Expat returning to the UK - Tax question

[Countdown]

A friend of mine is returning to the UK after spending 20 years abroad in the Middle East. During the last 20 years he has been paid by a UK based company into a UK bank account but as he was not resident or domiciled in the UK he had an NT tax code and didn't pay any tax.

Assuming he moves back here on 1st October - what tax (if any) will he have to pay on his 2021-22 earnings from April to September (ie his earning during the period when he was not resident in the UK)?

[Eric Mc]

HMRC normally taxes a person from the moment they become a UK tax resident, which is normally the date they return to the UK to live.

All explained here -

https://www.gov.uk/tax-foreign-income/residence

[Countdown]

Thanks Eric

[Eric Mc]

I used the word "normally" deliberately because, being UK tax, there are caveats and exceptions all over the place.

[Countdown]

Indeed.

The person in question thinks he's been non-dom in the UK for 20 years. However he has several BTL properties - I assume owning UK assets doesn't affect Non-Dom status (otherwise a million Chinese people would be considered UK domicile) ?

[darreni]

I'm returning to the UK after 20 years non resident (Channel Islands). I have a reasonable amount of investments (shares Unit trusts etc), some of which have done well & would exceed the UK capital gains allowance.

As the capital gains have taken place while not a UK resident, would i be liable on the total gain when moving back, or just the difference between the valuation at moving date & price when selling?

Or should i sell before i move back? - there is no capital gains tax in Guernsey, so i could do this with no issue.

[Eric Mc]

Countdown said:

Indeed.

The person in question thinks he's been non-dom in the UK for 20 years. However he has several BTL properties - I assume owning UK assets doesn't affect Non-Dom status (otherwise a million Chinese people would be considered UK domicile) ?

Domicile is "normally" based on where the person is born. It's actually very hard to lose your original domicile.

[Eric Mc]

darreni said:

I'm returning to the UK after 20 years non resident (Channel Islands). I have a reasonable amount of investments (shares Unit trusts etc), some of which have done well & would exceed the UK capital gains allowance.

As the capital gains have taken place while not a UK resident, would i be liable on the total gain when moving back, or just the difference between the valuation at moving date & price when selling?

Or should i sell before i move back? - there is no capital gains tax in Guernsey, so i could do this with no issue.

Forget "domicile". What is important is "tax residency" status. Once you move back to the UK to live here permanently, you become a UK Tax Resident and UK Tax Residents pay CGT when they dispose of an asset and make a gain on that disposal over the CGT threshold.

[Burwood]

darreni said:

I'm returning to the UK after 20 years non resident (Channel Islands). I have a reasonable amount of investments (shares Unit trusts etc), some of which have done well & would exceed the UK capital gains allowance.

As the capital gains have taken place while not a UK resident, would i be liable on the total gain when moving back, or just the difference between the valuation at moving date & price when selling?

Or should i sell before i move back? - there is no capital gains tax in Guernsey, so i could do this with no issue.

You could very well be taxed on those UK assets if sold after becoming a UK resident for tax. You could always sell them(before returning)and rebuy later. If you don't want to sell them, seek professional advice.

[Countdown]

Or sell in tranches each year so as to utilise your CGT allowance.

Bear in mind the tax liability doesn't crystallise until you actually sell them

[Eric Mc]

And you need to be careful if you are selling off an asset piecemeal. HMRC look carefully at such transactions because if they see that somebody is selling a single asset in "chunks" in order to maximise their personal CGT allowance, they may deem that it is actually a single transaction and tax it accordingly.

It depends on the circumstances as to whether this is likely or not. For example, it's harder to sell land and property piecemeal - but a share portfolio would be a lot easier.