Immigration to the UK: Preparatory Legal and Tax Steps

Immigration to the UK: Preparatory Legal and Tax Steps

Immigration to the UK: Preparatory Legal and Tax Steps 1800 1136 Hugill & Ip
Reading Time: 38 minutes

Alfred Ip of Hugill & Ip discusses with Julia Jackson and Matthew Braithwaite of Wedlake Bell issues related to immigration. The preparatory steps when applying for resident status in the UK are not only crucial from an immigration point of view, but also in terms of wealth planning.

From income and property tax to inheritance, individuals need expert advice in order to navigate the complexity of legal requirements in the UK.

They also touch upon the recent developments announced by the UK Government regarding rights of BN(O) status holders as a new path along the immigration route.

Show Notes:

03:50 Pre-migration tax planning
10:11 Immigration application and funds transfers
14:05 Impact of UK domicile on tax
19:59 Segregating accounts
23:46 Indefinite leave to remain
26:08 Same-sex marriage, civil partnerships and common law relationships
29:22 Relocation for employment reasons
40:28 Student visas
48:28 UK inheritance tax
52:27 BN(O) status


TRANSCRIPT

Alfred Ip  00:08
Hello, everyone, thank you for tuning in. I’m Alfred Ip of Hugill & Ip Solicitors. Today we have the privilege of having Julia Jackson and Matthew Braithwaite of Wedlake Bell to share with us about the UK, in particular, Hong Kong people moving to the UK. Hello, Julia.

Julia Jackson  00:25
Hi, Alfred, a pleasure to join you this morning.

Matthew Braithwaite  00:27
Hi, Alfred. Good to join you.

Alfred Ip  00:29
Thank you very much for joining me today. Before we begin, perhaps I would ask you to introduce a bit about yourself and your firm.

Julia Jackson  00:39
Alfred, I’m Julia Jackson, and I’m a solicitor at Wedlake Bell here in London. I’ve been specializing in Immigration and Nationality law for over 25 years, advising high net worth individuals, businesspeople and entrepreneurs, as well as their families  on the best routes and the most effective routes to come into the UK.

Matthew Braithwaite  01:01
Thanks, Alfred. Great to be with you today and to collaborate with Julia to demonstrate the issues that any individual who is minded to move to the UK really does need to think about. So, I am a partner in the Private Client team at Wedlake Bell, which is a firm that’s been in existence for over 240 years. So, we really know our stuff with regards to acting for individuals, both in the UK and internationally. I’m a partner in the Private Client team and my practice encompasses both UK and international clients advising on all aspects of their private, legal and also tax affairs. And that includes those individuals who are thinking of and in fact do arrive in the UK for the first time and need to navigate what you will certainly find out during this presentation is the myriad of tax rules, as well as the immigration points, which Julia will touch on.

Alfred Ip  02:09
Thank you. The reason why we invited the two of you is that if I were the person to be moving to the UK, I would definitely come to you guys for help on the immigration aspect and on the planning aspect. And in that respect, perhaps I can bring out the major issue faced by Hong Kong people when they’re considering moving to the UK. The major issues include, first of all, finding a place to live, secondly, finding a job to do, and certainly finding a school for their children. And I believe that in all these respects, the two of you can help. Can I ask, how can you help?

Julia Jackson  02:45
That’s right. Yes, I mean, the first thing to do is to find the right immigration route for the family into the UK. And once we find the right route that gives us the doors to open it in terms of finding schooling, and we can work with partners here on the ground, to find independent schools if that’s the choice that the family want, or we can assist in putting children into state school, and it’s really a matter for the family to decide which is the best kind of schooling for their child. There’s a wide variety of different types of schooling here in the UK, and some really fantastic schools that are used to dealing with international candidates. In terms of property, we often work with property search agents, who will help find the right area in which family will be most happy to live and help them then find the right kind of property for them to live in. We don’t tend to help work, finding roles, employment here in the UK, but certainly in terms of business and getting them into the right job which have been identified, that’s something we can definitely help.

Alfred Ip  03:42
Thank you. And Matt, I was told the UK tax is particularly complicated. Can you give us some idea about how complicated it is?

Matthew Braithwaite  03:50
Yeah, I think it’s one of those things where ultimately, anybody arriving in the UK will be more focused probably on the more immediate concerns about how they arrive in the UK.  But I think where we can add value as a law firm, and have that immigration expertise, is that we know the tax issues at stake, and making clients aware of those as part of that process rather than them becoming at the forefront of what they need to be doing. Because they’ll have their minds concentrated on other issues in terms of actually arriving in the UK. But there are some real subtleties around UK taxation to ensure that there are certain steps that you can take before you arrive and we can point those out to clients to ensure that there are as well as coming in successfully from an immigration perspective that are actually arriving in the most tax efficient way, and navigating all those tax rules as part of that process.

Alfred Ip  04:43
Thank you in that respect, what’s the difference between your services that your firm can offer compared with the services that, for example, an immigration consultant can offer.

Julia Jackson  04:53
I think the benefits of using a full service law firm is that we can make sure that all of the advice that people receive in coming to the UK is harmonized, so that the planning, the tax matches the immigration and so forth, and we can link all those services together with the purchase of the property and the most effective structures here in the UK. Most immigration consultants really just deal with the immigration and the rest is up to individuals to deal with. It’s really having that full level of service and years and years of expertise of doing that.

Alfred Ip  05:24
And Matt, perhaps you can share with us some of your experience in helping families moving to the UK.

