Football, Residence and Ordinary Residence
Written by Tina Winter
If you’re interested in football and are sitting a financial services exam, then you may be surprised to know that you’ve been watching some prime examples of residence and ordinary residence (and in addition domicile) in action! Don’t believe me? Then consider the following:
Wayne is resident, ordinarily resident and definitely domiciled in the UK – he definitely lives in the UK this tax year, he has done so on a regular basis, and England is the country he regards as his permanent home.
Mario is resident in the UK in the current tax year (always assuming he turns up for training at the beginning of next season), but he isn’t ordinarily resident just yet (give him a few years) and definitely not UK domiciled as Italy is his spiritual home.
David and his family have been in the USA for a few years now, after spells in Spain and Italy, so he’s been away from the UK over five years. He’s not resident and not ordinarily resident in the UK, but his heart is in the UK so it’s unlikely that he has lost his UK domicile of origin.
Arsene has worked in the UK continuously since 1996 so he is both resident and ordinarily resident in the UK. He’s had 16 years in the UK now and loves it here, he’s even been awarded the OBE – he may not yet have lost his French domicile of origin but in a year’s time when he has spent 17 years in the UK, he will be treated as deemed domicile for Inheritance Tax purposes.
Residence is the status of an individual for a particular tax year – 183 or more days in the UK in a tax year and you are resident for that year.
Ordinary residence means being resident in the UK on a regular basis – you will normally be treated as ordinarily resident from the start of the fifth tax year of residence. If someone is coming to work in the UK for three years or more, they will normally be treated as ordinarily resident from the start of the employment.
Why is this important? For tax of course – and all of these chaps are high earners. The taxes it particularly affects are Income tax and Capital Gains Tax as the tables below show:
Income Tax on Employment earnings
|Residence status||Duties of employment performed wholly or partly in the UK||Duties of employment performed wholly outside the UK|
|In the UK||Outside the UK|
|Resident & ordinarily resident||Liable||Liable||Liable|
|Resident /not ordinarily resident||Liable||Liable / remittance basis||Liable / remittance basis|
|Non-resident||Liable||Not liable||Not liable|
Remittance basis is linked to domicile, which is so important we’ll cover it in its own article.
Capital Gains Tax
|UK domicile||Non UK domicile|
|Resident / ordinarily resident||Liable on worldwide gains||Liable to UK gains and foreign gains remitted to the UK|
|Resident / not ordinarily resident||Liable on worldwide gains||Liable to UK gains and foreign gains remitted to the UK|
|Not resident||Not liable unless a temporary non-resident||Not liable unless a temporary non-resident|
I knew there had to be a way to link football with financial services CII exams!