1. 1 TAX PLANNING FOR FOREIGN DOMICILIARIES Emma Chamberlain 5 Stone Buildings Lincoln’s Inn London WC2A 3XT Tel: 0207 242 6201 Fax: 0207 831 8102

2. 2 Income tax and capital gains tax Income tax and capital gains tax Deemed domicile for inheritance tax purposes – 1992/93 Deemed domicile for inheritance tax purposes – 1992/93 £30K charge – 2001/2 £30K charge – 2001/2 Importance of Residence

3. 3 Limited statutory provisions Limited statutory provisions Based on case law Based on case law Relevance of available accommodation Relevance of available accommodation IR20 IR20 Recent cases Recent cases Residence

4. 4 New rules – section 24 FA 2008 midnights in the UK New rules – section 24 FA 2008 midnights in the UK 183 day test only 183 day test only “in transit” nights excluded “in transit” nights excluded Future statutory residence test? Future statutory residence test? Residence

5. 5 Changes for individuals £30K applies from 2008/9 £30K applies from 2008/9 Remittances in specie; defining a remittance Remittances in specie; defining a remittance Alienation rules Alienation rules Interest on debt – offshore mortgages Interest on debt – offshore mortgages Mixed fund rules Mixed fund rules Loss relief for foreign gains Loss relief for foreign gains

6. 6 Changes for individuals Payments for UK services and goods made abroad Payments for UK services and goods made abroad Temporary residence rules Temporary residence rules Offshore trusts and capital gains tax rules Offshore trusts and capital gains tax rules Transfer of assets Transfer of assets Gains of non-resident companies Gains of non-resident companies Income source ceasing Income source ceasing Transitional rules Transitional rules

7. 7 £30,000 and personal allowances £30K to pay from 2008/9 if more than £2000 unremitted income/gains £30K to pay from 2008/9 if more than £2000 unremitted income/gains Adults only – “remittance basis user” Adults only – “remittance basis user” You can opt in and out of charge You can opt in and out of charge Loss of personal allowances/exemptions Loss of personal allowances/exemptions Tax charge on unremitted income and gains - nominated income/gains Tax charge on unremitted income and gains - nominated income/gains US tax credit? UK tax credit for £30K? US tax credit? UK tax credit for £30K?

8. 8 £30,000 and personal allowances Nominate any income Nominate any income Payment dates Payment dates Do not remit nominated income Do not remit nominated income Pay the £30K from offshore account Pay the £30K from offshore account Effect of claim to be a remittance basis user Effect of claim to be a remittance basis user Avoiding the need for the remittance basis Avoiding the need for the remittance basis

9. 9 Foreign losses No relief before 6 April 2008 No relief before 6 April 2008 Limited loss relief for RBU if election Limited loss relief for RBU if election Election irrevocable Election irrevocable Make in first year of RBU Make in first year of RBU No loss relief when losses realised after gains No loss relief when losses realised after gains Order of relief Order of relief Watch UK losses Watch UK losses

10. 10 Foreign losses No losses to be used against s87 gains No losses to be used against s87 gains Separating gain from capital Separating gain from capital Watch currency gains Watch currency gains

11. Meaning of remittance Condition A – money or property brought to or received in or used in the UK by or for the benefit of a relevant person or service provided Condition B – the property/service is the income or gains or derived from income/gains or used in respect of a relevant debt Definition of relevant person – individual,spouse, civil partner, cohabitee, minor child/grandchild/trust, company

12. 12 Offshore mortgages Money lent before 12 March 2008 Money lent before 12 March 2008 Money lent abroad Money lent abroad Before 6 April 2008: Before 6 April 2008: money received in the UK and money received in the UK and residential property acquired residential property acquired debt or guarantee secured on property debt or guarantee secured on property no variation in terms no variation in terms RFI only RFI only

13. 13 Meaning of remittance Condition C – enjoying the gifted property Condition C – enjoying the gifted property Condition D – reciprocal arrangements Condition D – reciprocal arrangements Are the rules comprehensive? Pre 6 April income/gains Are the rules comprehensive? Pre 6 April income/gains Transitional rules Transitional rules Advantage of trusts Advantage of trusts

14. 14 Trusts and capital gains tax Section 86 – does not apply if foreign domiciled even if no remittance basis claim Section 86 – does not apply if foreign domiciled even if no remittance basis claim Section 87 – charge now applies Section 87 – charge now applies Remittance basis on capital payment – where gain is made is irrelevant Remittance basis on capital payment – where gain is made is irrelevant Pre April 2008 capital payments or pre April 2008 gains – not taxed Pre April 2008 capital payments or pre April 2008 gains – not taxed Rebasing options Rebasing options

15. 15 Trusts and capital gains tax Capital payments matched with gains on last in and first out basis – reduces penalty Capital payments matched with gains on last in and first out basis – reduces penalty If matched to pre April 2008 gains – no charge even if not a remittance basis user If matched to pre April 2008 gains – no charge even if not a remittance basis user Surplus capital payments pre April 2008 to be matched pro rata against pre and post April 2008 gains on election Surplus capital payments pre April 2008 to be matched pro rata against pre and post April 2008 gains on election Rate of tax Rate of tax