Matthew Braithwaite  05:30
Sure. I mean, the main issue really that comes out is preparation. We often see clients who have already gone through the process with Julia, maybe not with Julia herself, but they’ve actually found their way into the UK and they come to us and say, you know, we need some help from a tax and structuring perspective in order to get our affairs in order and you think will actually, probably, you may well be too late to be doing any planning depending on the tax rules and how they impact on them. So, typically, any planning should take place prior to arrival. Because there is a scope really to ensure that you can get your affairs in order to structure bank accounts accordingly, to allocate a sum of money that you know, you can bring to the UK that isn’t going to be subject to tax immediately on remittance into the UK. So, having a degree of foresight is key, I think for clients when they’re coming to the UK, budgeting for perhaps a property purchase, finding and rent, understanding where income sources are going to come from; and potentially budgeting for the purchase of a property as well and understanding, again, all of the other UK tax rules that arise from that; most notably stamp duty land tax, and realizing as well whatever assets they will acquire in the UK, they’re going to come within the realms of potentially inheritance tax as well and possible steps they might want to take to mitigate inheritance tax. If the unforeseeable happens and their estates pass on through death. So, in any one particular scenario, every client’s situation is very different but I think the takeaways really for any client thinking of coming to the UK is really preparation and starting those conversations early to understand that it’s important to take steps before they even come to the UK and then once they’re here to make sure that they manage their affairs in the right way to ensure that they stay within the rules, and they limit their UK tax exposure.

Alfred Ip  07:40
Matt, it definitely sounds very very complicated. And in order to illustrate it, perhaps the best way is to fill it in with a real example. So perhaps you can approach it like this. Let’s say, I am married with two children. I have a small rental property in Hong Kong, but I have a portfolio with my Private Bank. I have a position in my family business and considering moving to the UK with my children, is there anything that I need to look at? To be honest, the first and foremost that I want to hear is, where am I going to put my children to school? How are we going to approach this?

Julia Jackson  08:22
I think the first thing is to look at where you might be happier to be, coming to the UK, and perhaps deal with a school search agent who can give expertise in that location. So obviously, finding a school in Scotland is very different to finding a school in London, although we tend to find that most of our clients are centered in London. And then once you’ve sort of got an idea in mind, it’s really a question of getting the immigration  sorted out because  until  you’ve got the right to come into the UK and live here it’s very difficult to get accepted into schools anyway, so that’s got  to be lined up. And as far as schools are concerned, I think it’s very much like the tax side of things: you can’t start planning early enough.

Alfred Ip  09:02
Understood, it takes time for my children to enroll into school with interview process, applications and all these…

Julia Jackson  09:08
Yeah, and some schools have an admission test that they require students to take. And obviously lining up with thespecific date of admission tests can be important if that’s the type of school. Some schools have a waiting list, and some schools are happy to admit students throughout the school year. It goes on a lot of different factors. But it depends on the type of school that’s going to be right for your child. And of course search agents will help you work that out if you if you need some guidance.

Alfred Ip  09:33
Okay, so the first person I can come to is to you, to advise me on finding my children the school to go to

Julia Jackson  09:41
Yeah and planning that immigration status to make sure, because depending on the immigration status and you’re really probably going to want if the family are moving over you’ve got the option to state school or an independent school if children come here for education then  it will be an independent fee paid school. And so that that will guide the type of school as well.

Alfred Ip  10:02
Okay, that comes to my next question in that case, how can I move on to the UK? What kind of route  are available to me?

Julia Jackson  10:11
Thinking about this family, who’ve  got a significant personal wealth, and  are looking at coming over as a family but perhaps with hand in the business, retaining that hand in the business after relocation in the UK, there are a number of different options. You could look at an Innovator visa  to set up a UK business or possibly even Global Talent, which is for very highly talented people, but I think probably the one that is most relevant and most of interest is the Tier One investor visa. And that is a very attractive visa route for people coming in. It’s open to only over 18s as the main applicant, the person who’s the main applicant must have a personal investment funds  of at least 2 million pounds, that they’re going to be able to move to the UK, and then set up a UK bank account to receive those funds. The funds don’t have to come to the UK until the family get here. But the UK bank account has to be in place for the time of the immigration application. And so when we make that kind of immigration application, we’re demonstrating that the funds are there. We’re demonstrating the provenance of the funds. So whether if they particularly recently arrived, we’d have to say whether they came from the gift or sale of a purchase or from a business or perhaps they might have been sitting in investment funds for some time. So we demonstrate that. There is no requirement to prove any evidence to speak English, that’s a nice one that we think we can tick  off straightaway. But there is a TB test for the main applicant, everybody from Hong Kong needs the TB test. They make the application and then the main applicant, the person who’s going to invest in the UK will get permission to come and live here for three years and four months. But at the same time that we’re making the application for the main investor, we’d also be making applications for the spouse and for the children and they will all have status as the dependents of the main applicant. Now I’m saying very carefully main applicant because we get to decide who’s the main applicant so long as they are over 18. And sometimes it’s most appropriate for that to be the husband in a marriage or sometimes it’s more appropriate to be the wife. It depends on who’s likely to be in the UK most, is usually the primary consideration there. If, for example, in this scenario, the husband is going to be  traveling a lot for business, and it looks like you might be spending more than half a year outside the UK for business or professional travel, I would say we should make the wife the main applicant because then that keeps the right to stay in the UK and the track towards an indefinite right of settled status in the UK open. And that’s something that we have to think about right at the beginning of the process.

Alfred Ip  12:44
But then should I give my wife 2 million pounds in order to make her eligible for investment visa?

Julia Jackson  12:51
Yes, but the funds can be held in joint names at the beginning of the application.

Alfred Ip  12:55
Okay, that makes me more relieved, but generally should I move everything to the UK, or should I just move 2 million?

