Doing business in the UK: a guide for Hong Kong nationals

We are seeing an increasing number of Hong Kong nationals moving to the UK under the British National (Overseas) visa which supports individuals and their families to come to the UK from Hong Kong. As of May 2021, there had been over 34,000 visa applications.

The UK tax system of self-assessment and the complex rules for non-domiciled persons are quite different to the Hong Kong system where capital gains, dividends, and foreign income are all taxable at 0%. These differences often mean that tax is an important consideration when undertaking such a big move.

Making the move

For those arriving to the UK, they will need to consider their tax residency and the application of the split year rules long before they land in Great Britain. It is possible that an individual who arrives in the UK in September may be treated as UK resident from the April before.

Therefore, it is important to consider any dividends or gains that the person will be using to fund their lifestyle in the UK which are paid before they leave Hong Kong. If the payments are made when the individual is Hong Kong resident only, then they would not be subject to tax in Hong Kong, however those same dividends could be taxable at the additional rate of 38.1% in the UK as a worst-case scenario.

Setting up residency

Determining residency status is complex. Once you’ve established that you are UK tax resident, then you must look to apply the split year cases and review your number of days, occasions, and workdays in the UK to confirm your residency position. The legislation can be complicated, however following the introduction of the Statutory Residence Test in 2013, there is no ambiguity. Individuals could find themselves with an extensive UK tax bill in their year of arrival if they are UK resident earlier than they thought.

At Carpenter Box we are working to start these conversations with clients early in their relocation planning, so we can help mitigate their exposure to significant tax charges in the UK.

Once the residency position has been established, an arriving individual can turn their attention to their domicile status, and the more favourable basis of taxation available to non-domiciled individuals. Depending on the individual’s total income in the UK and Worldwide, the Remittance Basis can be very tax efficient, however the cost of use may not be suitable for everyone.

We can assist in reviewing both methods of taxation and help an individual understand the wider costs associated with the remittance basis so they make use of tax reliefs where they would be beneficial.

Long term plans

Many of the individuals we’ve spoken to are not only bringing their families to the UK, but their businesses. This can create additional reporting requirements and compliance burdens for Hong Kong companies as it is possible for corporate entities to be resident in both the UK and Hong Kong.

Moreover, for the larger corporate groups attention must be given to Transfer Pricing and Profit Fragmentation legislation. A transaction undertaken freely in Hong Kong may be subject to additional charges, and penalties if not reported correctly in the UK.

Doing business in the UK webinar

On 28 September, Carpenter Box were pleased to present to clients and contacts of our PrimeGlobal Hong Kong member firm, Cheng & Cheng Taxation Service Limited, on doing business in the UK.

In the webinar, Carpenter Box Partners Tony Summers, Anthony Davies and Dan Hobbs discussed:

• Benefits of doing business in the UK
• Options for business structures and their benefits
• Corporate tax considerations and tax reliefs available
• Post Brexit considerations

How we can help

In comparison to Hong Kong, the UK personal and corporate tax reporting can seem like a minefield. Carpenter Box are well placed to assist any person or business arriving to or departing from the UK to ensure they are complaint and taking advantage of all the tax reliefs available to them.

If you would like any assistance or further information, please contact a member of our International team on 01293 227670.