Tax Consequences for UK resident, Ordinary Resident and Domicile
A person’s status of residence, ordinary residence and domicile is of utmost significance when determining taxation implications. Before going into the nitty-gritty of tax consequences associated with a person’s residence status, one must understand definitions with respect to Resident, Ordinary Resident and Domicile.
Conditions for becoming Resident:
1. Individual visiting UK
Factors (family or property) connecting him to UK
physically present > 183 or 6 months in a tax year
regular visits combining to average of 91 days over a period of 4 years
Becomes resident for whole tax year
Becomes resident from 5th year (if period of visit not confirmed at outset)
2. Individual visiting UK
comes for permanent residence
comes with intention to stay for 2 years
Becomes resident from the date of arrival
Conditions for becoming Ordinary Resident:
1. Individual visiting UK
average visits count to 91 days over a period of 4 years
remains in UK for 3 years
Becomes ordinarily resident from 5th year
Ordinarily resident from beginning of 4th year
2. Individual visiting UK
Intention to take permanent residence in UK
intention to stay for 3 years
Becomes resident from the date of arrival
Conditions for becoming Non Resident:
1. Individual leaving UK
if a person remain absent for a complete tax year
Becomes non -resident for whole tax year
2. Individual leaving UK
1. if intention is to leave UK for permanent (more than 3 years)
2. leaves to work abroad (full time employment)
Becomes non -resident from the date of arrival
Conditions for becoming Not Ordinary Resident:
1. Individual leaving UK
if person is absent for more than 3 years
Becomes not ordinarily resident for whole year
2. Individual leaving UK
1. if person has intention to leave UK for permanent or for good (more than 3 years)
2. for work abroad for full time contract
Becomes resident from the date of arrival
Conditions for Domicile: Domicile status for a person is determined as;
Aged below 16: Domicile of Parent (usually father or in some cases mother) becomes the domicile of Person. Further, domicile of Guardian is considered domicile of person if legally dependent on person other than parent.
Domicile of Choice:
A person may choose domicile of his own choice. But according to UK tax law a person has to sever all ties with his / her previous country of domicile. Domicile is different than country of residence or citizenship. For becoming UK domicile all connections with previous domicile country must be lost.
Tax consequences related to the Resident, Ordinary Resident and Domicile are covered in Part-2 of this topic.