Julia Jackson  13:06
So, you’re  going to have to move 2 million because although it’s not assessed at the time of the initial application, when you come to extend the status at the end of that three year four month period, you’re going to  have to show that you’ve invested  at least 2 million pounds in UK trading companies and that can be publicly listed companies like Marks & Spencers or BP or it can be your own company or the company of a friend or just whatever venture you’re interested in. There’s a lot of flexibility. The main restriction is to stay away from property companies, companies that derive their income or capital gains from property. And that’s principally to avoid you buying a house, through the, through the vehicle of the company and then living that living in the house. So you’re going to have to demonstrate that you’ve invested at least 2 million pounds in UK trading companies. But beyond that 2 million that has to be invested, I would then pass it to Matt how much is the right amount of money to bring in for that family and the means for bringing it in, when it’s brought in, and how…

Matthew Braithwaite  14:05
So actually even listening to Julia and understanding the process from the immigration side is quite apparent that tax is relevant at every step of the way. So it’s probably worth at this juncture, just to describe the typical broad options that this client might well have, in fact, that client being you, Alfred, upon coming into the UK.  That’s typically being taxed on an arising basis whereby you’re coming to the UK, you’re going to become UK resident; and, by implication, you are resident here for tax purposes, and therefore, any income you earn or gains you receive during any one tax year would be subject to UK tax. And of course, if you’re coming to the UK and you’re thinking about, well, how much do I bring to the UK? That’s one consideration, but actually from an arising taxing basis, actually, it’s all of your assets that will be subject to UK tax and that might not be the most tax efficient solution for you. And in fact, I can probably guarantee it wouldn’t be. So the other option is to be taxed on what we describe as the remittance basis. Now this is open to anybody who is UK resident but non-domiciled. So English law has a quirk that is domiciled and we understand the concept of domicile to be really a combination of residence and intention to permanently reside somewhere or indefinitely reside somewhere. So you may well be resident somewhere but unless you have that intention, and you wouldn’t necessarily be domiciled in the UK, so many people who come here, particularly those from Hong Kong could come here on the basis they were coming here to perhaps school children, for example; they know that they’re wanting to ultimately return to Hong Kong, so, we would argue that they had a Hong Kong domicile but they were UK residents, so we would categorize them as UK resident but non domiciled. On that basis, if you can get yourself into that position, you can claim the remittance basis which means that you’re only subject to UK tax on anything that you’re earning here in the UK or anything that you remit or bring into the UK. So that then leads on to the next point, which is the pre arrival planning, is what we describe, whereby, if you know that whatever you bring into the UK once your UK resident will be subject to UK tax, you’re better off being able to bring in money before you become resident in the UK. So that you know that that money you’re bringing in it could be made up of income and gains from other offshore assets, that you know that that money will not be subject to UK tax in that particular tax year. So, two other points to note here, a UK tax year runs from 6 April one year to 5 April the following. So unhelpfully it doesn’t run in calendar years, which makes life a little bit more complicated. And the other point to bear in mind is people can arrive at different points during a tax year. So, and if you arrive in and we’re talking about schooling, and you want to come to bring your children here for schooling purposes, and that ties in with the next academic year, so we’re looking at September, so you’d want to arrive at some point in August to get settled ready for school, you’re arriving midway through a tax year. And if you arrive midway through a tax year, in that period between 6 April and arrival, you may well have not been resident here during that period. But if you arrive in August, and you stay here for the rest of the tax year, the way that the rules work would mean that you are treated has being tax resident for the entire of the tax year. So any planning you did prior to arriving in August, between April and August, would be treated as if you were UK tax resident already, even though you weren’t. So, part of our job would be to look at the rules, and the other point to bear out here is UK tax resident status is determined by reference to the statutory residence test which was introduced in the UK a number of years ago, but it’s very actively used now about five or so years ago. And we can better determine now how people will become UK resident or how they can become non-resident by reference to a number of different tests. And part of that framework also enables people who are arriving in the UK partway through a tax year to claim what we describe as split year tax treatment. So, you can basically split the tax year into two. So you can say for that period of between 6 April and August, that I was non UK resident, and from the period from August to the throughout the rest of the tax year that I was UK resident, the benefit there being that during that non-resident period, you can do that pre arrival planning; you can allocate that sum of money that you need to bring to the UK, and know that you are not UK resident during that period, so that doesn’t come with any UK tax implications. It’s important to understand what the cases are when you can come within the scope of split year tax treatment. So, understanding the facts around your arrival and what your intentions are is helpful to understand whether you could also qualify for split year tax treatments upon arrival in the UK.

Alfred Ip  19:47
So, it seems to me that there’s no one solution fits all. You have to look into the individual situation and give them a tailor-made solution.

Matthew Braithwaite  19:59
Yes, that’s key already, you can’t rubber stamp this advice. It’s important that people not only obtain advice before arriving, but actually keep that advice updated whilst they’re in the UK to ensure that, for example, if they are claiming the remittance basis that they’re not inadvertently bringing money into the UK, which is then subject to UK tax. How might they do that? Again, one of the steps prior to arrival, is to segregate their bank accounts. So typically, we look at identifying what money they had prior to their arrival, and then you can bank that as what we described as clean capital; that’s money that they can safely bring into the UK and access without any UK tax implications. But any income arising off of those funds in the future, you’d want to segregate into a separate income account, which you would know that you would keep those funds offshore. So, you wouldn’t want to draw from that income. And if you did, and if you bought those monies into the UK, you would know that that came with the UK tax implication. And likewise, assets that generate gains if you sell an asset, you want to ensure that the asset itself, the proceeds of sale plus the value of the gain, stayed in a separate capital gains account. So, the art is segregating your bank accounts to ensure that going forward, you know what funds you can access to ensure that you are tax efficient in the UK. And that’s the process to work with your UK lawyers, us of course, and we would suggest a competent accountancy firm to perform the annual tax filings if appropriate, and also a bank who understands the need for clients to segregate their bank accounts because it’s incumbent on the banks to make sure that debits and credits in bank accounts are allocated correctly to avoid inadvertent remittances into the UK that could give rise to tax charges.

Alfred Ip  22:00
I have to have you helping me since the day before I consider submitting my application to the UK.

Matthew Braithwaite  22:08
Yeah, exactly. This is where it comes back to the idea of preparation. Having all your ducks in a row before you do and understanding what’s involved, goes back to that example I gave before of the client who sort of unwittingly walks into the office. Well, maybe not at the moment given the current circumstances, but certainly, if we assume normality walks into the office and says I’ve just come to the UK, what can I do to make my tax affairs more straightforward, often it’s too late at that point, it’s the art of preparation.

