UK Individual Tax Guide

EY

1 More London Place

London SE1 2AF England United Kingdom

Executive contacts

Stephanie Phizackerley

+44 (20) 7951-0616 Email: sphizackerley@uk.ey.com

Nicholas Yassukovich +44 (20) 7951-9517 Email: nyassukovich@uk.ey.com

Social security contacts

Mike Kenyon +44 (20) 7951-2583 Email: mkenyon@uk.ey.com

Graham Crouchman +44 (20) 7951-7160 Email: graham.crouchman@uk.ey.com

Rob Pearce +44 (118) 921-7926 Email: rob.pearce@uk.ey.com

Immigration contacts

Lisa Amos +44 (20) 7951-6813 Email: lisa.amos@uk.ey.com

Charlotte Nicolas +44 (20) 7197-5228 Email: charlotte.nicolas@uk.ey.com

Private Client Services contacts

Tom Evennett

+44 (20) 7980-0890 Email: tom.evennett@uk.ey.com

Caspar Noble +44 (20) 7951-1620 Email: cnoble@uk.ey.com

Neil Morgan +44 (20) 7951-1878 Email: nmorgan1@uk.ey.com

Sonia Rai +44 (20) 7951-6384 Email: srai1@uk.ey.com

On 23 June 2016, the United Kingdom (UK) voted in a referendum to leave the European Union (EU). The UK/EU Withdrawal Agreement (WA) (and equivalents with the European Economic Area [EEA] and Switzerland) protected or grandfathered certain rights of citizens (and other persons covered) built up before 31 December 2020 beyond that date. In the absence of a new deal, various social security provisions enjoyed between the UK and the EU/EEA and Switzerland would disappear for many indi viduals who entered into a cross-border activity between the UK and the EU/EEA and Switzerland from 1 January 2021.

On 24 December 2020, the UK and EU reached a Trade and Cooperation Agreement (TCA) covering various issues, including trade rules, fishing rights, legal provisions and, importantly, various elements of social secu rity coordination. These provisions were finally signed off in April 2021 and will remain in force for at least 15 years unless renegotiated in the interim.

In the new TCA, there are clear parallels with the old social security regu lations in certain areas, but the agreement is not as all-encompassing as the old regulations. For example, certain provisions on coverage for longer-term assignments of more than 24 months are not carried

forward, but state old-age pension totalization provisions are carried forward.

The UK leaving the EU will still significantly change the social security landscape for certain mobile workers (and their families), both UK residents working within the EU and EU residents working in the UK, if the activity begins on or after 1 January 2021. This could lead to increased social security costs and compliance obligations for employers, together with implications for employees in relation to accessing and entitlement to pub lic health care and benefits. Please see Section C for further information.

From a personal tax perspective, the exit should have little impact on the operation of the UK personal tax and withholding regime on employment income because currently the interactions between the different EU states’ personal income tax regimes are governed by international tax treaties with the individual countries, and these treaties continue to be in force.

What we do know is that grandfathering of pre-2020 social security rights will still continue into 2021 by virtue of the WA and potentially beyond that, as long as that activity continues without interruption. At present there is not total clarity across the EU/EEA and Switzerland as to how the WA will be applied, but HMRC (in its publications) appears to want to apply the WA quite widely and wherever possible will consider its application.

A. Income tax

Who is liable. The taxation of individuals in the UK is determined by residence and domicile status. The UK applies a comprehen sive statutory residence test (SRT) to determine whether an indi vidual is resident in the UK. The SRT has rules that determine whether someone is one of the following:

• Conclusively UK nonresident

• Conclusively UK resident

• Subject to the “sufficient ties” tests to determine their UK residence status

Residents. Tax residents are liable to UK tax on their worldwide income. However, individuals who are regarded as not domiciled in the UK (see Domicile) may not be liable to UK tax on offshore income and capital gains if the funds are not remitted to the UK (this is known as the “remittance basis”).

Individuals wanting to be taxed on the remittance basis must, in most cases, make a claim each year. For further details regarding the remittance basis, see Remittance basis.

Nonresidents. Nonresidents are subject to tax on their UK-source income, such as compensation attributable to UK workdays and certain UK-source investment income. Under the SRT, an individual who has been nonresident for UK tax purposes throughout the preceding three UK tax years is generally regarded as conclu sively nonresident if he or she spends no more than 45 days in the UK in any UK tax year. Other tests may also apply under which a taxpayer is regarded as conclusively nonresident, the most com mon of which is the test applying to an individual who meets the conditions for “full-time work abroad” (FTWA) during the tax year. This term has a statutory definition under the SRT and is very different from the previous practice.

UK residence. Employees leaving the UK most commonly cease to be UK tax resident by virtue of FTWA. FTWA, as defined under SRT, requires individuals to work for a minimum of

35 hours per week under one or more contracts of employment and/or self-employment (the methodology for calculating the hours per week is set out in the legislation) for the relevant tax year. It also places a limit on the number of days (maximum of 90 per UK tax year) and workdays (maximum of 30 per UK tax year) that an individual may spend in the UK and still be regard ed as FTWA for the tax year concerned. It is also possible to be conclusively nonresident by spending no more than a de minimis number of days in the UK in a tax year (15 days if the individual has been resident in any of the previous 3 tax years and 45 days if he or she has been nonresident throughout that period). Separate automatic nonresidence rules may apply if the taxpayer dies in the tax year.

An individual coming to the UK is likely to be regarded as con clusively UK resident if he or she does not meet any conditions to be regarded as conclusively UK nonresident (see above) and satisfies any of the following conditions:

• He or she spends at least 183 days in the UK in the UK tax year.

• He or she works sufficient hours (at least 35 hours per week on average) in the UK, assessed over a 365-day period, with more than 75% of his or her workdays being UK workdays (full-time working in the UK, or FTWUK).

• He or she has his or her only home or all his or her homes in the UK, for a period of at least 91 consecutive days, and at least 30 days of the 91-day period fall in the UK tax year concerned.

• He or she meets the sufficient ties test.

Particular rules apply to individuals who have relevant jobs in international transport, such as air crew. These rules exclude them from the FTWA and FTWUK tests.

