Today 's money tip comes courtesy of the Schmidt Report website, as quoted in Moneyweek magazine, and highlights a useful tax loophole open to people planning on emigrating.
Temporary non-residence is when someone introduce 'a gap between emigrating from one country and becoming resident in another'.' To illustrate the point Moneyweek gives the example of a US resident (soon to be non-resident) who has decided to emigrate and become a resident in the UK.
The US tax year runs from 1st January to 31st December while the UK's runs from 6th April to 5th April. Normally if, for example, you sell an asset with a substantial capital gain you would pay tax on the gain in the country where you are a resident, at the time, for tax purposes.
However, if the emigrant in question had a large asset they wished to sell they may be able to avoid paying tax by selling the asset while they were temporary non-resident. They could achieve this by leaving the US at the end of their tax year (31st December 2010) and take an extended holiday, during which they could sell the asset, and then take up UK residency after 5th April 2011.
From a tax perspective they will not have been resident anywhere for the 3 month period in which the asset was sold. Hence they will not have triggered what ''would otherwise been a substantial taxable event''. So avoiding a huge potential tax bill. The beauty of the temporary non-residency loophole is that it can be used to mitigate a host of taxes and not just capital gains tax.
(Image: Tim Beach / FreeDigitalPhotos.net)
Looking for a financial adviser near you?
Do you need financial advice? An independent financial adviser can show you how to make the most
of your money. Find your nearest qualified and regulated adviser using this VouchedFor search tool.