Alfred Ip  22:37
Understood, and would it affect my situation, if I want to come back and forth between UK and Hong Kong to see my parents.

Julia Jackson  22:46
Yeah, I think it does have very important immigration implications. So if you are spending more than 180 days outside the UK in any 12 month period, that’s not a calendar year, a taxpayer or school year is any12 month period, then you wouldn’t then be able to qualify for what’s called indefinite leave to remain – sometimes called settled status or permanent residence it’s the indefinite right to live and work in the UK.  So keeping a tally of how much time you spent outside the UK is really important. And if you’re thinking that you might like to have British citizenship, then the restrictions are even greater than that. So generally, if you’re thinking British citizenship is the way you’d like to go in the future, then certainly spending no more than about 90 days outside the UK in a year, but we can split that across the family so if one partner is traveling more than the other it might be that one partner gets indefinite right to British citizenship, but not the other and sometimes planning that in advance is important too. We tend to find that with children at school, at least one partner is in the UK enough of the time.

Alfred Ip  23:36
It seems to me it is so complicated if I stay too long, I will be caught by the taxman. If I stay too short, I’ll be caught by the immigration.

Julia Jackson  23:45
Yeah, immigration law is designed to make sure that the taxman can catch you. But he doesn’t, but he doesn’t have to catch all of your income and all of your assets and that’s when Matt comes in to make sure that what the taxman is allowed to see is restricted.

Matthew Braithwaite  24:10
The other point to bear in mind, Alfred, is that you make reference to returning to Hong Kong to oversee the family business and if we assume you have a directorship in that business, we will be concerned to ensure that by becoming UK resident, you don’t inadvertently create a tax profile for the business in the UK through any management or control that you exert whilst you’re here, and so that may be incumbent on you to ensure that any board decisions that are made and minuted outside the UK and any board meetings that are held are likewise held outside the UK, obviously, probably back in Hong Kong, I suspect. But we really don’t want the influence to say that central management and control was exercised in the UK and therefore, the business has a UK tax profile for corporation tax purposes. And then the most straightforward solution there would be for you to step down as director, really, if your understanding was that you were going to be in the UK, and maybe you could redefine your role as more of an advisor to the business, just to limit that risk.

Alfred Ip  25:19
I should resign as a director of my family business.

Matthew Braithwaite  25:22
Yeah. So it’s something that you know, may be inconsistent with the overall succession planning that the business is anticipating in terms of bringing you up to sort of ultimately take on the mantle in due course and run the business. But I think the business would also be equally concerned to ensure that it doesn’t inadvertently have its own UK tax issues as a consequence of your actions. And it may well be that stepping down as a director doesn’t fit in with the family business, but certainly managing that risk then becomes imperative.

Alfred Ip  25:53
Yeah, this sounds very complicated to me, especially when I don’t want my brothers and sisters to come over and take control the family business. So there are a lot to think about.

Matthew Braithwaite  26:02
Yeah. This is looking at the bigger picture, really, and I think that’s what we’re there to help you do.

Alfred Ip  26:08
Thank you, Matt, for the detailed answer. Let’s say that the situation is a bit changed: instead of me having a wife with two kids, I am married to a man with two dogs. The situation is very different. Clearly, same sex marriage is not recognized under the Hong Kong laws but that is different in the UK. Certainly, I want to move to the UK but instead of having a position in my family business, I’m a professional, I’m working for a company. Is that going to change anything, Julia?

Julia Jackson  26:40
It is, I think the first really good point to pick up there is that the UK does recognize same sex marriages in exactly the same way that it acknowledges mixed sex marriages, there’s no difference between the two in law at all. And in fact, from immigration law, though its less true  over other areas of law, the UK also recognizes common law relationships. So you can have a route  to come to the UK through  your partner, if you’ve been living together, and the lovely phrase is “in a relationship akin to husband and wife” and that can include same sex couples for at least two years. If you’ve got that enduring relationship that has lasted, it doesn’t matter whether you’re married or not. It doesn’t matter if you’re  a mixed sex or same sex couple, the immigration law recognizes it in exactly the same way. So for professional couples, there are a number of different options. I think what’s good to look at is the existing employment relations, the existing employment relationship. So, you’re ready with an employer in Hong Kong say, is that employer willing to transfer you to the UK? Do they have an existing operation in the UK? If there is an existing operation here, and you’re in a reasonably skilled job, then the employer can ask the UK company to assign a certificate of sponsorship, rather like printing their own work permit. And then you use that to apply for a visa to come to the UK to work for that company here in the UK, you’re only allowed to do the job that’s described in the certificate of sponsorship, but it’s a very quick route to come to the UK. And if you come in as an intra-company transfer, we call it a Tier 2  intra-company transferee – if you come in in that route, then you’re partner, the same sex partner can accompany you to the UK, and they’ll get permission to be here for the same length of time that you have. The really nice thing about it is your partner is actually in a slightly better position because you’re only allowed to do the job that’s described in  your certificate of sponsorship, the partner can work for any employer in any job, or study or not work or in set up a  business. They’ve got much more freedoms as to what they can do in the UK. If your employer doesn’t have a set up in the UK, but they’re willing to put a toehold into the UK market and you could come over in a different route , in what’s called a sole representative of an overseas business. So that’s really where you’d be employed in a company outside the UK which doesn’t have any existing branch, subsidiary or representative in the UK. But they would start off here, so they’re sending you over to set up a branch or subsidiary, and to represent that company. Again, it’s a relatively straightforward immigration application, lots of information is needed to document the company, the status of the company and the assets of the company. But then once you’ve got that immigration approval, you can come over set up the branch or subsidiary and in exactly the same way your partner can accompany you and can work for any employer in any job.

