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A Tax Guide for Hong Kong Residents Moving to the UK

A Tax Guide for Hong Kong Residents Moving to the UK

It is imperative that Hong Kongers seeking to relocate or invest in the UK ensure that they have a clear understanding of the UK tax system and seek pre-arrival tax planning advice. Income tax rates are generally much higher in the UK than in Hong Kong, and the UK also levies tax on capital gains and inheritance.

However, depending on eligibility, the UK permits non-UK individuals to benefit from a favourable tax regime while resident in the UK.

The UK’s tax system for individuals hinges on two crucial concepts: residence and domicile. These factors determine an individual’s liability to UK taxes, and they are distinct from immigration status.

To discuss the 'Residence' aspect of this tax guide for Hong Kong residents moving to the UK, an image of St Paul's Cathedral in London can be seen. The photo is taken from the other end of the Millennium Bridge, and a rainbow can be seen in the background, encircling the cathedral.

RESIDENCE

An individual’s UK tax residency status is determined by the UK’s Statutory Residence Test, taking into account factors such as:

  • The number of days spent in the UK
  • Ownership of a home in the UK
  • Employment inside or outside the UK
  • Presence of UK-resident close family members
  • Previous days spent in the UK in prior tax years

Non-resident individuals generally face limited UK tax liability, primarily related to UK-source income, such as earnings from UK properties, as well as capital gains on specific categories of assets.

Becoming a UK tax resident significantly expands this tax exposure to a global level; it is, therefore, crucial to plan carefully and far in advance to avoid inadvertently becoming a UK tax resident or becoming a UK tax resident having already put in place measures for UK tax optimisation for your global assets.

To refer to the 'Domicile' section of this tax guide for Hong Kong residents moving to the UK, a row of Kensington & Chelsea Edwardian style townhouses can be seen. It is a light and bright day, and there are red flowers on the gates and Juliette balconies.

DOMICILE

Domicile, an English common law concept, centres on the place of an individual’s permanent home. A status generally inherited from one’s father at birth, domicile may change if a person relocates to a new jurisdiction with the intention to reside permanently/indefinitely. UK tax rules also deem individuals domiciled in the UK under specific circumstances, notably for long-term residents.

Domicile plays a vital role in UK taxation because:

  • Non-UK domiciled individuals who are resident in the UK can claim the remittance basis of taxation for non-UK income and capital gains and
  • Non-UK domiciled individuals are subject to inheritance tax only on UK-situated assets and certain offshore assets linked to UK residential property.

With longer-term residents of the UK, there is merit in building up evidence that they have not acquired a domicile of choice in the UK. Nevertheless, the UK tax authorities (His Majesty’s Revenue and Customs) may challenge domicile claims.

As Hong Kongers who relocate to the UK under the BNO visa program do so with the intention to settle in the UK indefinitely, their worldwide income and gains could be brought into the scope of UK taxation, including UK inheritance tax, highlighting the need for such individuals to obtain advice as soon as possible before they intend to come to the UK or shortly after.

To refer to the pre-arrival tax planning section of this tax guide for Hong Kong residents moving to the UK, this photo is an image of the UK Home Office building. The logo can be seen, alongside some of the stone of the building.

PRE-ARRIVAL PLANNING

Pre-arrival planning aims to arrange assets tax-efficiently in relation to their UK residence, including:

  • Segregating accounts and creating a pool of funds for UK use without tax consequences, known as ‘clean capital’;
  • Reviewing investments, trusts, and company holdings from a UK tax perspective; and
  • Considering the tax benefits of the remittance basis of taxation for the first 15 tax years of UK residence.
To refer to the 'remittance basis' section of this tax guide for Hong Kong residents, an image of a mother and child walking past a glass window at an airport can be seen. On the left-hand side, the background is that of an airport, with aeroplanes. On the right hand side, the background shows the London cityscape.

THE REMITTANCE BASIS

By default, UK residents are taxed on worldwide income and capital gains, known as the arising basis. However, UK resident non-UK domiciled individuals can elect to be taxed on the ‘remittance basis’. This means that such individuals are taxed on UK source income and gains as they arise, but non-UK source income and gains remain untaxed, unless remitted or brought back to the UK.

Under current rules, the remittance basis can be claimed for no charge during the first seven out of nine years of UK residence, making the UK an attractive destination in comparison to other jurisdictions. After this time, a charge applies, starting at £30,000 and increasing to £60,000. The remittance basis cannot be claimed after 15 out of 20 years of residence.

To refer to the 'property' section of this tax guide, an image of a country house can be seen. In the foreground, a white posted sign can be seen. A red sign hangs from it, with the text 'Stamp Duty Land Tax' on it.

PROPERTY

For most individuals moving to the UK, purchasing a family home is a significant investment. Tax implications, as well as funding methods, should be carefully considered. Stamp duty land tax (SDLT) applies to property purchases in England and Northern Ireland, with higher rates for non-UK residents and additional rates applying for those who already own property worldwide. Seeking advice is crucial to navigating SDLT and other potential taxes related to property acquisition.

CONCLUSION

Relocating to the UK is a monumental decision with potentially far-reaching tax implications. The UK’s favourable tax regime, especially for non-UK domiciled individuals, presents a wealth of opportunities.

However, to ensure the most favourable tax outcomes, it is essential to seek expert advice and plan strategically, both before and after arriving in the UK. Whether you are considering the BNO visa route or other immigration options, understanding and optimising your tax position can significantly enhance your financial prospects in the UK.

To discuss any of the points raised in this article, please contact Ben Rosen or fill out the form below.

