Limit on income tax liability of non-residents

Produced by Tolley
Limit on income tax liability of non-residents

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

  • Limit on income tax liability of non-residents
  • Overview
  • Interaction with split year rules
  • Limited income tax liability
  • Disregarded income for the purposes of the limit
  • Disregarded savings and investment income
  • UK income tax limit on disregarded income
  • Income tax due on non-disregarded UK source income
  • Normal rules for the calculation of the income tax liability of non-residents
  • Comparative calculations
  • More...

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 Non-resident capital gains tax (NRCGT) on UK land ― individuals and UK capital gains tax liability of temporary non-residents guidance notes and Simon’s Taxes C1.602.

Overview

Non-resident individuals with UK source income can either:

  1. 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

  2. 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.

Non-resident companies are also able to limit to their liability to income tax under similar rules. For more details, see Simon’s Taxes D4.122.

As far as non-resident trusts are concerned, the trustees are only able to limit their liability to UK income under

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