One crucial topic covered in the Advanced Tax exam is the taxation of individuals with overseas aspects. Understanding the residency status of individuals is paramount, and it involves learning about the automatic residency statutory tests.
Individuals are considered automatically non-resident if they spend less than 16 days in the UK (for leavers), less than 46 days (for arrivers), or less than 91 days (for visitors). Conversely, they are automatically deemed UK residents if they spend at least 30 days in the UK (having a UK home), at least 183 days, or work full-time in the UK.
However, if the automatic tests do not apply, the individual’s ties to the UK are considered, such as close family, accommodation, work, presence for 90 days in either of the previous 2 tax years, and the country tie. Based on these factors and the number of days spent in the UK in the current tax year, the client’s UK residency status can be determined.
A notable consideration is the status of temporary non-UK residents—individuals who, despite being UK residents for at least 4 out of the last 7 years, leave the UK for less than 5 years.
Regarding taxation, gains on assets owned before leaving and sold while non-resident are taxed in the tax year of return to the UK. Conversely, assets bought after leaving the UK and sold before returning escape UK CGT. Non-residents are subject to CGT on UK property gains, regardless of when the assets were bought.
It’s important to note that residential gains are taxable from April 2015 onwards, with the gain calculated as sale proceeds less cost, while commercial property gains are taxable from April 2019 onwards, with the gain computed as sale proceeds less market value in April 2019.
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