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. This visa 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. There are a number of differences such as 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 in the UK, they will need to consider their tax residency. In addition, it is important to be aware of 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 a 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 a 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 a UK tax resident, 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 residents earlier than they thought.
At Carpenter Box, we are working to start these conversations with clients early in their relocation planning. 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. This is 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. It is worth noting that the cost of use may not be suitable for everyone.
At Carpenter Box can assist in reviewing both methods of taxation. We can also 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.
How we can help
In comparison to Hong Kong, the UK personal and corporate tax reporting can seem like a minefield. Carpenter Box is well placed to assist any person or business arriving to or departing from the UK to ensure they are compliant and taking advantage of all the tax reliefs available to them.