Alfred Ip  29:22
So let me see if I understand you clearly, Julia. I don’t really have to apply for work permit if my employer relocates me to the UK, all they have to do is to issue a sponsor letter.

Julia Jackson  29:38
So if you’ve got an existing employer, if your company in Hong Kong has an existing company in the UK, that company will need to get a sponsor license. That’s a permission to sponsor people coming in from overseas. Lots of companies have those, they are increasingly common and will become more common over the next six months as we change slightly our immigration status in the UK. But that company then effectively prints the work permit for you. They’ll have a stock , almost like writing a check, they have a blank certificate that they will fill out electronically, you’ll then need to apply for a visa to activate that permit. But it’s a relatively straightforward application that would be done locally in Hong Kong. If there is no employer in the UK, and you’re coming up to set up that employment entity, then it’s simply a visa application in Hong Kong. And obviously, there’s not no groundwork needed in relation to having a UK company prior to arrival.

Alfred Ip  30:29
And my partner can come with me without us getting married. That’s also very convenient.

Julia Jackson  30:35
That’s absolutely the case. Yes. So, you can either be in a civil partnership, in a marriage, or in a common law relationship, as long as you’ve got evidence that you’ve been living together at the same address for at least two years.

Alfred Ip  30:50
We plan to move to the UK and before that we sell the property that we’re living in in Hong Kong. And when should I sell the property? And when should I move the money? Or how much should I move the money to the UK?

Matthew Braithwaite  31:05
That’s a question for me. And so a couple of points just to just again, listening to what Julia said and how much it weaves into the tax piece is, of course the UK recognises civil partnerships and same sex marriages. But what it doesn’t do from taxing perspective recognise common law relationships. So, you wouldn’t get some of the benefits that spouses or civil partners enjoy, if you are in a common law relationship, and that’s worth bearing in mind. Equally, it’s worth bearing in mind that along with being married, or in a civil partnership, and some of those reliefs that might otherwise be available in particular, if you have a main residence, you’re treated as sharing one main residence as a married couple or civil partnership, which may be relevant for future capital gains tax on any property disposal. And likewise, when you’re looking at the stamp duty land tax rules as well, properties owned between married couples and civil partnerships will be considered collectively rather than each individual part they’re being considered on their own merits. So that’s just another example of where there’s a sort of a mismatch even in the UK between the immigration perspective and the tax perspective.

Alfred Ip  32:20
So you’re saying that instead of marrying for immigration, I should consider marrying for tax?

Matthew Braithwaite  32:26
Well, this wouldn’t be the first time that we’ve advised that!

Alfred Ip  32:30
Okay, it is a very complex situation, should I marry or not?

Matthew Braithwaite  32:34
Yes, well, that’s… yeah. It may give it what you will, I suppose if you’re married or entered a civil partnership, depending on what appealed to you and you know, again, it’s a case of just looking at every situation on its facts and it may well be that there’s a reason why a long standing relationship hasn’t entered either a marriage or a civil partnership and, you know, we always say it’s a corny phrase, but you never let the tax tail wag the dog. So, you know, it’s better to let the tax advice or tailor the tax advice around your circumstances rather than your circumstances around the tax.

Alfred Ip  33:09
Okay, all sounds like really bad when we’re talking about marrying for tax or marrying for immigration.

Matthew Braithwaite  33:16
Yes, it doesn’t sound particularly romantic.

Alfred Ip  33:18
Yes, it should be marrying for love instead of all these.

Matthew Braithwaite  33:23
Absolutely. Yeah. So just returning to your piece around the idea that our couple here are going to sell their residence in Hong Kong. And they may well be better off doing so before they arrive in the UK. If that property comes at a gain, it comes back to the point we were discussing before about ensuring that you’re not bringing foreign income or gains into the UK and if they’ve sold their Hong Kong property, and they remit the proceeds of sale into the UK was there already UK tax resident, we don’t want that game to then be subject to UK tax. So, selling the property before arrival and bringing the proceeds of sale in due course may well be helpful in that regard. And actually, their timing is quite fortuitous from a tax perspective, because in recent weeks, the government have announced what we’re describing as a stamp duty land tax holiday to kickstart the property market. So, people who are who are buying properties for the first time who aren’t buying additional properties, so second homeowners don’t take advantage of this relief in the same way. But broadly, anybody in the first category can look at not paying stamp duty on a purchase of up to GBP 500,000 pounds, that’s a zero percent stamp duty rates on the GBP 500,000 of a property purchase. In this scenario, where of course a couple are selling their existing main residence and buying a new one. Depending on the timing of how easy it is to sell the formally main residence, they would still qualify for this stamp duty land tax provision because they’re replacing their main residence. So, where there is a replacement within the requisite amount of time, if you’re selling one main residence to acquire another, you may well end up owning two properties at any one time. You may have to pay a bit more stamp duty up front but if you then go on and sell your former main residence, you can then claim a refund based on the on the standard rates of stamp duty. So again, I’m not expecting anybody to understand this completely, partly because it’s probably my way of under my way of explaining it, but the takeaway really is that anybody in this situation needs tax advice. And not only for their personal circumstances, but also for their property purchase, because they could well tap into a more advantageous rate of stamp duty as a consequence, and that’s helpful. So that’s available for the next sort of, well for the rest of the tax year really, until the end of March next year [2021], that stamp duty holiday will be available to property purchasers, and may well provide an incentive to buy property rather than simply decide to rent.

Alfred Ip  36:21
Hmm, this sounds very complicated, but my take on it seems to be that – correct me if I’m wrong – is that if I plan to move with my partner to the UK with my dogs, the first thing is to do is to get my visa sorted and then sell our home and then move to the UK and then apply for my partner for the, for the, immigration as well. Julia, can I confirm if I’m correct or not?

Julia Jackson  36:49
Yes, you are largely correct, but I would do the applications for the partner and yourself at exactly the same time. There’s no, there’s no, need for you to be in the UK before your partner. The applications would go through as a pair.