For an individual who is neither conclusively resident, nor con clusively nonresident, a sufficient ties test applies under the SRT. The sufficient ties test looks at the number of connection factors (ties) that the individual has with the UK and the number of days spent in the UK. Five possible ties can apply to determine the extent of the individual’s connection to the UK; the more ties that an individual has, the fewer days he or she may spend in the UK in a tax year without becoming UK tax resident. The following are the five possible ties that an individual may have:

• He or she has a UK substantive employment (at least 40 UK workdays, as defined).

• He or she has UK accommodation (as defined).

• He or she has more than 90 days present in the UK in either of the preceding two UK tax years.

• He or she has UK-resident family (spouse, civil partner or minor children).

• He or she has been UK tax resident in any one or more of the three preceding UK tax years and has not spent more days in any single country than he or she has spent in the UK.

After the number of ties is determined, this is compared with the number of days of presence in the UK. For example, under the sufficient ties test, an individual who has not been tax resident in the UK in any one of the preceding three tax years does not become a UK resident in the following circumstances:

• He or she is present up to 120 days in the UK and has no more than two ties.

• He or she is present up to 90 days in the UK and has no more than three ties.

Complex statutory definitions apply in all cases. For example, a day is usually counted as a day of presence if the individual is in the UK at midnight, but an additional anti-avoidance rule can also apply if the individual has three UK ties, has been UK tax resident during any of the preceding three UK tax years and has more than 30 days in the UK when he or she is in the UK during the day but absent at midnight (see Days present in the UK). A UK workday is defined as a day on which more than three hours of work is undertaken in the UK and includes both training and traveling undertaken in the performance of employment duties.

Overseas workday relief. For UK tax residents who are nondomiciled, overseas workday relief may be available on their employment income when they first become resident if they have been nonresident for UK tax purposes throughout the preceding three UK tax years, if the remittance basis is claimed and if the remuneration related to those overseas workdays is both paid and retained offshore (for further details, see Remittance basis). If overseas workday relief applies, the income relating to the over seas workdays is excluded from UK taxation so long as it is not brought to the UK.

Overseas workday relief is likely to apply to the UK tax year in which the individual first becomes UK tax resident and to the two subsequent UK tax years. The law does not prevent an individual from being entitled to overseas workday relief on several different assignments to the UK. However, unless he or she is nonresident in the UK for at least three full UK tax years between assignments, the period over which relief may be claimed is likely to be restricted.

Split-year position. In principle, residence is determined for a tax year as a whole, but under the SRT a taxpayer who is UK tax resident may be eligible for split-year treatment in certain cir cumstances. If the conditions are met, non-UK income and gains of the overseas part of the UK tax year concerned are generally not subject to UK tax. An individual arriving in the UK who would otherwise be UK tax resident all year may qualify for splityear treatment in any of the following five circumstances:

• The individual starts to have his or her only home in the UK.

• He or she starts to work full time in the UK.

• He or she returns from working full time abroad, having been UK tax resident in one or more of the four tax years immedi ately preceding the previous UK tax year.

• He or she is an accompanying spouse or civil partner of someone who is returning from working full time abroad, as described above.

• He or she starts to have a home in the UK and did not previ ously have a UK home.

If more than one of the above circumstances applies, an ordering rule typically applies the test that minimizes the overseas part of the tax year and begins taxation as a UK resident from the earliest possible date.

In addition, in any of the following three sets of circumstances, someone leaving the UK may qualify for split-year treatment:

• The individual leaves the UK for FTWA.

• He or she is an accompanying spouse of someone who is leav ing the UK for FTWA.

• He or she is leaving the UK permanently and will not have a home in the UK after departure.

If more than one of the above circumstances applies, the date of the beginning of the overseas part of the tax year is determined in the following order of priority:

• FTWA

• Accompanying spouse rule

• Test based on ceasing to have a UK home

Individuals may also need to look at their residence position for the previous and subsequent tax years as part of the split-year conditions. Consequently, professional advice should be obtained if relevant.

Domicile. Under English law, an individual’s domicile is the country considered to be his or her permanent home, even though he or she may be currently resident in another country. It may be a domicile of origin, choice or dependency. Under English law, every person is born with a domicile of origin, which is normally that of his or her father. A domicile of origin has great tenacity. Consequently, individuals who were never domiciled in the UK and who work there for limited periods normally have no diffi culty in proving that they are not domiciled in the UK.

Effective from 6 April 2017, individuals who are non-UK domi ciled are deemed to have a UK domicile for income tax purposes if they have been resident in the UK for at least 15 out of the 20 tax years immediately preceding the current tax year. In addition, if an individual with a UK domicile of origin had acquired a nonUK domicile of choice, it was possible for him or her to maintain that non-UK domicile of choice in the event that he or she returned to the UK for a limited period. Effective from 6 April 2017, such individuals are deemed to be domiciled in the UK from the date on which they return. If such individuals returned to the UK before 6 April 2017, they are deemed domiciled in the UK from that date.

Domicile status affects how an individual’s offshore income and/ or capital gains are taxed. A non-UK-domiciled individual can have his or her offshore income and/or offshore capital gains taxed on either of the following bases:

• Remittance basis

• Arising basis

An individual who is taxable on the arising basis is subject to UK tax on his or her worldwide income and capital gains, regardless of where they arise. For further details regarding the remittance basis, see Remittance basis.

Days present in the UK. Any day on which the individual is pres ent in the UK at midnight is considered a full day of presence in the UK for residence purposes. Days in transit may be excluded from the count if the individual does not perform any activities in the UK that are unrelated to the transit. In some cases, up to 60

days that were spent in the UK as a result of exceptional circum stances that were not anticipated and were outside the taxpayer’s control may be disregarded in calculating total days of presence. An anti-avoidance rule applies to taxpayers who have three or more ties under the SRT and who were UK tax resident in at least one of the preceding three UK tax years. If an individual spends more than 30 days in the UK on which the individual is not also present in the UK at midnight, each subsequent day spent in the UK (above 30) for which the taxpayer is absent at midnight is counted as a day of UK presence for all of the day-count tests applied under the SRT. However, this anti-avoidance rule does not apply to individuals who meet the criteria for FTWA (see above).

