For British National (Overseas) card holders from Hong Kong who want to become UK tax residents, non-domiciled tax status is an important thing to think about. You are a non-dom if you live in the UK but were born outside of the country, your main home is not in the UK, and you have no plans to stay in the UK forever or indefinitely. If you properly claim and keep up your non-dom status, it can give you big tax breaks in the UK. This piece will talk about BNOs from Hong Kong who don’t live in Hong Kong and their non-domiciled tax returns and tax planning options.
Claim Non-Domiciled Status: A non domiciled tax return BNO Hong Kong lets a person who lives in Hong Kong and pays taxes in the UK be charged on the remittance basis. This means that the non-dom BNO is only taxed on gains and income from outside the UK that are sent to or taken into the UK. Foreign income and gains that are kept and held abroad, outside of the UK, are not taxed in the UK until they are sent back.
A Hong Kong BNO must fill out the new Residence, Remittance Basis, etc. page of the UK tax return in order to claim non-dom tax status. The old self-assessment Form R38 has been replaced by this page. BNOs must also fill out the extra pages about residence, remittance base, etc., which ask for information about all of their foreign gains and income. Any statements made under the Requirement to Correct (RTC) law should match up with the supporting schedules.
Keeping your non-domiciled status: business non-residents (BNOs) from Hong Kong can get tax breaks for up to 15 straight UK tax years if they file non-domiciled tax returns. This is called the “15-year clock.” You can turn the clock back by not being in the UK for a full tax year. If a BNO wants to keep their non-dom status for a long time, they should talk to UK tax experts about how to set up their accounts.
Making Tax-Free Remittances: By sending as much money as possible tax-free during their first 15 UK tax years, BNOs can lower the amount of tax they have to pay in the UK. This could mean paying off savings and investments made outside of the UK and sending the money back to the UK. By using exempt property trusts and companies, you can send more foreign income and gains without having to pay taxes on them.
Rule of the Statutory Residence Test (SRT): BNOs should also pay close attention to the SRT rules when they fill out their UK non-domiciled tax return. Based on things like days spent in the UK and work ties to the UK, the SRT figures out who is tax resident in the UK.
Each tax year, you must meet the SRT requirements in order to claim non-dom status. To keep their non-domiciled position, BNOs must constantly keep an eye on and manage their activities in both the UK and Hong Kong.
Tax on Foreign Income and Gains Sent Back to the UK: Non-dom BNOs only pay UK tax on foreign income and gains sent back to the UK, but the amounts sent are taxed at the full UK rate. Earnings sent back to the UK are taxed as work income in the UK. Sending investment income or rental profits to the UK will be taxed as investment income or renting profits in the UK.
Capital gains that are sent to the UK are taxed as capital gains. You can’t use losses on assets sent back to the UK to offset gains or income in the UK. This lack of loss relief is something that should be thought about when investing overseas.
After 7 years of claiming the remittance base, BNOs have to pay an extra RBC tax charge on their income and gains that they haven’t sent back to the RBC. In the eighth year, the RBC is charged £30,000 to use the remittance base. In the ninth year, it is charged £60,000, and in the tenth year and beyond, it is charged £90,000.
The RBC charge rate goes up to £60,000 for high net worth BNOs in the 12th year and every year after that when they claim the remittance base. The remittance base can be claimed for an unlimited amount of time by BNOs who pay the RBC, not just the first 15 tax years.
How to Plan Your Taxes for Non-Domiciled BNOs:
BNOs from Hong Kong who want to claim non-domiciled status in the UK must carefully plan their taxes. Some strategies are:
Putting assets from outside the UK into excluded property trusts before moving to the UK to avoid paying taxes on them
Making the most of tax-free transfers in the beginning of UK tax years
Watching days in the UK to make sure SRT rules are followed
Leaving the UK for full tax years to start over after 15 years
Trying to decide if they want to pay RBC to extend the remittance base for another 15 tax years
Sending only certain amounts to reduce UK tax risk
Setting up investments and funds to separate gains and income by date of expected payment
If you want to make sure your tax planning is legal and effective, you should talk to a professional foreign tax advisor. If qualified non-domiciled British Nationals (Overseas) coming from Hong Kong and take the right steps, they can save a lot of money on UK taxes.
In conclusion
The non-domiciled tax regime gives Hong Kong BNOs who are qualified big tax breaks in the UK. However, claiming and keeping non-dom status takes careful tax planning and following the rules. It is strongly suggested that you work with a professional to help you understand the complicated rules surrounding residence, domicile, and tax-free money transfers. As new non-domiciled tax residents, BNOs can save a lot of money on UK taxes if they set up their businesses correctly.