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Taxation of French Nationals living in the UK
FranceInLondon meets Shabir Djakiodine, a Chartered Accountant from Euro Accounting Ltd to talk about Taxation.
Prior to establishing his own accountancy firm, Shabir Djakiodine worked in Paris, London and Geneva for Deloitte where he was dealing with individuals and small & medium size companies. Shabir, who speaks six languages, has also worked for several years as an auditor in Switzerland and for American multinational companies. Thanks to auditing, accounting and international taxation experiences, he is now sharing his expertise with small and large companies.
When you come to work or set up your business in the UK, you may wonder what is the tax amount you must pay and how it is calculated. Will you pay only on your English income? Or will you need toinclude your French income? If you already pay your taxes in France, are you going to pay again in the UK?
The answer to these questions depends on the income you earn outside the UK, the time spent in this country and the time that you intend to stay there. First, you must know your status: are you a resident, ordinarily resident and/or domiciled in the UK? Then you have the choice between two modes of taxation: "arising" or "remittance basis".
Definition of your status
There are many different factors which will determine whether you are resident in the UK. It is not simply a question of the number of days you are physically present in the UK during a tax year, although this is an important consideration.
The only occasion when the number of days that you are physically present in the UK will determine your residence status is when you are here for 183 days or more during a tax year. If you are here for 183 days or more in a tax year, you are resident in the UK. There are no exceptions to this. You can also be resident in the UK if you are present here for fewer than 183 days in a tax year. This will depend on how often and how long you are here, the purpose and pattern of your presence and your connections to the UK. These might include the location of your family, your property, your work life and your social connections.
UK ordinarily residence
Ordinary residence is different from ‘residence’. The word ‘ordinary’ indicates that your residence in the UK is typical for you and not casual.
If you have always lived in the UK then you are ordinarily resident here. When you come to the UK you do not have to intend to remain in the UK permanently or indefinitely in order to be ordinarily resident here. It is enough that your residence has all the following attributes.
• Your presence here has a settled purpose. This might be for only a limited period, but has enough continuity to be properly described as settled. Business, employment and family can all provide a settled purpose, but this list is not exhaustive.
• Your presence in the UK forms part of the regular and habitual mode of your life for the time being.
• You have come to the UK voluntarily. The fact that you chose to come to the UK at the request of your employer rather than seek another job does not make your presence here involuntary.
If you are resident but not ordinarily resident in the UK you may claim the remittance basis for your foreign income. But you will always pay income tax on your UK income. When you are resident in the UK but not ordinarily resident you cannot use the remittance basis of taxation in respect of your foreign gains unless you are not domiciled here.
There are many things which affect your domicile. Some of the main points you should consider if you
are claiming not to be domiciled in the UK are:
• you cannot be without a domicile
• you can only have one domicile at a time
• you are normally domiciled in the country where you have your permanent home
• your existing domicile will continue until you acquire a new one
• domicile is distinct from nationality and residence, although both can have an impact on your domicile
• the fact that you register and vote as an overseas elector is not normally taken into account when deciding whether or not you are domiciled in the UK.
« Remittance » et « arising basis »
« Remittance »
If you are resident in the UK you will normally be taxed on the arising basis. This means that you are liable to pay UK tax on your worldwide income and gains, wherever those arise or accrue.
The remittance basis is an alternative tax treatment available to people who are resident in the UK and who are either:
• not domiciled in the UK, or
• not ordinarily resident in the UK.
The remittance basis is relevant only if you have foreign income and/or gains.
If you are eligible and choose this method of taxation, you will be liable to UK tax on all your income in the UK but you will be subject to UK tax on your foreign income and/or profits if you bring them in the UK.
If your unremitted foreign income and/or gains arising or accruing in the tax year are less than £2,000 you can use the remittance basis without having to make a claim or complete a Self Assessment tax return.
If you decide to apply the "remittance basis" and have been a long-term resident in the UK, you may have to pay the RBC (Remittance Basis Charge) of £30,000.
« Arising Basis »
If you are resident in the UK, you will normally be imposed on the "arising basis". This means that you will pay taxes on your worldwide income, which includes:
§ your income earned in the United Kingdom,
§ and income earned outside the United Kingdom,
§ and accumulated gains on the sale of your worldwide assets.
Taxation – Key figures
The income tax rates are as follows:
§ 20% between £8,105 and £34,370,
§ 40% between £34,371 and £150,000,
§ 50% above £150,000.
Corporate tax rates are as follows:
§ 20% up to £300,000 profits,
§ 24% above £1.5 million profit.
§ a "marginal relief" applies between £300,000 and £1,500,000.
Case of a Limited Company
When you are self-employed, it is sometimes useful to set up a "Limited Company". The formalities of incorporation are relatively simple; the structure that can be created in three hours and with a capital of £1 only.
The Company may decide to transfer profits to the shareholder who is in most cases is the director. As an individual, you can receive a dividend. The tax rate on dividends is 10% up to £ 34,370 but you will receive a tax credit i.e. you will not pay tax. The tax rate is 32.5% (25% in reality because of the tax credit) to £ 150,000 and 42.5% above.
Do you have a piece of advice that you would like to give to our readers in particular?
International taxation is a complex area and I would strongly advise your readers to consult a specialist before making any decision.
What does Euro Accounting specialise in?
Euro Accounting Ltd is an accountancy practice with clients from self-employed and start up companies to multi-million pound turnover companies. The sectors in which Euro Accounting Ltd operates are varied: petrochemicals, food-processing, import-export, etc. and individual clients from all activities: web designers, surgeons, doctors, dentists, artists, etc.
We are specialised in international taxation and taxation for expatriates.