Remittance basis. Non-UK domiciled but UK resident individu als can claim the remittance basis of taxation. An individual who is taxed on the remittance basis can potentially keep certain of his or her foreign income and gains outside the scope of UK tax by having them paid offshore and not subsequently remitting them to or enjoying them in the UK. “Remittance” is widely defined to include direct and indirect remittances, and professional advice should be taken as necessary to determine when the remittance basis may be claimed.

The default position is that nearly all residents are subject to UK tax on worldwide income and gains (known as the “arising basis”). Individuals who qualify and wish to be taxed on the remittance basis must normally claim to be taxed on this basis. Individuals who claim the remittance basis lose the tax-free per sonal tax allowance for income tax (in any event, this allowance is subject to phaseout for individuals with income in excess of GBP100,000 in the tax year; see Personal allowance) and also lose the annual exemption for capital gains tax (CGT) for that tax year. In addition, individuals who have been resident in at least seven of the preceding nine UK tax years must pay an additional remittance basis charge (RBC) of GBP30,000 for each year for which the claim to be taxed on the remittance basis is made. The charge is increased to GBP60,000 for individuals who have been resident in the UK in at least 12 of the preceding 14 UK tax years. Individuals resident in the UK in at least 15 of the preceding 20 UK tax years are no longer able to access the remittance basis.

However, the remittance basis currently applies without a formal claim if non-domiciled residents satisfy the following de minimis conditions:

• Their total unremitted offshore income and gains in the UK tax year amount to less than GBP2,000 (if a taxpayer is eligible for split-year treatment, this limit applies to the UK-resident part of the tax year only, so that any unremitted offshore income and gains for the overseas part of the tax year are ignored; only income and gains related to the UK part of the split tax year count toward the GBP2,000 limit).

• They have not made any remittances of “relevant income or gains” to the UK, have been resident in the UK in no more than six out of the preceding nine UK tax years (or they are under 18 throughout the tax year), and their only UK-source income is investment income that has been taxed at source of no more than GBP100.

“Relevant income or gains” are the individual’s foreign income and gains for that tax year as well as foreign income and gains for every previous tax year to which the remittance basis applied.

If the remittance basis applies without a formal claim, the individual does not lose the tax-free personal tax allowance for income tax (assuming his or her gross income is below the phaseout level; see Personal allowance) or the annual exemption for CGT for that tax year.

Income and gains that may be taxed on the remittance basis include the following:

• Earnings paid outside the UK and attributable to workdays outside the UK if the individuals are eligible to claim overseas workday relief (see Overseas workday relief)

• Earnings from a separate employment with a non-UK-resident employer if the duties are performed wholly outside the UK (however, under an anti-avoidance law, remuneration from many such contracts are typically taxed on the arising basis instead)

• Most common forms of investment income arising from assets or funds based outside the UK

• Capital gains arising from the disposal of assets located outside the UK

Organizing bank accounts. If the remittance basis applies, spe cial rules identify the source of funds remitted to the UK in a specific order from a so-called “mixed fund.” A “mixed fund” is a fund that contains monies from different sources, such as employment income, investment income, capital gains and “clean capital,” or income or gains of more than one UK tax year.

If monies are remitted to the UK, the following order applies in determining what has been brought to the UK:

• Employment income that has already been taxed in the UK

• General foreign earnings (for example, earnings relating to overseas workdays) that have not been subject to foreign taxes

• Specific foreign employment income (such as income derived from certain share incentives) that has not been subject to foreign taxes

• Foreign-investment income that has not been subject to foreign tax

• Foreign chargeable gains that have not been subject to foreign tax

• Employment income that has been subject to foreign tax

• Foreign-investment income that has been subject to foreign tax

• Foreign chargeable gains that have been subject to foreign tax

• Income or capital (including income or capital already taxed in the UK) not contained in the above categories, including under lying capital, such as preresidence earnings, investment income and capital gains

If possible, offshore accounts containing segregated funds (for example a separate account to hold proceeds from the disposal of assets chargeable to CGT) should be organized to avoid the com plications of the mixed fund rules.

A taxpayer can nominate a particular offshore account that meets certain conditions to be a “qualifying mixed fund account,” which simplifies the calculation of overseas workday relief. To

qualify, the types of income that the account may contain are restricted. Although the account may be held in joint names, only one of the account holders may contribute to it. Accounts that do not contain current year employment income that is a mixture of UK-source earnings and earnings that are eligible for overseas workday relief are not eligible for nomination. A taxpayer may have only one nominated bank account at one time and details of that nominated account must be provided to HMRC.

For most bank accounts, an analysis of what has been brought to the UK with each remittance must be made on a transactionby-transaction basis. For nominated bank accounts only, the analysis may be undertaken at the end of the UK tax year on the basis of cumulative figures for the year if all of the necessary conditions are met.

As a result of the complexities of the remittance basis and the mixed fund rules, and the potential interaction with double tax treaties, professional advice should be sought from the outset.

Income subject to tax. The taxation of various types of income is described below.

Employment income. An employee is prima facie taxed on all remuneration and benefits from employment received during a tax year. The UK tax year ends on 5 April. An employee is taxable not only on basic salary but also on most perquisites or benefits in kind, including company cars, meals, accommodation, tuition for dependent children, medical insurance premiums and imput ed interest on loans below market rates. Employer-paid education expenses for employees and life insurance premiums may be taxable in certain circumstances. Education allowances provided by employers to their expatriate and local employees’ children are chargeable to income tax and social security. However, contribu tions by an employer to a UK-registered pension scheme are normally not taxed if prescribed limits are not exceeded (see Pensions).

All salaries, fees and benefits in kind earned by directors are tax able as employment income. Individuals who are resident are taxed on their worldwide employment income. However, non-UK-domiciled individuals may be taxed on the remittance basis if they elect to be taxed on the remittance basis or if the remit tance basis applies without a claim (see Remittance basis). As a result, remuneration for duties performed outside the UK, such as income relating to overseas workdays, may potentially escape UK tax altogether if it is paid offshore and not subsequently remitted to or enjoyed in the UK. However, as explained above, overseas workday relief is only normally available for the UK tax year in which tax residence is established and the two subsequent UK tax years. Earnings derived by non-UK-domiciled individuals from UK duties are taxable in the UK regardless of whether the arising or remittance basis applies.

