Limit on income tax liability of non-residents

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Limit on income tax liability of non-residents
  • Overview
  • Limited income tax liability
  • Normal rules for the calculation of the income tax liability of non-residents
  • Comparative calculations
  • Interaction with the temporary non-residence rules

This guidance note covers the statutory rules that limit the income tax liability of non-resident individuals. For details of when an individual is considered to be non-resident in the UK, see the Determining residence status (2013/14 onwards) guidance note.

This guidance note considers the income tax position of non-residents. For the capital gains tax position, see the Capital gains tax charge on UK residential property owned by non-residents and Capital gains tax on leaving the UK guidance notes and Simon’s Taxes C1.602 (subscription sensitive).

Overview

Non-resident individuals with UK source income can either:

  • be taxed on UK source income under the normal rules. If so, they are entitled to a personal allowance (so long as they are resident in a territory covered by ITA 2007, s 56, see the Personal allowance guidance note), or
  • use the rules on limiting UK tax liability in ITA 2007, ss 811–828 (referred to as the ‘special rules’ in this guidance note), but under these rules, they cannot benefit from the personal allowance, blind person’s allowance or the married couple’s allowance. Note also that these rules are subject to anti-avoidance provisions in relation to temporary non-residence, as discussed at the end of this guidance note

The non-resident can choose which rules to use. In order to make this choice it may be necessary to prepare comparative calculations.

There is no need to decide in advance of the tax year and no claim is required. If the non-resident is required to complete a Tax Return, this is prepared under whichever provisions provide the best outcome. If the non-resident uses the special rules, it is a good idea to include a note in the white space stating that the Return has been prepared under these rules.

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