When reading exam questions, it is important to allow yourself to think so you can understand where the question is going. If you are able to see the ‘destination’ the examiner is heading to, it becomes easier to anticipate the tax implications.
One popular area in the Advanced Tax exam involves UK domiciled individuals going abroad for a few years. Once abroad, UK income is still taxable but overseas income escapes UK tax. The personal allowance is still available even if non -resident. However, the remittance election is not available to UK domiciled individuals.
Capital Gains Tax
For capital gains tax, if the individual returns to the UK after less than 5 years then the temporary non-residence rules apply and any capital gains on assets acquired before leaving the UK are taxable in the tax year the individual returns to the UK. The annual exemption can be claimed. With regard to assets acquired while the individual is abroad, any disposals of overseas assets will escape UK CGT. Disposals of UK property (residential and commercial ) are now taxable even if the individual is non-UK resident
Finally, for inheritance tax, the individual remains UK domiciled so is still taxable on worldwide assets including the gift of overseas assets whilst non-resident in the UK. If the individual is leaving the UK permanently to acquire a permanent home overseas, the individual will be deemed UK domiciled for a further 3 years after leaving the UK.
In the exam, it is easy to be overwhelmed by the volume of information in the question. In addition, the pressure of performing under timed conditions leads to anxiety. Learn to calm your mind and carefully take in the information. Map the flightpath and detect the destination of the question. By understanding this and explaining your rationale, the quality of your answer is dramatically improved, and you can secure enough marks to pass the question.