Remuneration from certain specific employment contracts for non-domiciled individuals with non-UK employers under which no duties of the employment are performed in the UK may also be taxable on the remittance basis, but following the reform of the related law, effective from 6 April 2014, additional conditions

must be met, which means that income from such contracts is much more likely to be taxable as it arises.

Individuals who are resident are taxed on their employment income for the year. However, some individuals may qualify for “split-year” treatment under which the employment income relating to periods before and after their UK employment and assignment can be excluded from UK taxation if certain conditions are met (see Split-year position).

Individuals who are nonresident in the UK are taxed on their earnings from UK employment duties only.

If employment income that is earned during a period of UK resi dence is paid when the individual is nonresident, the employment income remains taxable as though the individual is resident. It is the resident status of the employee when the individual earns the income that determines the taxability of the earnings and not the residence status of the employee at the time of payment unless HMRC has specifically agreed to the use of an alternative “cash basis” for tax-equalized employees.

If all of the conditions are satisfied, a double tax treaty may grant an exemption to exclude certain types of employment income from UK taxation for employees who are resident in another contracting state for the purpose of the treaty (see Section E).

Tax is normally deducted from employment income at source under the Pay-As-You-Earn (PAYE) system (see Section D).

Self-employment income. Self-employment income includes in come from a trade, profession or vocation. Whether a person is considered to be employed or self-employed is determined by the individual’s particular circumstances and as a matter of fact.

Tax is charged on the profits or gains of trades, professions and vocations carried out wholly or partly in the UK by UK residents. A nonresident individual is charged on any business exercised in the UK, or on the part of the trade carried on in the UK if the trade is carried on partly in the UK and partly overseas. A busi ness carried out wholly overseas by a UK-resident individual is regarded as foreign income and, consequently, may be taxed on the remittance basis if the individual is eligible and claims the remittance basis.

For tax purposes, profits are usually determined in accordance with normal accounting principles, but adjustments may be necessary.

A self-assessment system applies, which means that selfemployed individuals are generally taxed on the business profits earned during an accounting period ending in the current tax year.

From 6 April 2017, a GBP1,000 trading allowance is available. If the allowance covers all the trading income before expenses, the income is not taxable and not reportable. If this is not the case, the individual has the option of deducting his or her expenses or using the allowance. The allowance cannot be claimed by part nerships and cannot be claimed if rent-a-room relief is claimed.

Investment income. For tax years up to and including the 2015-16 tax year (ended 5 April 2016), income from most investments in the UK was received after tax was withheld or paid at source wholly or in part. Effective from 6 April 2016, a new regime applies.

For UK dividends, the tax credit regime that previously applied has also been abolished, effective from 6 April 2016. Instead, taxpayers are potentially entitled to a dividend allowance of up to GBP2,000 (GBP5,000 before 1 April 2017), so that up to the first GBP2,000 of dividend income received in the tax year is effec tively taxed at 0%. For dividends in excess of the allowance, the following rates apply:

• 7.5% for basic rate taxpayers

• 32.5% for higher rate taxpayers

• 38.1% for additional rate taxpayers

Although the first GBP2,000 of dividend income is tax-free, it is still taken into account in determining the taxpayer’s marginal tax rate and any entitlement to the personal savings allowance, as explained below.

Effective from 6 April 2016, a new personal savings allowance applies for other investment income such as bank interest.

UK banks and building societies are no longer required to deduct basic rate tax at source from any interest income paid by them. The personal savings allowance is set at GBP1,000 for basic rate taxpayers and GBP500 for higher rate taxpayers. It is not a deduction from taxable income, but it is effectively an amount of savings income that may be taxed at 0%. Additional rate taxpay ers (individuals with taxable income in excess of GBP150,000) are not entitled to a savings allowance.

Investment income in excess of the savings allowance is subject to income tax at the taxpayer’s marginal tax rate. See Rates for further details.

Any income from UK leased property is taxed as income at the applicable marginal rate of the taxpayer (see Rates). Leasing agents for nonresident landlords should withhold the basic tax rate of 20%, unless HMRC issues a direction to them authorizing gross payment to the landlord. Income tax on property income is charged on the net profit from rentals after deduction of qualifying expenses, such as repairs and maintenance but not deprecia tion, which is not a qualifying expense for UK tax purposes. Mortgage interest paid in prior years was a fully deductible expense, but this deduction is being phased out over three UK tax years, starting from 6 April 2017, so that from 6 April 2020, it is no longer deductible. An alternative deduction that will be lim ited to a maximum of basic rate tax relief on the disallowed mortgage interest will apply instead.

The net profit is calculated in accordance with UK rules even if the rental income arises from foreign leased property and is taxed on the remittance basis. A deduction may be claimed instead for actual expenditure on replacement of furniture and fittings used in a property income business.

A GBP1,000 property allowance is available. If the allowance covers all the property income before expenses, the income is not taxable and not reportable. If this is not the case, the individual has the choice of deducting his or her expenses or the allowance.

UK domiciled and resident individuals are usually liable to UK tax on their worldwide investment income.

Nonresident individuals are liable to UK tax on their investment income from UK sources only, regardless of their domicile status.

Individuals who are not domiciled but are resident in the UK are also usually liable to UK tax on investment income from UK sources. However, they may claim to have their investment income from any non-UK-source income taxed on the remittance basis so that they are taxed on their investment income from any non-UK sources only to the extent that it is remitted to or enjoyed in the UK.

If all the conditions are satisfied, a double tax treaty may grant an exemption to exclude certain types of investment income from UK taxation for individuals who are resident in the other con tracting state for purposes of the treaty (see Section E).

Stock options and share-based incentive schemes. Detailed, complicated legislation applies to the taxation of share incentives provided to employees by their employers. The legislation applies to “securities,” which includes, but is not limited to, shares in the employer company. The application depends on the specific plan rules. As a result, professional advice should be taken on the tax and legal implications in any particular case. The following dis cussion is for general guidance only.

The UK introduced reforms of the law that governs the taxation of certain equity-based compensation for internationally mobile employees, which took effect on 6 April 2015. This new regime applies to all chargeable events, including awards vesting or being exercised, occurring on or after 6 April 2015 and generally seeks to tax the proportion of any award attributable to periods of UK tax residence, together with any amounts attributable to UK work during periods of nonresidence. The regime described below applies to all awards if the taxable event occurs on or after 6 April 2015, regardless of the original date of grant.

