Why is UK non-Dom residence not more popular?

[JustAnotherNomad]

We always read about residency in Malta or Cyprus for EU citizens.
Malta has a remittance-based tax system like the UK and there is an effective corporate income tax of 5% as well as a minimum personal income tax of €5000 or so. Plus fees for accounting. It’s not really cheap. Also in theory, you have to spend 183 days per year on the island.
Cyprus might be a little cheaper and you only have to spend 60 days per year on the island to become tax resident.

But with the UK non-dom scheme, no complex structure is needed. You could probably do the accounting yourself. I would assume that you need to remit some money to cover rent and other living expenses, but thanks to deductions, the tax to be paid should either be zero or extremely low. To be considered tax resident, you simply have to rent an apartment and spend at least 30 days there per year, half of what Cyprus requires.
As of now, EU citizens can still easily become UK residents. And finally, the UK has a much better reputation than Cyprus or Malta.
So why isn’t that option more popular?

 

[Jmeery1]

We always read about residency in Malta or Cyprus for EU citizens.
Malta has a remittance-based tax system like the UK and there is an effective corporate income tax of 5% as well as a minimum personal income tax of €5000 or so. Plus fees for accounting. It’s not really cheap. Also in theory, you have to spend 183 days per year on the island.
Cyprus might be a little cheaper and you only have to spend 60 days per year on the island to become tax resident.

But with the UK non-dom scheme, no complex structure is needed. You could probably do the accounting yourself. I would assume that you need to remit some money to cover rent and other living expenses, but thanks to deductions, the tax to be paid should either be zero or extremely low. To be considered tax resident, you simply have to rent an apartment and spend at least 30 days there per year, half of what Cyprus requires.
As of now, EU citizens can still easily become UK residents. And finally, the UK has a much better reputation than Cyprus or Malta.
So why isn’t that option more popular?

Anything you remit into the UK once you have moved there is heavily taxed, as I understand it (although if you are operating a business there you could benefit from deductions).

You need to be very diligent with your bank accounts to segregate pre-arrival funds, post-arrival income, post arrival dividends, and post arrival capital gains. Essentially anything post-arrival needs to stay outside of the UK and can't be spent in the UK. Even earning interest post-arrival on your pre-arrival funds can mess you up.

Personally I would say you would be crazy not to pay an accountant, unless you are only talking about a very small sum (in which case, why bother with the difficulties of non-dom residence anyway).

 

[Konstanz]

Anything you remit into the UK once you have moved there is heavily taxed, as I understand it (although if you are operating a business there you could benefit from deductions).

You need to be very diligent with your bank accounts to segregate pre-arrival funds, post-arrival income, post arrival dividends, and post arrival capital gains. Essentially anything post-arrival needs to stay outside of the UK and can't be spent in the UK. Even earning interest post-arrival on your pre-arrival funds can mess you up.

Personally I would say you would be crazy not to pay an accountant, unless you are only talking about a very small sum (in which case, why bother with the difficulties of non-dom residence anyway).

But in general, if you stay out of the UK most of the time and spend money out of the UK from a non-UK account , you are not taxed in UK?

 

[JustAnotherNomad]

Sorry, I think I was a bit unclear. I was thinking of the UK as an alternative to the typical 60-day non-dom Cyprus residency.
I believe many people stay in Cyprus for 60 days and then either travel the rest of the year or live elsewhere under the radar.
If that’s what you want, wouldn’t the UK be even better? You could rent an apartment in some shitty area where rent is low, then spend 30 days in London in an AirBnB or hotel and be a proper UK tax resident. As you would only remit the bare minimum to the UK, there should hardly be any tax. And you don’t raise any eyebrows opening bank accounts, which you certainly would as a Panama resident - and probably even as a resident of Malta or Cyprus.
Unless I missed a major catch, I just don’t see why such a setup isn’t more popular.

Yes, it only works for free for 7 years or so. But even after that, you only have to pay £30k/60k in taxes to keep the non-dom status for a few more years. And that money is actually tax credit. So if you pay the £30k in taxes, you can actually remit and spend £150k or so. It really doesn’t sound that bad. And you’d even be covered by the NHS.

I for one probably still wouldn’t want to live in the UK for 30 days, but 30 days in the UK definitely seem more appealing than 60 days in Cyprus.

 

[Jmeery1]

I think that would work, if all you wanted was a Tax residence for banking etc.

Remembering that being tax resident in one country doesn't preclude you from being taxed in another though. Some countries (like Australia) say that if you don't have any place where you are "ordinarily resident" then the default is you are resident in your country of citizenship. If they found out that you were merely renting a place but not living there they would disregard it. How could they find out? Flights, credit card statements, location of cash withdrawals, maybe they could ask for your phone records.

