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December 2, 2020

Tier 1 Investor Visa and How non-domicile status works in the UK

In order to qualify for a tier 1 investor visa the applicant must have a minimum of £2,000,000 or more available to invest in the UK. To remain eligible to remain in the UK the funds must be invested at all times in qualifying investments.

Qualifying investments for Tier 1 Investor Visa, include:

  • UK Government Bonds, if invested before 29th March 2019 under the “Old Rules”. For anyone falling under the scope of the Old Rules, you can only rely upon those investments in government bonds for extension applications made before 5th April 2023 and for indefinite leave to remain applications before 5th April 2025.
  • Share or loan capital (e.g. corporate bonds) in active and trading companies registered in the UK, other than those primarily engaged in property investment, property management or property development.
  • Pooled investments which receive funding from the UK government, a government department or one of its agencies.

Generally speaking, providing the company is registered in the UK, is listed on a UK stock exchange and is not taking part in any non-qualifying activities, the Home Office is likely to take a view that it meets these requirements.

Non-qualifying investments, include:

  • Funds which have been invested via an offshore trust or company
  • Any investments in open-ended investment companies, investment trust companies or pooled investments (unless they receive UK governmental funding). This is because the underlying investments are not guaranteed to be within the UK
  • Funds which are invested in companies with their main activity in property. Whether that is property investment, development, or management. This includes any returns via rental income.
  • The funds cannot be invested by using bank or building society deposits or any enterprise whose fundamental business model includes the acceptance of deposits
  • ISAs, premium bonds and savings certificates issued by NS&I (National Savings and Investments).
  • UK visa and immigration will not approve any application that relies upon leveraged investment funds because they will not accept these are the Tier 1 investor’s own funds.

How non-domicile status works in the UK

Domicile is an important factor when determining an individual’s tax status. The term non-domicile describes someone who for tax purposes lives outside the UK.

What is a domicile?

The term domicile carries a legal definition which allows it to be used in a tax context. When someone is born, they automatically acquire a domicile of origin. You can only ever have one domicile at any one time, although it can change over time. There are two other types of domicile, these are: dependency and choice.

You do not have to completely sever ties with the previous place you were domiciled and you may still own a passport and continue to be a citizen whilst being domiciled in another country. However, your choice not to do so may be used to determine whether you have in fact, settled in a new country and indeed changed domicile.

The potential advantages of a non-domicile tax status

If you are not identified as a deemed domicile in the UK, there are several tax advantages, including:

Remittance basis

If you have foreign income or gains amounting to £2,000 or less that has not been brought into the UK, it is not contingent for tax to be paid on this amount or state it in your tax return. But if your foreign income is over £2,000, tax is payable and the amount must be given within the tax return.

Under the remittance basis, income and gains only incur UK tax if they are brought into the UK. When making a claim under this basis, you will lose certain personal allowances and exemptions and if you have been resident in the UK for several years, using the remittance basis incurs an annual charge.

Foreign workers exemption

In cases where you work both in the UK and overseas, you may be eligible for this exemption, providing:

  • Income from working overseas amounts to £10,000 or less
  • Any foreign income aside from the above figure, amounts to less than £100
  • Your overseas income was taxed in the country it was earned, regardless of whether any tax was due
  • Income from working in the UK and overseas cannot exceed the income tax basic rate

Overseas workday relief

If you have been seconded to work within the UK, you may be eligible for this relief under the following conditions:

  • The employment is carried out either partly or entirely overseas
  • You have made a claim under the remittance basis
  • Any resulting income is not brought to the UK (e.g. transferred into a bank account)

You can claim this relief in the first three years of UK tax residence, providing you were not resident in the UK during the three years prior.

Excluded Property

Excluded property includes, but is not limited to:

  • Overseas assets held in trust
  • Foreign currency bank accounts managed in the UK by non-UK residents
  • Holdings in open-ended investment companies
  • Holdings in authorised unit trusts
  • Exempt UK government securities
  • Works of art in the UK on public display, or taken down for cleaning and restoration

There can be numerous advantages to gaining a non-domicile status from tax exemptions and relief to protection from inheritance tax. But it is also an extremely complex area so it is essential you remain informed on your personal domicile status and how it is likely to impact upon your personal situation.

LONDON IMMIGRATION ADVISERS – Tier 1 Investor Visa

Mann’s Solutions is international immigration law firm with offices in London, Hong Kong and Moscow and has expertise in offering UK Visas and Immigration by Investment services to high net worth individuals. Our immigration advisers regulated by OISC.

For further information or to discuss your personal circumstances in a private consultation with our immigration advisers in London Office, please contact us at enquiries@manns-solutions.com or call +44 207 993 63 46.