Unapproved employee share option schemes and restricted stock units. Unapproved employee share options are not taxed on grant, but when the chargeable event occurs. This is usually when the option is exercised but may include other events, such as the settlement in cash of the option by the employer, rather than the exercise of the option to acquire shares.

Any rights to acquire securities are now likely to be taxed as employment-related securities options on exercise of the option or, for other rights to acquire, such as restricted stock units, when the employee becomes entitled to the award. The UK taxable proportion of the award is calculated by allocating the award to the UK tax years over which it was earned and apportioning the income by tax year between UK and non-UK elements. Any parts that are not attributable either to periods of UK residence or to UK workdays are excluded from UK tax. If employees are enti tled to overseas workday relief, they may also be eligible for a

form of overseas workday relief with respect to their overseas workdays during UK-resident periods. It may also be possible to rely on a double tax treaty to limit the UK’s right to tax amounts attributable to non-UK duties if the employee is treaty nonresi dent in the UK at the time of the chargeable event.

The employer must withhold income tax on chargeable events, such as exercise, if the underlying securities are considered to be Readily Convertible Assets for UK tax purposes, via the PAYE system.

The social security position is more complex. However, if rele vant and for employees who are within the scope of UK social security, it is possible for employers to enter into agreements with their employees to pass on the secondary (or employer’s) social security liability to the employee. Under the agreement, the employee pays any employer-owed social security contributions due on the exercise of the option; the employee may then deduct the contributions paid when calculating the amount of the gain liable to UK income tax.

If awards of shares are made, rather than share options, the value of the shares awarded to an employee is usually subject to income tax and social security contributions (if applicable) on the date of the award. The position may be more complex if shares are restricted, such as being at risk of forfeiture. If shares are at risk of forfeiture, the liability is usually deferred until the restrictions lift, assuming this happens within five years of the grant. Employers and employees can instead jointly make elections so that the taxes on the award are charged up front on the value ignoring the restrictions. This is an extremely complex area, and professional advice should be obtained in all cases.

For the purpose of any treaty apportionment, share-option income is typically sourced from grant to vesting, assuming that the individual remains in employment with a group company throughout this period. By exception, the UK continues to apply a grant-to-exercise sourcing period for gains under its treaties with Japan and the United States.

In all the above cases, the law is complex, and professional advice should be obtained. An apprenticeship levy is also poten tially payable. See Apprentice levy in Section B.

Tax-advantaged employee share schemes. The UK currently has several employee share schemes that can have tax-advantaged status. Income from tax-advantaged schemes that is realized in an approved manner is usually not subject to income tax or to National Insurance contributions. Tax-advantaged plans include, among others, the Company Share Option Plan (CSOP), the Save As You Earn (SAYE) Share Option Scheme, the Share Incentive Plan (SIP; formerly the All Employee Share Ownership Plan) and the Enterprise Management Incentives (EMI). Each plan has different characteristics and is consequently relevant to particular employer and employee circumstances. The advantage of these schemes over unapproved schemes is that they generally put shares into the hands of employees free of income tax and National Insurance. A disadvantage is that the value of awards that may be made to employees is limited.

CGT on employee share schemes. CGT may be due if the shares acquired from employee share schemes are sold and if the employee is within scope of CGT at the time (broadly, if he or she is resident or only temporarily nonresident). In general, the underlying shares acquired from tax-advantaged schemes are still subject to capital gains tax when they are sold. However, shares in a Share Incentive Plan subject to a minimum holding period may be exempt from UK CGT on disposal.

For shares acquired from the exercise of options, the base cost of the shares sold for UK capital gains tax purposes is increased by the amount of any income that was subject to UK income tax at exercise. More complex base cost rules apply if employees hold shares acquired by them on different dates at different prices.

The employer does not have any withholding obligation with respect to CGT.

Annual filing. Any plans under which awards of securities are made to employees should be registered with HMRC by the relevant employer. Annual reports must also be filed by 6 July following the end of the relevant UK tax year (for example, by 6 July 2021 for the 2020-21 tax year) to report all reportable events: in the UK tax year, including, but not limited to, the acquisition of shares or the exercise of share options. It is note worthy that nil returns must be filed if awards remain outstand ing, but no reportable events occur in the year. Plans must be deregistered once completed.

Pensions. In terms of UK tax treatment, pension schemes may broadly be divided into the following three groups:

• UK registered pension plans and international equivalents

• Unapproved (for UK-tax) pension schemes

• Wholly unfunded schemes

UK-registered plans. No limit is imposed on the absolute amount that may be contributed to UK-registered pension schemes, but an annual allowance charge applies to restrict the tax relief avail able if the contributions or increase in accrual in the pension input period (PIP) ending in a tax year exceeds the permitted annual allowance. For UK-registered schemes, it was possible for tax years up to and including the 2015-16 tax year for the PIP to end on a chosen date, nominated by the pension scheme admin istrator (or in the case of money purchase arrangements only, either the pension scheme administrator or the individual scheme member). For the 2016-17 tax year (beginning 6 April 2016) and future years, all PIPs are aligned with the UK tax year. To align PIPs with tax years, a transitional rule applied for the 2015-16 tax year, which for annual allowance purposes only, split the tax year into two separate periods before and after 8 July 2015.

Pension inputs are determined for a defined contribution scheme by adding together any employer and employee contributions and, for a defined benefit scheme, by multiplying the inflationadjusted increase in the accrued annual pension value over the course of the PIP (which from 6 April 2016 is the tax year) by a factor of 16 (plus the increase in any separate lump-sum entitle ment) to arrive at the value by which the fund is deemed to have increased over that period. The total of the pension inputs to all

relevant pension schemes for a particular individual is measured against his or her annual allowance for the relevant tax year, and any excess is subject to an annual allowance charge at his or her marginal income tax rate.

