Not resident in the UK – General Print

An individual who is not resident in the UK is not liable to UK tax on overseas earnings, or to higher rate tax on any investment income. Certain interest may also be paid to him without deduction of tax at source, although it may be advisable to relocate the investments offshore. Where however, UK source interest is received net of tax deducted at source, under general UK principles, this tax is not generally recoverable from HMRC. However, it is worth reviewing the relevant Double Tax Treaty between the UK and the country of residence, as this may provide exemption from UK tax, in which case the treaty will override the UK domestic law, and the UK tax may be recoverable. In these circumstances, it is likely that the income will be taxable in the country of residence. It should also be noted that split-year treatment is not available for the year of departure from the UK in respect of most UK sources of income.

 

In the event that the individual rents out his home whilst living abroad, the rental income is taxable in the UK, and unless prior approval is obtained from HMRC’s Centre for Non-residents, the tenant, or letting agent may be obliged to account for basic rate tax to HMRC in respect of the gross rental income. Any tax deducted in this way may be offset against the eventual tax liability, and any overpaid tax can be recovered by way of repayment. Application for payments to be made gross should be made on form NRL1 which is available on HMRC web-site.

With regard to CGT, an individual who is not resident in the UK is not liable to CGT on the disposal of assets other than UK real estate. However, where the individual is only temporarily not resident in the UK, and resumes residence before the expiry of 5 complete tax years of non-residence, then any gains in respect of disposals of assets held before the individual left the UK will crystallise in the year of return to the UK. Double Tax Treaties may no longer be used to circumvent this. The taxation of UK real estate is discussed further in the CGT section.

It should be noted that assets acquired and disposed of during the period of non- residence are not caught by this anti-avoidance provision.

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