Alfred Ip  36:50
Fortunately, I have you to  correct me otherwise, we made a mistake. It’s so complicated. I cannot imagine how can I get to do what I want to do without you guys, as for moving to the UK.

Matthew Braithwaite  37:13
Just another point just to make it even more complicate, where you’re looking at working for your Hong Kong based company but out of London, you’ll presumably still be remunerated from Hong Kong; so understanding or navigating possible double tax treaty relief between income arising in Hong Kong and what you’re then bringing into the UK. So another quirk there to consider is how that income is taxed, either or both in the UK and Hong Kong.  For the partner, he may well find an opportunity in London that’d be working for a London based organization, we assume for this purpose, so they’ll be receiving income in the UK, which will be taxed in the UK as part of regular earnings under the presumably under the “Pay As You Earn” scheme in the UK for tax purposes.

Alfred Ip  38:08
Wow, this is really mind blowing how complicated the whole thing is.

Julia Jackson  38:13
I think taking it step by step and dealing with, you know, a firm  like Wedlake Bell that has done it all before, it’s the right thing. because every time we advise clients, the advice we give is bespoke for that client so that they get what’s right for them rather than just what we’ve dealt with before, but having the expert years of experience behind us, we know how  to make sure that things are done in the right order.

Matthew Braithwaite  38:33
And also bearing in mind that no, UK Private Client lawyer could go through these sorts of scenarios without also flagging up the importance of these clients making Wills in the UK.  There are different types of ownership and as part of the property, the acquisition of the property, as a full service law firm again, we could assist with the property purchase and understanding how the couple choose to own the property, then has a bearing as well on what happens on their respective debts. And in any event, they’ll need to make a Will to govern their UK assets to ensure that their wishes are carried out. And again, that’s something we can assist with. But as Julia says, it’s one step at a time. You don’t want to, you don’t want to overload people at any one time with all these, this shopping list of requirements, but it will all as the client will appreciate it, will all come naturally in the end as they say as they go through the process.

Alfred Ip  39:34
Yes, it seems to me that it requires a group of professionals to look after all aspects before the client making the right decision to move to the UK and make sure that all the affairs are sorted in the right way. And in that respect, I want to see another case study to explore other issues that our clients may come across. Another case study may change in the sense that now I’m married again to a woman. And then I have two children. In this case, in this case study, I’m married to a woman with two children: one is 18 years old – a teenager – and she’s about to enroll into university and then I have a young child who is 8 years old. You’ve seen a big difference in terms of age. So that’s a different consideration for my two children when they’re, when they want to move them to study in the UK, how can you help?

Julia Jackson  40:28
Yeah, I think it’s looking at, if  you start taking them separately, so your 18 year old daughter would be applying for a Tier 4 General visa to come to the UK as a student.  The university that she’s chosen and applied to would issue her with a Certificate of  Acceptance for study, it is like a work permit, if you like it’s a study permit. And then it’s a  visa application and she will be coming in then to study that particular course at that university. If she’s not keen on studying, she’s 18 and just fancies seeing  a little bit of the UK, there is another option, she could come under what’s called the Tier 5 Youth Mobility , which is open to Hong Kong SAR passport holders and also BN(O)sand that’s right to come here for  two years work for any employer any job. So, we do sometimes see 18 year olds coming in that category, and then maybe coming back as a student maybe a little bit later on or even the other way around. But the student category, Tier 4 student  would allow her to study a degree but she could even work part time while she was studying up to 20 hours a week and during vacations. It’s quite an expensive route because you’ve got to show that you’ve got the money to pay for the student fees at the university, and also there is  enough money to live on as a student while studying. And that’s done in a purely mathematical calculation. If you’re studying in London, the amount is £1,265  per month of study up to a maximum of nine months. So, you can see that with the student fees, it does add up quite quickly in terms of the amount of cash that has to be available for this kind of application. But it’s a nice category. And we don’t have it at the moment. But coming on-stream in the summer next year, anybody who completes a degree level course in the UK will be able to then apply for a right to work in the UK for a further period of two years. And again that will be any employer any job, it’s a really attractive option to come study for three years, and then work for another couple of years beyond that. It might be that that’s then enough time to spend in the UK or it might be that then the student feels really at home here and might want to move into another immigration application from there. So, there’s a really nice immigration path. The problem with a student visa is it doesn’t ever lead to an indefinite right to stay in the UK in its own right, but it’s whether you can then find a foothold with an employer to move into a path that does lead to a right to stay in the  UK long term, if that’s important.  But if it’s not important, and a UK degree is a really valuable asset to take off to anywhere in the world.

Alfred Ip  42:50
I guess I will let them decide after they graduate.

Julia Jackson  42:53
And then thinking about your 8 year old, completely different again, because obviously, there are different issues there. It’s fine to send an 18 year old over to go to university on her own but your 8 year old is going to need some support. Now it might be that you send them, he will be coming over on a Tier 4 Child visa, slightly different criteria. But again, applying to school, the school would issue a Certificate for Acceptance studies, a study permit, then he’d apply for a visa to come. If it was a boarding school, you just need to show that you’ve got enough money to pay for the boarding school fees for the year of study. If it’s not a boarding school, you’ve got a couple of options. You can have a carer, it might be that you have a brother or  a sister, an aunt or an uncle, a cousin in the UK, that your son would stay with, in which case, you need to show that that person will be there to support him, and that there’s enough money. And again, it’s worked out on a mathematical calculation, £570  per month, up to a maximum of nine months to show that you’ve got that income or you’ve got those assets to support your son.  Or, there’s a nice little glitch in the UK immigration rules that if you have a child under the age of 12, you are allowed to apply for a visa as a parent of a child at school. And that would give you the right to come almost like an extended visitor and live with your son whilst he was studying in the UK. There’s no right to work, there’s no long term right to say UK, but it might get your son to the point at which he’s more confident to go to boarding school if is too young.

