If an individual domiciled in the UK chooses to leave the UK what are the tax implications and is there an exit tax?
Although there are normally no taxes or exit charges for an individual who ceases to be a UK tax resident, certain circumstances can trigger tax consequences in this situation. Examples of these are as follows:
· Clawbacks on hold-over Section 168(1) Taxation of Capital Gains Act 1992 (TCGA 1992) in case of emigration of a domicile. In certain circumstances if the transferee has not disposed of received assets prior to ceasing to be a UK resident, then a chargeable gain can be accrued as if they were still a UK resident.
· Enterprise Investment Scheme (EIS) relief may not apply if an investor ceases to be UK resident (Schedule 5B TCGA 1992). If certain requirements are met the relief can still apply even though the UK tax resident is recognised as a non-UK resident for the purposes of the double tax agreement.
· Charges on emigration of a trust (Section 80 TCGA 1992). If the trustees cease to be UK residents or are ordinarily non-UK residents, then consequently a deemed disposal of the trust assets is triggered.
· Income taxed as trade profits (Section 17 ITTOIA). An application of the section could be caused by change of residence. In this instance the individual is treated as permanently ceasing to carry on the trade at the time of the change of residence for tax purposes, and then as though they are starting a new trade immediately afterwards. This doesn’t prevent a loss made before the change of residence being deducted from profits made after the change of residence.
If you are considering leaving the UK and would like to ensure that your investments are protected, then you can speak to a member of LEXeFISCAL who have specialist experience in this type of tax law. Please contact Yuliya Shved at: yuliya@lexefiscal.com or Dr Clifford J Frank at: clifford.frank@lexefiscal.com.
