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Where Taxpayers and Advisers Meet

Resetting of "Deemed Domiciled Clock"

JoePublic
Posts:6
Joined:Mon Jun 27, 2022 1:49 pm
Resetting of "Deemed Domiciled Clock"

Postby JoePublic » Mon Jun 27, 2022 2:07 pm

I have read in several places that if a person is non-resident for 6 continuous years after being "deemed domiciled" the domicile clock is "reset" and the 15 year period starts again from zero.
For example:
"If you remain non-resident for the full six year period and return to the UK after that, you will re-set your “domicile clock”. You will become deemed domiciled again if you remain resident in the UK for a further 15 years."

However I can't find where in the legislation or HMRC guidance it covers this point - all I can see is that it says:
"Condition B
Condition B is met when you’ve been UK resident for at least 15 of the 20 tax years immediately before the relevant tax year."

I read this to mean that if a person returned say after 7 years on non-residence, having been UK tax resident for 20 earlier years - in year 8, he would already have been UK resident for 13 of the past 20 years.
Am I wrong?

I did find the following from the original consultation document:
https://www.gov.uk/government/consultations/reforms-to-the-taxation-of-non-domiciles/reforms-to-the-taxation-of-non-domiciles

"The proposed rules will mean that an individual who has lived in the UK for 15 consecutive tax years and then leaves the UK for 6 or more consecutive tax years could return here and could claim non-dom status again for another 15 years (assuming they still had a foreign domicile status under general law). The government believes that introducing the deeming rule in this way will allow those non-doms who are internationally mobile to continue to benefit from non-dom status in a way that is not appropriate for those who are firmly based in the UK."

But I cannot see where in the legislation this point is reflected.
No mention of "resetting the clock" for another 15 years.

Any wisdom appreciated.

darthblingbling
Posts:515
Joined:Wed Aug 02, 2017 9:09 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby darthblingbling » Mon Jun 27, 2022 8:19 pm

If you're non res for 6 continuous tax years then you can't be resident for 15 out of the last 20 years when you start being resident again, so the clock is essentially reset. The legislation won't mention resetting the clock, it's just logic and maths.

darthblingbling
Posts:515
Joined:Wed Aug 02, 2017 9:09 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby darthblingbling » Mon Jun 27, 2022 8:21 pm

I should emphasize it won't reset the clock for the remittance basis charge.

JoePublic
Posts:6
Joined:Mon Jun 27, 2022 1:49 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby JoePublic » Mon Jun 27, 2022 9:09 pm

If you're non res for 6 continuous tax years then you can't be resident for 15 out of the last 20 years when you start being resident again, so the clock is essentially reset. The legislation won't mention resetting the clock, it's just logic and maths.
Not just maths. The quote from consultation says -"could claim non dom status for another 15 years.

Let me use an example. James is a non dom and had been UK resident for 20 years before leaving the UK on 5 April 2020. He returns to the UK on 6 April 2027 after being away for 7 years. So for 2027-8 looking at the last 20 years he will have been

in UK 2027-8 1 year
out of UK 7 years
in the UK 12 years
Total 20 years
so (12+1)=13/20 and so not deemed domicile for 2027-8
and 14/20 in 2028-29
but 15/20 in 2029-30 - so now deemed domicile from then on.

That is very different to what the consultation note and some of the commentary says - if that is correct - the "clock is reset" - and 2027-8 is once again year 1 out of 20? He can stay in the UK for another 14 years before re-hitting the 15/20 and deemed domicile.

I hope the question is clearer! If its simply last 15/20 then no clocks need "resetting".

AGoodman
Posts:1452
Joined:Fri May 16, 2014 3:47 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby AGoodman » Tue Jun 28, 2022 1:10 pm

No, your "clarification" of your question is just wrong.

First, you don't count the current year so in 2027-8, the year 2027-8 would not be counted. That's an important detail but not the main point.

In your calcs, each subsequent year you would gain a year of UK residence but also lose a year of UK residence as years drop off the bottom of the rolling 20 year period. Your calculation that it would increase to 14/20 and 15/20 in the two subsequent years is simply wrong and ignores the fact that two years of UK residence would be lost from the calculation. The overall figure would stay the same at 13/20 until the year that the person left the UK came around. From that year, the rolling total would start to increase as years of non-residence cease to be counted.

Think about it this way: any 20 year period that contains a six year period of non-residence can only, at most, include 14 years of residence.

JoePublic
Posts:6
Joined:Mon Jun 27, 2022 1:49 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby JoePublic » Tue Jun 28, 2022 2:19 pm

Thank you AGoodman. You are of course right and I am feeling pretty stupid for not seeing that!

maths
Posts:8448
Joined:Wed Aug 06, 2008 3:25 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby maths » Tue Jun 28, 2022 2:29 pm

To attempt to add to AG's comments:

1. The relevant legislation (for information) is contained in ITA 2007 s 835BA.

2. When ascertaining deemed domicile status post 5 April 2017 for a particular tax year (eg 2022/23) it is the previous 20 tax years that are important; tax year 2022/23 is ignored.

3. 6 successive tax years of non-residence are required once at least 15 successive tax years of residence have occurred for the "clock" to restart.

4. In your example you say "UK resident for 20 years before leaving the UK on 5 April 2020. He returns to the UK on 6 April 2027"

What's the position for tax year 27/28?
Of the previous 20 tax years [ie 13 tax years pre 6 April 2020 plus tax years 20/21, 21/22, 22/23, 23/24, 24/25, 25/26 and 26/27] he has been resident for 13 out of 20 tax years. Hence is not deemed domiciled for tax year 27/28.

He could have in fact returned to the UK one tax year earlier on 5 April 2026. For the tax year 26/27 he would still not be deemed domiciled for 26/27 as of the pervious 20 tax years he has been resident for only 14 tax years.

However, if he returned on 5 April 2025 then for 25/26 he would be deemed domiciled as out of the previous 20 tax years he would have been resident for 15 tax years.

5. There are transitional provisions which may affect the above, but basically the rules are as above.

6.Regarding the Remittance Basis Charge the amount payable is a function of number of tax years residence in the UK but the numbers vary from those discussed above [ITA 2007 s809C].

JoePublic
Posts:6
Joined:Mon Jun 27, 2022 1:49 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby JoePublic » Tue Jun 28, 2022 2:37 pm

maths. Thanks for explaining this. I was being dim. I was adding new years but not taking off the year that dropped off for last 20.

For remittance charge
"The remittance basis charge
From 6 April 2017 the remittance basis charge changed to 2 levels of charge:

£30,000 for non-domiciled individuals who have been resident in the UK for at least 7 of the previous 9 tax years immediately before the relevant tax year
£60,000 for non-domiciled individuals who have been resident in the UK for at least 12 of the previous 14 tax years immediately before the relevant tax year."


So, on re-arrival there would be no RBC to pay for the first 7 years despite the fact he was paying RBC before he left the UK.

maths
Posts:8448
Joined:Wed Aug 06, 2008 3:25 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby maths » Tue Jun 28, 2022 3:22 pm

So, on re-arrival there would be no RBC to pay for the first 7 years despite the fact he was paying RBC before he left the UK.

Agreed.

maths
Posts:8448
Joined:Wed Aug 06, 2008 3:25 pm

Re: Resetting of "Deemed Domiciled Clock"

Postby maths » Tue Jun 28, 2022 3:26 pm

One other point is that on return after 6 successive tax years of non-residence although deemed domicile status may be avoided depending upon the facts the individual by returning may acquire UK domicile status under common law applicable for, inter alia, tax purposes


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