International private client tax

If you have not done so already you must inform your employer of your plans and seek their agreement as there are a number of areas that they must consider, for example – the operation of payroll, National Insurance Contributions (social security), employment law, as well as potential corporation tax implications for the company depending on the duties you will perform overseas.

From your personal perspective, it will broadly depend on your tax residence status and where you are performing your duties as to how your salary will be taxed going forwards.

Our Global Mobility Team can provide advice to your Employer and our Private Client Tax Team can advise individuals.
 

Your tax position is broadly dictated by your tax residence status.  With this in mind you must be clear on how to cease UK tax residency (in accordance with the UK Statutory Residence test) and be able to manage this going forwards if you plan to make trips back to the UK. 

Therefore, you would want to choose a jurisdiction that you would be happy to spend the majority of your time in so this can be achieved.

If you wished to take advice on this it is recommended that you compile a list of potential countries that you would consider living in full-time, along with your current and potential future sources of income and gains so we can consider this further.

A gift of cash to an individual based in the UK will typically not attract any UK tax charges nor reporting requirements.  

If the funds are from overseas but are gifted to you from a UK domiciled individual, you may be liable to UK inheritance tax if they pass away within 7 years of making the gift to you.

It may be that the UK beneficiary is liable to gift or estate taxes on receipt of the gift in the applicable overseas jurisdiction and if in doubt it is recommended that you seek local tax advice. 

Depending on what you do with the funds in the UK, they may then be liable to UK inheritance tax if held in your estate on death, or the funds may generate income or gains that are taxable in the UK during your lifetime.

If you are UK tax resident the starting point is that you are taxable on worldwide income and gains.  It is therefore highly likely that this income would be taxable in the UK also.

There may be the possibility to claim a tax credit in the UK for tax paid overseas, but please note this may not be creditable in full and would be subject to the terms of the Double Tax Treaty between the UK and the overseas jurisdiction in which you have paid the tax. 

If you are selling your ‘main residence’ in the UK then often no UK capital gains tax is due if you have occupied it as such throughout the entire period of ownership.  Complications can therefore arise if you have multiple residences, and your ‘main’ property is unclear.

If you have multiple homes globally, your tax residence status may be unclear if you spend time in each home.  Furthermore, if you are performing work whilst in those homes this could trigger a tax reporting requirement and potential tax liability in the jurisdiction that you are performing these duties.

If you are UK domiciled, you will be liable to UK inheritance tax on your worldwide assets on death.  If you are non-UK domiciled, you will be subject to UK inheritance tax on your UK-situs assets on death.

Certain gifts made during an individual’s lifetime can trigger immediate UK inheritance tax charges, or potential inheritance tax charges if you were to pass away within 7 years of making the gift.

Further information on the UK inheritance tax regime can be found here.

Please note it is currently proposed that from April 2025, the UK inheritance tax regime will move to a residence-based system, rather than being based on an individual’s domicile status.

If you wish to gift away assets in order to mitigate your exposure to UK inheritance tax, the main point to raise is that you must no longer retain a benefit from that asset following the gift, or it may still remain in your estate (and be in the estate of the beneficiary of the gift also).

There can be structures put in place that mean you retain legal but not beneficial ownership if you wished to still remain in control of who can benefit from these assets going forwards, but it cannot be you.

Certain gifts made during an individual’s lifetime can trigger immediate inheritance tax charges, or potential inheritance tax charges if you were to pass away within 7 years of making the gift.

If you are UK tax resident and are considering withdrawing from overseas pensions, the tax position on this is typically dictated by the terms of the Double Tax Treaty between the UK and the jurisdiction in question. 

If there is a Double Tax Treaty in place, this will often state which jurisdiction holds the taxing rights and this can also differ depending on whether you take a lump-sum or an income drawdown.  A formal claim under the Double Tax Treaty may be required to be made in the UK.

There may also be scope to consolidate these pensions, this would require further review and specialist advice and is often an expensive process so it may depend on the size of the pension pots as to whether this is worthwhile pursuing.

The taxation of overseas trusts is a complex area of UK tax legislation. There are some general rules that can apply but the UK tax treatment will depend on the type of Trust structure that is in place.

If you are in receipt of distributions from an overseas trust you may need to file a UK tax return to report the distributions and may be liable to UK income tax and/or UK capital gains tax.

The Trustees and Settlors may also be liable to UK taxation and have UK filing requirements. We would recommend that a review is undertaken if you are unsure of the UK tax position.