Probably depends how much tax is at stake and if it would be worth their trouble to disprove your story.

But assuming your ties with your home country are sufficiently broken, and they aren't likely to dig into your whereabouts, I expect the UK would probably work.

 

[JustAnotherNomad]

Yes, I’m aware of that. But that’s exactly why I don’t understand why the UK isn’t more popular. Cyprus residency with 60 days is really popular, but UK residency with 30 days isn’t? Why not?

Also while I don’t know the Australian rules, you would be ordinarily resident. You are renting a home for the whole year and you spend 30+ days in the UK. The UK rules clearly define you as tax resident and I’m sure that the Australia-UK tax treaty wouldn’t override that - unless of course you still have other to Australia than your citizenship.

 

[Jmeery1]

Renting a home alone would not be enough for Australia to say you were "ordinarily resident". Merely renting a place is one tie but wouldn't be conclusive. They would look at where you spend most of your time, where your belongings are, etc. If you spent more time elsewhere they may argue you were nomadic and therefore should be taxed as an Australian resident. The treaty wouldnt protect you, it would just mean you pay the higher amount of tax out of the UK and Australia.

My point is, for some strict countries, you can get a tax residency elsewhere, but that alone is not enough to preclude them from taxing you.

The issue here is more how your country treats perpetual travelers / nomads, than whether the UK would give you a tax ID and non-dom status (they will happily I'm sure). So if all you need is a tax ID UK will do the job. But if you don't want to be taxed in your home country, it depends how hard it is to break the ties and show you are actually truly living somewhere else now.

 

[Martin Everson]

But that’s exactly why I don’t understand why the UK isn’t more popular.

UK non-dom scheme is COMPLEX to benefit from it. I have been through it and brought many others too. I have discussed it in other threads before also. If you don't know what your doing and can't separate capital from capital gains and income then it's not for you. Plus poor people who move to UK for a 9-5 jobs wont derive benefit from it. It tends to be millionaires with multiple forms of offshore income and good accountants that utilize it. Basically there is more working class foreigners moving to UK then rich folk so its not that popular .

 

[Jmeery1]

Agree. The other reason I think Cyprus and Malta are more popular is that they offer easier residence programs to attract non-EU residents and have lower company tax rates available to people actually residing there as well. So it's probably an option for a lot more people.

 

[JustAnotherNomad]

@Jmeery1
Yes, of course. But if what you say is correct (and I don’t doubt it), then I think Australia clearly is an outlier. That would be close to the rules for US citizens. Few countries are so strict. And it certainly wouldn’t make any difference compared to Cyprus 60-day residency.

@Martin Everson
Ok, maybe I was overly optimistic with regards to the tax filing thing. But you would certainly need an accountant for Cyprus or Malta as well. I can’t imagine it would be that hard for a professional to set up the UK scheme?

 

[Martin Everson]

Ok, maybe I was overly optimistic with regards to the tax filing thing. But you would certainly need an accountant for Cyprus or Malta as well. I can’t imagine it would be that hard for a professional to set up the UK scheme?

For even a pleb to claim UK non-dom it is easy and can be done during any tax filing. The issue where it gets complex is complying with the non-dom rules. Have a read of what I wrote here for example:

https://www.offshorecorptalk.com/th...e-brokers-and-banks-account.29441/post-132679
https://www.offshorecorptalk.com/threads/newbie-crs-questions-uk.25480/post-93100

 

[Jmeery1]

Agree, UK is not gonna be any worse than doing 60 days in Cyprus.

Re the accounting bit, this link explains the complexity pretty well: Clean Capital planning

It's pretty easy to mess it up so I would make sure you get an accountant with experience in non-dom.

I think the most important bit is the initial banking setup. Essentially you want to have a UK bank account that you will never need to add any further funds to and it pays for everything you do in the UK for the next few years. Anything new you earn stays outside the UK, try not to earn anything inside the UK. I heard there are UK bank accounts specifically for non-doms so I'd look into that too.

 

[Martin Everson]

Re the accounting bit, this link explains the complexity pretty well: Clean Capital planning

It's pretty easy to mess it up so I would make sure you get an accountant with experience in non-dom.

That's what I advised user here .

https://www.offshorecorptalk.com/th...e-brokers-and-banks-account.29441/post-132679
It's no joke. I gave example of client who made a non-dom mistake below

https://www.offshorecorptalk.com/threads/newbie-crs-questions-uk.25480/post-93100

 

[JustAnotherNomad]

Hmmm, I see. It’s a fair bit more complex then.
Funny that Malta has the same system in theory, but everything seems so much more relaxed.

 

[Martin Everson]

Funny that Malta has the same system in theory, but everything seems so much more relaxed.

Very true. A lot of countries have a lot more relaxed approach than UK.