What is Domicile?
A person’s domicile is generally the place they consider their permanent home, the place with which they have the strongest social and family ties. Unlike residence, there is no one legal test to determine domicile, but various factors are considered. Determining legal domicile can be complex, and it is open to challenge by HMRC, so advice should be taken.
How are non-doms taxed?
Non-doms, who have not been in the UK long enough to acquire a deemed UK domicile – see below - can elect to be taxed on the remittance basis. This means that their foreign income and gains will only be taxable in the UK as and when they are remitted to the UK.
Any UK income, such as UK employment income and interest from UK bank accounts, and UK capital gains, such as gains realised on UK company shares or UK property, will be fully taxable as they arise.
If non-doms do not elect to be taxed on the remittance basis they will be taxable on their worldwide income and gains in the same way as a UK domiciled UK resident. There is an exception for those with foreign income less than £2,000 a year, to whom the remittance basis applies automatically.
Should I structure my property business through a Limited company?
It is possible to run a rental business through a company. The matters that should be considered include income tax and corporation tax rates, SDLT liabilities, and the impact of a future sale of the property in the company.
The tax analysis will depend on the number of properties comprising the business, whether there is an existing rental business or a new one is being started, and whether or not you or a family member might need to occupy one of the properties. We would be happy to discuss the pros and cons of each option.
