plenty of these schemes around, talk to some of them and make a decision. Even if you find a structure that genuinely keeps the income out of the UK HMCR reach it is also important that they are kept out of reach of the authorities in the country you happen you to be tax resident in at the time they are made.

i think that's the fundamental bit i don't understand with all the 'offshore' options - if i am doing the work here, and the income is produced as a result of that work, it's uk-sourced income isn't it? i've not come across any structures which didn't involve some sort of 'dodge' in that area.

i checked out the limited company with working holiday visa (rung up borders and immigration) and after much checking and being on hold they said it was fine provided i wasn't employing anybody else, setting up premises, investing heavily in capital etc. so that sounds like it might be the way to go, all above board.

[ASB]

i'm not trying to walk around any rules, i would just like to minimise my tax while staying within the rules. i have plenty of options open to me if i want to walk around the rules.

Assuming you are non domiciled (and it's not just a matter of claiming to be, there are if I recall certain claims that have to be made) you are taxed on a remittance basis. Essentially this means UK sourced income or income remitted to the UK.

You have to ensure the income is not yours or attributable to you and is sent to an offshore entiry. The structure needed is something like:-

You - Agency - Uk front - offshore entity. If the offshore entity (or UK front) is able to pay you a small salary or similar and the balance is payable to the offshore entity as compensation payments then you might just stay within the rules. There are plenty of these schemes around, talk to some of them and make a decision. Even if you find a structure that genuinely keeps the income out of the UK HMCR reach it is also important that they are kept out of reach of the authorities in the country you happen you to be tax resident in at the time they are made.

Certainly you can sometimes imrove things by being non domiciled, but it depends on the individual circumstances. Also in the UK domicile and residency are two very different things.

It is also entirely possible that whilst tax-resident here you may also be simultaneously tax resident in Aus. That depends on their rules.

[facboy]

i'm not trying to walk around any rules, i would just like to minimise my tax while staying within the rules. i have plenty of options open to me if i want to walk around the rules.