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Tax Guide for Expats PDF Print E-mail
Wednesday, 10 December 2008 12:33
Offshore TaxAn individual who is considering a move from the UK to retire overseas will need to take into account a number of factors, including the impact of their move upon their offshore tax planning position.
One aspect is the taxation regime of the country to which the UK expatriate is moving. According to the Association of International Life Offices, the tax regimes of countries around the world vary considerably.
Generally most countries will levy a tax on any income earned in the country. Others will tax the worldwide income or capital gains of an individual, in addition, perhaps, to raising an inheritance/estate tax on the worldwide wealth of an individual if they should die whilst living in the overseas country.

The exact tax regime applied will depend upon the country in question as well as the personal circumstances of the UK expatriate, for example the length of time they have lived in the country and whether they have purchased a permanent place of residence in the country.

A UK expatriate’s continuing liability to UK taxes will depend upon their residence, ordinary residence and Domicile status. An individual who is both resident and domiciled in the UK is liable to income and capital gains tax on their worldwide income and gains, as well as inheritance tax on worldwide assets (as a consequence of their UK Domicile).


In order to be tax resident in the UK an individual must be physically present in the UK at some time during a tax year. An individual’s residence status in other countries is irrelevant to determining UK tax residency. In order to be classified as tax resident in the UK an individual must meet one of the following criteria:

• If an individual is physically present in the UK for at least 183 days in the current tax year they will be classed as resident.

• If an individual visits the UK, for any reason, in four consecutive tax years and the visits average more than 90 days per year they will be classed as resident from the start of the fifth year. Alternatively if an individual arrives in the UK with the intention of spending more than 90 days per year in the country they will be treated as resident from their day of arrival.

• If an individual intends to work in the in the UK for two-years or more they will be classed as resident from the day of arrival in the UK.

Ordinary Residence

The definition of ordinary residence considers the longer-term, compared to residence. Ordinary residence considers an individual’s ‘habitual’ or usual place of residence rather than an individual’s residence in a particular tax year.

Depending upon an individual’s circumstances, a UK expatriate may still be ordinarily resident in the UK, even if they are no longer resident.

The UK Inland Revenue will normally look at ordinary residence over a three year period and once an individual has been Non-resident for three complete tax years they will generally be considered to be not ordinarily resident in the UK.


An individual’s Domicile indicates the country which an individual considers to be their permanent home.

Under UK law every individual has a country of Domicile and this impacts upon their liability to certain taxes, such as inheritance tax. Domicile is different to residence and rarely changes.

An individual usually acquires their father’s Domicile at birth and then retains this for life unless ties with their original country of Domicile are severed and a permanent home in another country is established.

Most UK expatriates moving overseas are usually UK domiciled and will retain the UK as their Domicile. However, if an individual is moving overseas permanently, it is possible for the individual to acquire a new Domicile in the country to which they have moved and established a new permanent place of residence.

If a UK expatriate, who has acquired non-UK Domicile, moves between foreign countries it is possible that their Domicile will revert back to the UK until Domicile is established in the country to which they have moved.

If an individual leaves the UK to retire in an overseas country, and will not be working in the country, they may still be able to become Non-resident or not ordinarily resident in the UK if the individual intends to leave permanently or spend at least three complete tax years outside the UK.

For an individual to claim that they are no longer resident and ordinarily resident, the Inland Revenue may ask for some evidence that the individual has left the UK permanently, or to live outside the UK for three years or more. This evidence might be, for example, steps to acquire accommodation abroad to live in as a permanent home.

If an individual does not have any evidence they will be treated as remaining resident and ordinarily resident in the UK, but this status can be reviewed if:

• The absence actually covers three years from departure, or
• Evidence becomes available to show that the individual has left the UK permanently providing in all cases visits to the UK since leaving have totaled less than 183 days in any tax year and have averaged less than 91 days a tax year.

Normally an individual will be either resident or Non-resident for a whole tax year but the UK Inland Revenue allows, by concession, tax years to be split in the years of arrival and departure, hence an individual may only be treated as resident for a part tax year.


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