【正确答案】Jodie Paragraphs for inclusion in a letter from manager Client Jodie Prepared by Tax senior Date 5 June 2015 Tax implications of emigration from the UK and related matters (a) UK tax residence status and liability to UK income tax Using the automatic overseas tests it has already been concluded that you will not be automatically regarded as non-UK resident in the tax year 2016/17. It is therefore necessary to consider the automatic UK residence tests. Applying these, you will also not be regarded as UK resident because you will not: – be in the UK for 183 days or more; or – have a home in the UK but no home overseas; or – work in the UK. Accordingly, because your status cannot be determined automatically, it will be determined by the number of ties you have with the UK. Because you have been UK resident in one or more (actually all) of the three tax years preceding 2016/17 and you will be in the UK for between 46 and 90 days in the tax year 2016/17, you will be UK resident if you satisfy three or more UK ties. I set out the ties below: You can see from this that, if you proceed in accordance with your plans, you will only satisfy one of the UK ties, such that you will not be UK resident in the tax year 2016/17. However, if you were to change your plans (for example, the number of days which you spend in the UK in 2016/17), this may have an effect on your residence status. As a non-UK resident, you will not be subject to UK income tax on your overseas income. (b) Relief available in respect of the trading loss The terminal trade loss for the final 12 months of trading is ￡22,750 (see appendix). This loss can be offset against your taxable trading profits for the final tax year of trading (however, you have no trading profit in the tax year 2015/16) and the three previous tax years, relieving later years before earlier years. The total tax which you will save by relieving the losses in this way will be ￡7,500 (see appendix). (c) Capital gains tax Becoming non-UK resident in the tax year 2016/17 As a non-UK resident, you will not be subject to UK capital gains tax on the disposal of any assets. However, if you were to return to the UK within five years, any gains made whilst you were in Riviera in respect of assets owned when you left the UK (for example, the shares in Butterfly Ltd) would be subject to capital gains tax in the tax year you return. This rule will apply because you have been UK resident for at least four of the seven years prior to the tax year 2016/17. Because you will become non-UK resident within six tax years of receiving the shares in Butterfly Ltd from your mother, you will be treated as having made a chargeable gain equal to the gain held over at the time of the gift. This gain will be chargeable immediately before you become non-resident, i.e. on 5 April 2016. Accordingly, a chargeable gain of ￡23,000 (￡60,000 –￡37,000) will arise in the tax year 2015/16. This gain will be taxed at 28% rather than 18% because the gain on the sale of your business premises (see below) will be regarded as having used the whole of your basic rate band. Sale of your business assets The chargeable gain of ￡55,000 (￡190,000 – ￡135,000) on the sale of your business premises will be taxed at 10% due to the availability of entrepreneurs’ relief. This relief is available because you had owned the business for at least a year prior to 31 May 2015 and you have sold the premises within three years of ceasing to trade. The computer equipment is not a chargeable asset as the cost and sales proceeds of each item did not exceed ￡6,000. There is no chargeable gain on the inventory because inventory is not a capital asset. Sale of your home Tax is not normally charged on a gain on the sale of a home if the owner has always lived in it. However, where the land exceeds 0·5 hectares, this exemption does not apply to the excess land unless the land is necessary for the enjoyment of the property. This is a judgemental matter and will require further work before a conclusion can be reached. Capital gains tax liability for 2015/16 Your total capital gains tax liability for 2015/16 will be at least ￡8,860 (see appendix). (d) Other matters Leaving the UK – inheritance tax implications Whilst you are UK domiciled, or deemed domiciled, your worldwide assets will be subject to UK inheritance tax, even after you have left the UK. Once you are no longer UK domiciled or deemed UK domiciled, only your assets located in the UK will be subject to UK inheritance tax. You will become non-UK domiciled once you have left the UK and severed all ties with the UK. However, for the purposes of UK inheritance tax, you will be deemed to be UK domiciled for a further three years once you have ceased to be domiciled under the general law. Value added tax (VAT) You should notify HM Revenue and Customs that you have ceased trading by 30 June 2015. If you fail to do so, you may be required to pay a penalty. On your final VAT return you are required to account for VAT on any business assets which you have retained and in respect of which you have claimed input tax (i.e. the inventory). This is invariably calculated by reference to the market value of the assets at the cessation of trade. However, this VAT is not payable if it does not exceed ￡1,000. Accordingly, you will not need to account for VAT in respect of your inventory as it was only worth ￡3,500.