Income from UK and Switzerland.

Income from UK and Switzerland.

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I have a client who arrived in the UK in 2010, earned PAYE income in UK and also earned salary in Switzerland (local tax paid). The funds from switzerland does not enter the UK and remains outside. He has family in UK and has travelled to UK for arround 200 days in the year. 

Does he have to pay UK tax on the income from switzerland? As he has not been in UK for 7 out of the last 9 year could he claim to be non domiciled and declare the income under the remitance basis, without having to pay the 30k charge?

Its been a while since I looked into this so any advice will be a great help.

Count

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By CrowtherP
22nd Aug 2012 12:03

See http://www.hmrc.gov.uk/nonresidents/flowchart.pdf

http://www.hmrc.gov.uk/nonresidents/flowchart.pdf

 

You will lose entitlement to personal tax allowances and the annual exempt amount for capital gains. You will need to make a claim for the remittance basis by completing a Do you have Self Assessment return.

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By kdauda
22nd Aug 2012 17:41

Income from UK and Switzerland

 I'll try and summarise here but you should probably get detailed advice.

1. You need to determine his UK residency status (from what you said about 200 days in the UK, sounds like the client is UK resident).

2. You need to determine his Swiss residency status (consult a Swiss adviser).

3. If he is resident in both UK and Switzerland, consult the Swiss/UK double tax agreement, to see which one wins.

4. If dual resident and DTA 'deems' him to be Swiss resident , then you only have to worry about the UK source income (from UK point of view).

5. If he is only resident in UK or DTA deems him to be UK resident, then you have to consider his 'ordinary residence' and 'domicile' status before you can apply remittance basis. Remittance basis can only apply to the Swiss income if he is not ordinarily resident or not domiciled. (For remittance basis to apply to the gains, he has to be non-domiciled). Be warned, ordinary residence is tricky. The employer's residence status and where the employment is carried out can also affect whether remittance basis can apply to the income. You may also have to consider splitting the tax year (UK) into periods of non residency and residency.

Following on from previous response, he may not actually lose his personal tax allowance if he does claim remittance basis, as Switzerland is one of the countries where DTA allows the personal tax allowance when claiming the remittance basis - he would have to be resident in both UK and Switzerland.

If it turns out that the Swiss income becomes taxable in the UK (either because it is not worth losing personal allowance or remittance basis is not applicable), you can claim relief for the tax paid in Switzerland. 

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By CrowtherP
23rd Aug 2012 09:07

respect for the above response

To try and fine tune further, i think the PA will be lost if the income is > £100K for the tax year as under article 26 of the DTA, a British subject not-resident in the UK would lose his own PA in those circumstances.

This is tricky and needs careful analysis, as per the above.

 

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