Effective from 6 April 2011, the annual allowance was limited to GBP50,000. However, this was decreased to GBP40,000, effective from 6 April 2014. For the purposes of the 2015-16 tax year transitional rule, the annual allowance was GBP80,000 for pen sion inputs falling into the pre-8 July 2015 period and, to the extent that the full GBP80,000 was not used, a maximum of GBP40,000 could be carried forward and used in the post-8 July 2015 period. Effective from 6 April 2016, a further restriction applies so that for most persons with UK taxable income and pension inputs (as adjusted) of at least GBP150,000 (this was increased to GBP240,000 from 6 April 2020), the annual allow ance is reduced by GBP1 for every GBP2 over the income limit, subject to a minimum allowance of GBP10,000 (this was reduced to GBP4,000 from 6 April 2020). Therefore, the minimum annual allowance is currently EUR4,000. Any unused annual allowances from the preceding three UK tax years may be carried forward to offset any excess pension inputs in the current tax year.

An overall limit is imposed on the maximum amount that may be saved tax efficiently over a lifetime, known as the lifetime allowance. For the 2011–12 tax year, this was set at GBP1,800,000. However, it was reduced to GBP1,500,000, effective from 6 April 2012, and was reduced further to GBP1,250,000, effective from 6 April 2014. Effective from 6 April 2016, it is further reduced to GBP1 million. Since the 2018-19 tax year, the standard lifetime allowance has been increased annually from GBP1 million in line with UK inflation. It was GBP1,030,000 for the 2018-19 tax year, GBP1,055,000 for the 2019-20 tax year and GBP1,073,100 for the 2020-21 tax year (and has since remained at that level). In the UK Budget 2021, the government announced that the current standard lifetime allowance limit of EUR1,073,100 will be fro zen until April 2026 without any inflationary increases. The level of pension saving is tested against the individual’s available life time allowance if a benefit crystallization event occurs, such as the individual beginning to draw a pension, and a lifetime allow ance charge is levied if the lifetime allowance is exceeded. Some individuals may have a lifetime allowance higher than the stan dard lifetime allowance.

International equivalents. Non-UK schemes that the UK law regards as being like a UK scheme are subject to a similar regime to the one described above, but with slightly different rules. For example, for non-UK schemes, by law, the PIP has always been the UK tax year. The following four types of schemes may fall within this group:

• Schemes for which Migrant Member Relief (MMR) has been claimed.

• Schemes for which transitional corresponding acceptance (TCR) has been claimed.

• Schemes for which tax relief on contributions has been claimed under an appropriate double tax treaty.

• Overseas pension schemes (as defined) with employer contri butions that are not taxable on the employee because the

scheme provides only death and retirement benefits. In very broad terms, an overseas pension scheme is usually one that is subject to a system of regulation and tax recognition in the country in which it is established and that is open to local resi dents in that country.

For schemes for which relief is available under MMR, TCR or a double tax treaty, employer contributions are also usually deduct ible for corporation tax purposes. However, for the employee personally, tax relief for total pension inputs are subject to the annual allowance and lifetime allowance limits described above. In addition, if after leaving the UK and not having been nonresi dent for a period of 10 complete UK tax years (or 5 complete UK tax years in the case of funds for which UK relief was claimed before 6 April 2017), an individual who has had UK tax relief takes benefits from his or her pension scheme in a form that would not be permitted for a UK-registered pension scheme (including taking any form of loan or making a transfer to another non-UK scheme that is not a qualifying scheme for UK tax purposes); a 55% unauthorized payment charge applies to an amount up to the amount of the total UK tax-relieved funds in the scheme.

Other pension schemes. Other schemes that are not UK-registered schemes and that are not schemes to which any of the reliefs for international equivalents are available are typically subject to tax under the UK’s “disguised remuneration” regime, unless they can be shown to be wholly unfunded. This usually means that if any contributions made to such a scheme are with respect to, or oth erwise earmarked for, an employee, the employee must be taxed on the contributions through PAYE at the time of contribution. For a funded defined benefit scheme, the employee is taxed on the value of the accrued benefit (unless the scheme provides only death and retirement benefits), but normally this tax charge is not subject to PAYE withholding.

Wholly unfunded schemes. Wholly unfunded schemes are usually outside the disguised remuneration rules but there are certain anti-avoidance provisions that could apply depending on the spe cifics of the scheme. It is noteworthy that an extended definition of funding for this purpose is provided. Under this definition, if, for example, the employer provides an asset as security for the scheme or if the employer makes any form of promise or under taking to provide funding to a third party in the future, this is subject to UK tax, with PAYE withholding, in the same way as if the scheme was funded immediately.

Benefits paid from pension schemes for which an employee has had contributions or has accrued entitlement during a period when he or she was a UK resident or was performing duties in the UK is likely to be subject to UK tax, often with a correspond ing PAYE withholding obligation for the employer or UK host employer. These UK tax charges might be blocked by the pen sions article of a double tax treaty in some cases, but this does not automatically remove the employer’s PAYE withholding obli gation unless the pension scheme member obtains clearance in advance from the UK tax authorities.

The law with respect to pension schemes in the UK is extremely complex. As a result, specific advice should be obtained in all cases.

Capital gains tax. An individual who is resident and domiciled or deemed to be domiciled in the UK is taxed on gains arising on disposals of assets located anywhere in the world. However, an individual who is resident but not domiciled in the UK and who elects to be taxed on the remittance basis for that year is taxed on disposals of overseas assets only if the proceeds are remitted to the UK (see Remittance basis in Section A). In this case, the gain element of the sale proceeds is regarded as being remitted ahead of the capital. All individuals who are subject to UK capital gains tax (CGT) are entitled to an annual CGT exemption, but this is lost if the remittance basis is claimed.

From 6 April 2020, when a UK resident disposes of UK land and a CGT liability arises, a return should be made and the CGT tax paid within 30 days after completion of the disposal.

An individual who is nonresident is not normally subject to UK CGT (however, see Years of departure and arrival, and tempo rary nonresidence rule and Disposal of UK residential property by nonresidents).

Years of departure and arrival, and temporary nonresidence rule Effective from 6 April 2013, individuals who leave the UK during the year, who are considered resident before departure and who qualify for split-year treatment under the SRT are not nor mally chargeable to CGT on gains realized in the nonresident part of the tax year. However, individuals who, on departure, had been resident in the UK for four out of seven of the preceding UK tax years remain subject to “temporary nonresidence” rules if their period of absence from the UK does not last for at least five years.