Alfred Ip  44:16
So my wife can live there and look after my son and be a Tai Tai there.

Julia Jackson  44:20
Yeah, exactly. Yeah. I did say that the student category doesn’t ever lead to an indefinite right to live in the UK. It’s true it doesn’t. But we do have separate to that what’s called the long residence permission. So if you managed to clock up 10 years of being a student living in the UK –  10 years studying here for 10 years –  then your son, by the time he finishes his A levels might be eligible to apply for an indefinite right to stay in the UK. So, generally the student route isn’t a direct path into a permanent right to stay, but if you can manage to get 10 years as a student, which an 8 year old would do, before he finished his main schooling, then that option would be open.

Alfred Ip  45:00
It seems like there will be going on a very, very long plan. And should I buy them a place for them to live? If specially if my wife is going to move there as well?

Matthew Braithwaite  45:10
Yeah, I just want to touch on sort of more generally, you might assume on this the facts as presented that actually UK tax isn’t quite so much of a relevance, but it’s worth bearing in mind on a number of different levels. Broadly, students and children in full time education are still within the scope of the statutory residence test for UK residence purposes, but it may well be less of a consideration for them given you were dealing with an 8 year old and an 18 year old in terms of their capacities for income generating and bringing offshore funds. And it’s not quite the same considerations as we might be dealing with if we were talking about the parents. If we’ve got a situation where mother is going to come and spend time in the UK to, you know, at least support the 8 year old in education, then we need to be alive to the fact that we don’t want her to inadvertently become UK resident through her visits to the UK. And there are some specific rules around that, where broadly onto these statutory residence test, there’s three categories, you’re are either resident or non-resident, it’s very black and white based on day count. Where there’s a degree of a gray area we have a sufficient ties test: the idea being the more ties you have to the UK, the less time you can spend here without being treated as UK resident. And children under the age of 18, there’s a family tie, and children under the age of 18 are ignored for the purposes of that sufficient ties test. Primarily where they’re only in the UK for purposes of attending school. And the parent themselves is spending less than 61 days here themselves to provide that supporting role. If there’s a suggestion that the child stays here during half terms and holidays, that may well create a tie to the UK that the mother needs to be aware of. So, again, another message is that don’t assume that UK tax isn’t a relevance here because it is. The sort of the silver lining to this cloud may well be, again, this stamp duty holiday that we were talking about, if mum and dad are thinking of buying a property for the daughter who’s going to university, which is not uncommon and something we see all the time, there’s two issues to consider: mum and dad purchased the property, although it’s an additional property for them if we assume they already have property in Hong Kong or elsewhere in the world. They’re not going to be paying the lowest amount of stamp duty, but the way that the new rules operate, this temporary window of opportunity, they will be able to take advantage of a lower rate than they might have otherwise have done. The other point to bear in mind is if they structure this purchase correctly, and the daughter buys the property, she may well be able to access the zero percent stamp duty land tax rate on the purchase that she’s buying the property. And that’s done through ensuring that the monies are gifted by parents to daughter offshore for inheritance tax purposes and brought to the UK in her name. So again, there’s some planning to be done to potentially save some significant tax. So, again, it’s just being aware of the options available to them.

Alfred Ip  48:28
I’m so sorry, I’m not sure if I understand the concept of inheritance tax because it’s not something that is available in Hong Kong. Can you explain a little bit?

Matthew Braithwaite  48:30
We have a tax in the UK that broadly applies on death, which is obviously a subject that you know, culturally, it’s not a subject people probably talk about all the time. But from a UK perspective, we recognise the idea that in the event of somebody’s death tax will be applied at a rate of 40% on the value of their assets over a certain amount of money. And that certain amount of money is typically the first GBP 325,000 of their estate, which is subject to tax 0%, and the balance is subject to inheritance tax of 40%. So, people typically take steps to try and mitigate their inheritance tax liability that might arise on death through making lifetime gifts. Now, if you make a lifetime gift and survive seven years, the value of that gift is outside of your estate and that’s good. If you are somebody who, sorry just to pause there actually and draw out a distinction, if you’re UK domiciled you’re subject to inheritance tax on your worldwide assets, so wherever they are in the event of your death, you will be subject to inheritance tax. If you’re non-UK domiciled, you’ll only be subject to UK inheritance tax on the assets that you own in the UK. So, people will either choose to own their assets and think about mitigating inheritance tax, or they might think about taking steps to reduce their inheritance tax exposure by perhaps structuring gifts outside the UK. So say for argument’s sake, in our example, mum and dad wanted to make a gift to daughter, daughter’s UK resident, so rather than them giving the money to her in the UK that might come into a UK bank account and then saying, this money is for you, that’s a gift of UK property which would then be subject to the inheritance tax rules and mum and dad would have to survive seven years. If they structure the gift so that they make the gift outside the UK, that’s outside the UK inheritance tax net, so, anybody that then daughter brings into the UK after the gift is made isn’t subject to inheritance tax if mum and dad happened to die within seven years, so it’s navigating these rules. And also worth drawing out, although not particularly relevant for this example, but rather than for anybody who’s looking to come to the UK, and stay here for more than 15 years, is that you can say that you are non-domiciled here which is great in terms of, you know, your assets that are in the UK will be subject to inheritance tax or anything else outside the UK won’t but when you’ve reached 15 years of tax residence, in year 16 you are deemed domiciled here for tax purposes, which broadly means that you will be treated as if you are domiciled in the UK, and therefore all of your worldwide assets could potentially be subject to inheritance tax. Anybody in that situation are facing the end of their 15-year term would be as well to think about what their intentions are for the future. If they’re intending to stay in the UK, it may be appropriate for them to set up a structure like a trust, to shelter those assets outside the UK in a trust to ensure that they’re not part of their estate for inheritance tax purposes. So, there’s another layer of planning that can be done in the future. So far, we’ve been looking at people’s immediate needs and the idea of coming to the UK, those needs will evolve in due course, people will probably find that, you know, one year spread into 5 years, 5 years into 10 and 10 into 15 and suddenly they spent a significant amount of time in the UK, and the opportunities to plan will reduce accordingly, the longer they spend here.