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Immigration Guide for Hong Kong Residents Relocating to the UK

Immigration Guide for Hong Kong Residents Relocating to the UK

The UK immigration system has undergone recent changes, and it is important to stay informed to ensure compliance and maintain your property ownership rights. This guide will provide you with a brief overview of the key visa options for individuals from Hong Kong, to consider.

The image reflects the two immigration pathways for Hong Kongers. One is a more touristy image of a man taking a selfie in front of Tower Bridge to show the short term pathway. The right hand side shows moving boxes, representing the long term pathway.
SHORT TERMLONG TERM
Currently Hong Kongers do not require a visa to enter the UK for short-term stays for purposes such as tourism, leisure or business. However, the UK electronic travel authorisation (ETA) for Hong Kong travellers will become a mandatory requirement in late 2024, when the official launch is expected.Hong Kongers who plan on visiting the UK for the long term or with the intention to settle in the UK will need a visa specific to their needs.The well-known BN(O) visa route is clearly very attractive but there are still many other immigration options available for Hong Kongers who are not eligible or who do not wish to apply under the BN(O) visa route.

IS THERE A ‘6-MONTH IN 12 MONTHS’ (OR 180 DAY A YEAR) RULES?

This is the most common immigration myth, and you may be pleased to know that there is actually no such rule. There is no specified maximum period in the immigration rules that an individual can spend in the UK as long as each visit does not exceed the maximum period for that visit, normally 6 months. However, if it is clear from your travel history that you are seeking to remain in the UK for extended periods or making the UK your home, the entry to the UK will be refused. This is because longer periods of stay in the UK comes with a rebuttable presumption of ‘non-genuine visit’. Nevertheless, spending over 183 days in the UK in any tax year may trigger UK tax residency.

ARE YOU AN INNOVATIVE ENTREPRENEUR?

Innovator Founder visa opened in April 2023, designed for individuals who wish to set up and run a UK-based enterprise, without the need to show any initial capital to invest in the business and allowing you to take employment alongside running your own business. A key requirement is that you must be endorsed by a Home Office approved endorsing body who will then assess your business in the aspects of innovation, viability, and scalability. Therefore, a meticulously researched and well-structured business plan is crucial for the application and we, Quastels LLP, has a track record of securing endorsements for game-changing ventures, like a recent beverage company leveraging the metaverse and NFT tech.

DO YOU HAVE A JOB OFFER FROM A UK BUSINESS OR WORK CLOSELY WITH A UK-BASED BUSINESS PARTNER?

The UK’s main work visa route is called Skilled Worker visa, which is under a sponsorship system. This means you cannot simply apply for this visa unaided and securing a job offer from a UK business is a prerequisite for this visa route.There are currently over 61,153 licence holders in the UK but you may not be aware that any UK employer who is a legitimate business trading in the UK is eligible to apply for a sponsor licence, including a one-person business. Therefore, although the Register of licenced sponsors list is an extremely helpful tool to look for visa sponsorship, don’t limit yourself to any possibility.

IS YOUR COMPANY LOOKING TO EXPAND TO THE UK?

Global Business Mobility visa provides five pathways for overseas firms to establish a UK footprint or transfer staff to the UK. If you own or are employed by an overseas company, this visa allows you to enter and work in the UK as a representative of your company, then potentially be sponsored by the UK establishment and switch into the above-mentioned Skilled Worker route.

ARE YOU A TALENTED AND PROMISING INDIVIDUAL?

Global Talent visa is one of the most interesting types of visas as it covers a wide range of industries such as science, research, engineering, humanities, social science, medicine, architecture, digital technology, arts and culture, fashion, film, and television.

The most complex part of the process is to get endorsed by a Home Office approved endorsing body who will assess your career history including your international standing, the significance of your work and the impact of your activity in a company or as an individual. Each endorsing body has very different criteria and so it is crucial that you thoroughly read and understand their specific assessment criteria.

ARE YOU AGED 18 TO 30?

Youth Mobility Scheme visa is designed to enable people aged 18-30 to live and work in the UK for two years. It is straightforward to apply for, however, you should be aware that there is a cap of 1,000 places for Hong Konger and you must be selected in the ballot, which is typically opened in January and July each year.

ARE YOU A GRADUATE OF CHINESE UNIVERSITY OF HONG KONG OR UNIVERSITY OF HONG KONG IN THE LAST 5 YEARS?

High Potential Individual visa allows recent graduates of a top global university to live and work in the UK without any sponsorship for two years (or 3 years for PhD or other doctoral qualification), which means you will not be tied to a particular job, you can be employed or self-employed.

ARE YOU LOOKING TO JOIN AN INTERNSHIP PROGRAMME IN THE UK?

Government Authorised Exchange visa is for individuals who want to come to the UK for a short time for work experience for up to 12 months or to do training, research or an Overseas Government Language Programme for up to 24 months.

FINALLY…

Owning to the UK’s colonial history with Hong Kong, you may want to explore whether you have a claim to British citizenship under the British Nationality (Hong Kong) Act 1990.

For example, if one of your parents were granted British dependent territories citizenship by the Hong Kong government between January 1983 and June 1997, amongst other ways to potentially qualify through a British parent, ancestor or colonial connection.

CONCLUSION

Changes to the Immigration Rules in recent years have created many new opportunities for people to relocate to the UK.

However, navigating the UK visa system can be complex and the Immigration Rules contain strict requirements.

Consulting with an experienced immigration lawyer at Quastels LLP is crucial to ensure you understand the most appropriate visa options and comply with all legal requirements. Our team is here to guide you through the process and provide tailored advice based on your unique circumstances.

To discuss any of the points raised in this article, please contact Cheryl Ma or fill in the form below.

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