If the temporary nonresidence rules apply, gains arising on the disposal of assets owned before the period of temporary nonresi dence that are sold during the period of temporary nonresidence are subject to CGT in the UK tax year in which the taxpayer returns to the UK and resumes tax residence (year of arrival). Gains on the disposal of assets acquired in a period of nonresi dence and sold while the individual is still nonresident are not subject to UK CGT. Likewise, individuals who arrive in the UK during the year, who are considered resident, who are eligible for split-year treatment and who are not subject to temporary non residence rules are normally taxed only on gains realized after the date on which they are treated as becoming UK tax resident under the split-year provisions.

Taxpayers who left the UK before 6 April 2013 but who return to the UK before a period of five complete UK tax years elapses are subject to the temporary nonresidence regime as it applied before the SRT on their return to the UK. They should obtain specific advice regarding this law, as necessary.

Reliefs. Various reliefs are available for CGT. The most common relief is main residence relief, which exempts all or part of a gain

that arises on a property that an individual has used as his only or main home, if certain conditions are met.

Business Asset Disposal Relief is a relief available to taxpayers who sell or give away their businesses. This relief aims to reduce the rate of CGT on qualifying disposals to 10%. Gains are eligi ble for Business Asset Disposal Relief up to a maximum lifetime limit, which is currently GBP1 million.

Many other reliefs are available, including rollover relief for disposals of certain business assets.

Foreign currency. Foreign currency is generally a chargeable asset for CGT purposes unless it is acquired for specific per sonal use outside the UK. However, currency gains on cash balances held in a non-sterling bank account are also specifically excluded from CGT by law, effective from the 2012-13 tax year, if such funds are retained for personal use only.

Annual exempt amount. The annual exempt amount for the 2021-22 tax year is GBP12,300. This exemption is forfeited if a claim for the remittance basis is made for the tax year.

Rates. For gains realized on all disposals other than those realized on residential property disposals made during the 2021-22 tax year, a 10% rate applies to chargeable gains that fall within the individual’s basic rate band limit, after taking into account income as calculated for income tax purposes (see Rates below). Chargeable gains in excess of the basic rate band are charged at a rate of 20%. For gains on residential property and earned inter est, the applicable rates are 18% for basic rate taxpayers and 28% for higher and additional rate taxpayers.

Capital losses. Capital losses can be automatically deducted from capital gains in the same year. Any allowable unused capital losses may be carried forward indefinitely to relieve future gains. Losses realized by non-domiciled taxpayers who have claimed the remittance basis are not normally regarded as capital losses except in the circumstances discussed below.

Effective from 6 April 2008, for individuals who elect to be taxed on the remittance basis, capital losses from the disposal of assets not located in the UK cannot be offset against chargeable gains in the UK, unless they make an election. The election potentially allows individuals to claim relief for capital losses on the dis posal of any assets not located in the UK. However, the election would require them to track and possibly disclose the details of their worldwide capital transactions to HMRC. Any losses from the disposal of assets located in the UK are first offset against any unremitted foreign gains in preference to any UK gains, thereby increasing the amount of UK CGT payable. As a result, this election might not be beneficial if an individual has signifi cant UK gains and losses.

The election must be made with respect to the first tax year in which individuals are claiming the remittance basis of taxation after 6 April 2008 (the election can be made up to four years after the end of the tax year the remittance basis is first claimed), regardless of whether they have any capital losses arising in that year. The election is irrevocable after it is made.

Disposal of UK property by nonresidents. Effective from April 2015, the UK government introduced nonresident Capital Gains Tax (NRCGT) to bring nonresidents into the charge of CGT on gains made on the disposal of UK residential property.

From April 2019, the UK government has widened the scope of NRCGT to bring nonresidents into the charge of UK CGT on gains made on the direct or indirect disposal of UK immovable property.

Direct disposals. From April 2019, direct disposals of UK land and buildings are subject to UK CGT, regardless of the type of the property or the residence of the disposing individual.

For nonresidential property, the property is rebased to market value at 6 April 2019, meaning that only the change in value from that date onward will be subject to UK tax. Nonresidents also have the option to use original cost rather than the April 2019 value if this results in a more favorable outcome. Sales of resi dential property do not benefit from a rebasing in April 2019; however, a further election is available to calculate the taxable gain on a proportionate basis.

Indirect disposals. In addition, indirect disposals of UK land are subject to UK CGT if the disposal is of an entity that is consid ered “property rich” and if the nonresident owner holds or has held at least a 25% interest in that entity at some point within the two years prior to the sale of the entity. For all indirect disposals of “property rich” entities, the value of shares is rebased to the April 2019 market value.

For these purposes, an entity is considered “property rich” if, at the time of disposal, 75% or more of the value of the entity being disposed of is directly or indirectly derived from UK land. The 75% test is based on the market value of the underlying assets held by the entity at the time of its disposal.

The rules only bring nonresidents into the scope of UK tax if they hold or have held an interest of 25% or greater in the “property rich entity.” The holdings of connected parties or parties “acting together” need to be considered in determining whether the 25% test is met. Disposals with an appropriate connection to a collec tive investment vehicle (potentially including limited partner ships, unit trusts and UK real estate investment trusts) do not benefit from the 25% ownership test such that even a disposal of a small percentage holding would fall within the rules.

Generally, taxing rights on disposal are allocated to the UK. However, certain double tax treaties include an exemption for disposals of listed shares.

Compliance. Individuals will need to file an NRCGT return and settle any tax due within 30 days after the disposal. Penalties for late filing and late payment apply. Professional advice should be taken as necessary.

Deductions

Deductible expenses. Under general rules, a deduction in deter mining taxable earnings is allowed for any amount if it is

incurred wholly, exclusively and necessarily in the performance of the duties of the employment. The rule relating to what is regarded as “necessary” in the performance of the duties of employment is very tightly drawn.