Alfred Ip  52:18
It sounds really complicated that we definitely need to come to you before we even consider whether to buy a property for the daughter.

Julia Jackson  52:27
So, Alfred, what’s really interesting at the moment is that there is a new offering coming online for residents in Hong Kong. It’s a reflection of the historic connection between the UK and Hong Kong, and will come online we expect from January 2021. It’s open to anybody who has a British National Overseas status. And when I say has the status, I don’t mean a valid passport, I just mean that they have the status so they could have a current valid passport, they could have an expired passport. It may be even that they’ve had a passport in the past that’s been lost or stolen. That’s not a bar to  the route, it’s still open. The lost or missing passport can actually be picked up from the UK records. And so even if that passport is long gone, the immigration category is open.   So ordinary resident; BNO status; there must be no serious criminal convictions – interesting that it has to be serious – so, we will need to have a police certificate, but we don’t know quite where it’s going to be set, but it might be that minor infractions aren’t going to be a problem for this route. There will be a TB test requirement and then the family or the individual coming will have to show that there are sufficient funds for maintenance and accommodation in the UK and I’ll come back to that in a second. And there’s no English language requirement, although if they are planning, if the person is planning to stay in the UK long term, there will be an English language test, possibly later down the route. And I mentioned family already so the route is obviously, to the BNO status holder, but it’s also open to their immediate family even if they’re not BNO status holders. So, it will be open to the partner of the BNO status holder. So that can be a marriage partner or wife, husband, it can be same sex or mixed sex marriage. It will also be open, we think, to long term cohabiting couples if they’ve been living together for at least two years, children under the age of 18 and, in exceptional circumstances, children over the age of 18, but who were born after July 1997.  Because there’s that little gap, they weren’t able to get BNO status after July ’97 but they might still be part of the family unit. So, if there’s still, if  there are compassionate, compelling reasons why the family shouldn’t be broken up even children over the age of 18 might be able to come in this route. Other family members may be able to come – that will be on a case by case basis. And I’m anticipating that we’d have to show that there were particular severe hardships, probably a degree of both physical and financial dependence on the BNO status holder. So, what does this route offer? So it gives the BNO status holder and the family permission to come to the UK, it will usually be 30 months initially although there will be an option to apply for five years right at the beginning -so  usually 30 months renewable from within the UK for another 30 months to get to that five-year point. During that five-year period, the family will be able to live and work in the UK, any employer, any job, bring an existing business, set up a new business, there’s a lot of freedom there. Children will be able to study at state schools, and the  whole family will be able to access the National Health Service. There will be a restriction that says that the family can’t claim public funds in the UK and that ties back into the requirement to show that they’ve got enough money for their maintenance and accommodation in the UK. We don’t quite know where that’s going to be set yet. But if I look at other immigration categories, for example, the Tier 2 working route, that is set at  normally for the main applicant having a cash bank account that has  held £945  minimum for at least 90 days. Then an extra £630 for each family member. So, if you’re looking at a partner, a main applicant, a partner and a child, you’re probably looking at just over £2,200, something like that. It might be set at that level, we don’t know, that’s a wait and see. But I would say that for anyone thinking of this route it might be a good idea, just have a savings account set up with some money in it just in anticipation. The way that the application is going to be made is quite different to all other visa applications. It will be, we think, through an online app that will be downloaded either through the app store or through a Google Play. It’ll be taking ID documentation, an ID check through that app, probably scanning a passport to read the chip in the passport and then completed, we think, online. We’re waiting for full details, but that seems to be the model that we’re going for. So, it’s unlikely that there will be a visit to a visa office in Hong Kong and it seems unlikely that they’ll be any endorsement in the passport, it will be an electronic status only. So, there will be no endorsement in passports. In terms of fees, there is going to be an application fee. We don’t know where that’s going to be set yet, but looking at other categories that might have a similar offering, my anticipation would be somewhere between £500 and £700 for the 3-year route, and maybe £900 to £1,200, £1,300, maybe for the 5-year route. On top of that, there’ll be the Immigration Health Surcharge, which is calculated to whichever route you go for, but it’s worked out at £624 per adult and £470 per child. So again, it’s a little bit pricey. But it’s going to be a great route. And I think it’s a welcome offering for Hong Kong residents and we anticipate it coming on-line as I say in January of next year [January 2021]. Having said that, if Hong Kong residents do need to access the route more quickly, there is probably some leeway outside the immigration rules to get a status here in anticipation of that route opening. So, lots of movement there. And it’s really worth sort of having a look at that as an option. If there’s a BNO status somewhere in the history.

Alfred Ip  58:16
Matt, it’s definitely very complicated. How can people find you if they need to assistance?

Matthew Braithwaite  58:20
Well, Alfred, I believe our contact details will be made available at the end of this presentation and both Julia and I will be more than happy to address any queries or speak to any potential clients about their needs.

Alfred Ip  58:33
And probably it doesn’t make any difference if we go to you or Julia.

Matthew Braithwaite  58:37
Indeed. No, I think that’s again, we’ve talked about the virtues of law firm like ours, we work very collaboratively, so, whoever something may come to the team of advisors that will be formed around them, and it will be a very collaborative process.

Alfred Ip  58:53
Thank you very much, Matt and Julia for today. We definitely learned a lot about complicated rules of immigration and tax of the UK. I’m sure that our clients will come to you for any advice or assistance. Thank you very much for your time today.

Julia Jackson  59:08
It’s been a pleasure. Thanks very much. Goodbye.

Matthew Braithwaite  59:10
Thanks very much, Alfred. It’s been a real pleasure.

 

This video is for informational purposes only. Its contents do not constitute legal or professional advice.

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