Non-dom tax

Non-dom tax

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A client has been living temporarily in the UK since late 2007. Currently residing in the UK on “limited leave to remain residence permit” until January 2013. Position after January 2013 unclear, expects to be allowed to remain in the UK and may qualify for full UK citizenship.

Resident and Ordinarily Resident in the UK for tax purposes, but not domiciled in the UK, domicile still overseas.

Prior to coming to the UK (i.e. before becoming tax resident in the UK) part of the proceeds resulting from the sale of some shares were deposited in a personal account in the Channel Islands.

Some the funds deposited in the Channel Islands have been lent to UK businesses set up by the client after becoming tax resident, who is also a director and part shareholder in the companies.

QUESTIONS

1.      Is there a tax implication in a non-domiciled tax resident loaning a UK based company money sourced from offshore funds?

2.      For tax purposes – is the loan deemed a UK based asset or an offshore asset?

3.      If the client transferred the loan from his personal capacity into an offshore trust (set up prior to becoming tax resident in the UK) – will this incur    an IHT tax liability?

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By mark hodges
09th Mar 2012 14:04

Be careful

it sounds like this client needs some proper advice from someone who has experience of NonDom's.  Depending on how long he is intending to stay in the UK, he could be creating tax issues that some proper planning could be avoiding.

There are remittance issues with what he is currently doing.

There could be benefits in using an offshore trust / company structure.  It may be possible to do this without incurring an IHT liability, although without more information it is difficult to say.

As with most areas of tax, if you don't have experience of it, it is worth getting advice from someone who does.

I'm sure that, like me, there are others on AW who have relevant experience.  Please email me if you would like further advice.

 

 

 

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