I have a friend who lives and works in Tokyo, and has recently bought a house there (his only property, he has never owned any property in the UK). He is UK born as were both parents.
He has lived in Japan for 5 years, and is employed by a Japanese company. He comes back to the UK infrequently, and has averaged less than 91 days in the UK over the last 4 years. I believe this makes him domiciled outside the UK, and not ordinarily resident.
He is wanting to remit some of his earnings (c£1.5k p/month) to a UK savings account, and as such I have the following questions:
- Will he be taxed on the earnings on remittance?
- Is he entitled to receive interest without tax deducted?
from your post 'He is UK born as were both parents'
This will make his UK Domicile
- Domicile by Origin - you acquire this at birth from your father
- Domicile of dependancy - Until you can legally change it by acquiring a domicile of choice, your domicile will be the same as that of the person on whom you are legally dependent. If that person's domicile changes, you automatically acquire the same domicile in place of your domicile of origin
- Domicile of choice - You can legally acquire a new domicile, a domicile of choice, from the age of 16. To do so, you must
leave the country in which you are now domiciled and settle in another country, and
provide strong evidence that you intend to live there permanently or indefinitely.
Living in another country for a long time, although an important factor, does not prove you have acquired a new domicile.
There is a 4th aspect relating to deemed domicile - this relates more to inheritance tax purposes
Thanks, I've read the HMRC manual and it is a bit confusing on the domicile status. It seems it's not really that clear cut.
Looking through again it seems to suggest that he would be liable to pay tax on UK bank savings, but he would have the option to have it paid without the tax deducted - presumably he would then need to complete an SA return and detail the interest income?
The main concern really is whether or not he could remit his employment income back to the UK without being taxed. The HMRC table suggests it would be taxed on remittance regardless of if he is domiciled within or outside the UK, as I believe he would fall in the not ordinarily resident - and not the not resident category - due to his family ties in the UK.
There is a DTA with Japan, but reading through the guide it suggests he can only claim relief on what he has paid tax wise in Japan - so if this does not cover the UK tax rate (I'm quite sure it won't) then he will have to pay more tax.
