Moving from Dubai to the UK

Let us consider few pointers specifically relevant to a move from a low tax environment such as Dubai to the UK.

There is now a double tax treaty between the UAE and the UK which entered into force on 25 December 2016 and effects all transaction occurring after 1 January 2017.

The main issue is making the most of the low tax environment to minimise future liabilities in the UK, and if non UK domiciled to establish a bank of clean capital and keep this isolated from any future income.

The main taxes you will have to consider in the short term and income tax and capital gains tax.  Where possible you should look to take any income before you become UK tax resident, this will then be tax free in Dubai and become clean capital when you move to the UK,.

Capital gains are also an issue, you should look to realise any before you become UK tax resident for the same reasons as income tax but also remember that you will be liable to tax on the gain accrued over the whole time you have owned the asset not just the gain arising from the date you became UK tax resident,

To take advantage of the low tax rate on assets you want to retain could mean rebasing the asset in some way by doing this you will increase the base cost of the asset to remove any gain accrued while in Dubai or elsewhere and thus will only be taxed on the gain arising following your move to the UK.

If you are leaving employment in Dubai you will be entitled to a severance payment based on the number of years you have worked for a company, sometimes these payments can be delayed and paid after you have left Dubai, in this case it would not be taxable in the UK even if it was received while UK tax resident as it was earned during your time of non-residence.

For the Non UK domiciled individuals once you have established the amount of your clean capital you need to take steps to protect this, the account containing this capital should be ring fenced and nothing should be added to it, as if it is the fund becomes a mixed fund and then if any funds are remitted to the UK there are rules which determine which funds are remitted first and as you can imagine they favour the UK tax authorities by saying that the income element is remitted before the clean capital.

If you are thinking about coming to the UK in the future you may wish to prepare by using tax efficient investments, one such investment could be a portfolio bond, from a tax perspective this can become very efficient as income and gains roll up within the bond free of tax and you are able to take 5% of the original investment each year tax free, these 5%’s also accumulate so if take nothing in year one you can take 10% say in year two and so on.  A further advantage is that when you do take income from the bond the amount taxed is reduced by the amount of time the bond was held before you became UK tax resident for example if you held the bond for 10 years and for five of these years you were resident in Dubai only 50% of the income would be taxed.  This applies from the date the bond is taken out, so if more capital is added later the calculation is done form the initial date of the bond not the date it was added.

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