Special rules relate to various items, including, but not limited to, travel and subsistence, relocation and overseas medical costs. The following are the common types of deductions and exemptions:

• Travel and subsistence costs incurred when an employee works at a temporary workplace (that is, a workplace where an em ployee expects to work for no longer than 24 months and such period does not form all or nearly all the employment period)

• The cost of employee and family return trips home (subject to certain limitations with respect to the duration of claim and family trips; a non-UK-domiciled individual who performs employment duties in the UK is eligible to claim home-leave expenses with respect to his or her family for qualifying jour neys that are completed within five years of the date of his or her arrival in the UK)

• Qualifying relocation expenses of up to GBP8,000

• Work-related training (for employees only)

• Professional subscriptions

• Business mileage allowance for using an employee’s private car to travel in the performance of employment duties

• Overseas medical costs (for UK employees on foreign assignment)

Certain conditions may need to be satisfied before the above expenses can be claimed as deductions. As a result, professional advice should be sought before making these claims.

Personal allowance. UK-resident taxpayers are normally entitled to an annual tax-free personal allowance. The amount is GBP12,570 for the 2021-22 tax year. Each individual has his or her own personal allowance. In addition, if an individual is tax resident for only part of the UK tax year, he or she will neverthe less receive his or her full annual tax-free personal allowance. However, effective from 6 April 2010, the personal allowance is reduced by GBP1 for every GBP2 of “adjusted net income” over GBP100,000. Consequently, individuals with “adjusted net income” of GBP125,140 or more do not receive any personal allowance for the 2021-22 tax year.

In addition, as mentioned in Remittance basis, an individual who claims the remittance basis loses his or her personal allowance unless the remittance basis applies without a claim. In this cir cumstance, the personal allowance may, in some cases, be rein stated as a result of the specific provisions of a double tax treaty (see Section E), but typically remains subject to the phaseout because of income levels. Not all treaties contain the necessary provisions. Consequently, professional advice should be sought if an individual is considering this option.

Nonresident individuals are generally entitled to a UK personal allowance (subject to the same income phaseout) if they satisfy either of the following conditions:

• They are nationals of the UK or a member country of the EEA.

• They are entitled to the allowance under specific double tax treaty provisions that cover personal allowances.

People born before 6 April 1948 may be entitled to a larger per sonal allowance.

Married couples also qualify for the married couple’s allowance if one or both of the spouses were born before 6 April 1935. The maximum amount of this allowance is GBP9,075, depending on the taxpayers’ age and income. This relief may be taken only at a rate of 10%. In some circumstances, married couples who pay tax at no more than the basic rate may also be able to transfer the unused personal allowance to their spouse or civil partner.

Relief for alimony and maintenance payments may be available if an individual or his or her ex-spouse was born before 6 April 1935 and if certain other conditions are met.

Business deductions. Expenses incurred for a trade, profession or vocation are generally only available as deductions in determin ing taxable profit or allowable loss if they are incurred wholly and exclusively for the purpose of the trade, profession or voca tion. In addition, certain types of expenses are not allowed as deductions. These include the following:

• Entertainment and gifts (except for certain inexpensive gifts bearing conspicuous advertising)

• Depreciation, other than capital allowances

• Nonbusiness expenses or the private-use proportion of expenses

• Costs of a capital nature

• Profits or capital withdrawn from the business

Although deductions for depreciation and expenditure of a capi tal nature are not allowed, deductions in the form of capital allow ances (tax depreciation) may be available.

Rates. The following are the income tax rates for the 2021-22 tax year.

UK excluding Scotland

Taxable income Tax rate Tax due Cumulative tax due GBP % GBP GBP

First 37,700 20 7,540 7,540

Next 112,300 40 44,920 52,460

Above 150,000 45

Scotland

Taxable income Tax rate Tax due Cumulative tax due GBP % GBP GBP

First 2,097 19 398.43 398.43

Next 10,629 20 2,125.80 2,524.23

Next 18,366 21 3,856.86 6,381.09

Next 118,908 41 48,752.28 55,133.37

Above 150,000 46

The 2018-2019 tax year was the first year that the Scottish Parliament used its powers to impose different rates and thresh olds from the rest of the UK.

From 6 April 2019, the Welsh Assembly can set part of the income tax rate. The current rates for Welsh taxpayers are the same as the UK excluding Scotland rates shown above.

Relief for losses. The most common types of losses are trading losses, property losses and capital losses.

Trading losses. Trading losses may be offset against a taxpayer’s total taxable income. The taxpayer may choose to offset the loss in the year in which the loss is incurred and/or in the preceding year. If the current year loss cannot be fully offset against the current or preceding year trading income, the balance can be used to offset capital gains for that year (after the current year capital loss has been used). For married couples, losses may be offset only against the income of the spouse incurring the loss. Special rules provide for the carryback of losses incurred in early trading years. In addition, a taxpayer may carry forward unused trading losses to offset future income from the same trade. Special rules apply at the cessation of an individual’s trade or business.

Property losses. If an individual has more than one rental prop erty, all profits and losses from properties that are leased commercially in the tax year are pooled together to give an overall profit or loss for the year. Special rules can apply to properties leased at less than a commercial rent and to furnished holiday leases. Typically, other property losses can be carried forward and offset against property income from a UK property business in future tax years. A property loss may not be carried back to a previous tax year.

Capital losses. For details regarding capital losses, see Capital gains tax.

B. Other taxes

Taxes on property

Real estate transfer taxes. The UK levies various real estate transfer taxes on transactions involving the acquisition of any estate, interest, right or power in or over land in the UK and certain partnerships that hold UK real estate. The real estate transfer taxes cover the following:

• Real estate situated in England and Northern Ireland is subject to stamp duty land tax (SDLT).

• Real estate situated in Scotland is subject to land and building transaction tax (LBTT), which is effective from 1 April 2015 (prior to this date, SDLT applied).

• Real estate situated in Wales is subject to land transaction tax (LTT), which is effective from 1 April 2018 (prior to this date, SDLT applied).

Although these taxes are similar, differences exist, most notably to the rates and bands. In all cases, the tax rate depends on whether the property is residential (suitable for residential or in the process of being constructed or adapted for residential prop erty) with higher rates applying to such property. The rates are up to 15% for residential property (the rate depends on where the property is situated and the profile of the buyer).

From April 2021, an additional 2% rate will apply to SDLT if the buyer is regarded as a “foreign buyer.”

For nonresidential property, the rates are up to 6% (the rate depends on where the property is situated).

The purchaser is liable to the real estate transfer taxes.

Real estate transfer taxes apply at the applicable rates based on the value-added tax (VAT)-inclusive consideration given. In cer tain cases, the taxes are levied based on the market value of the real estate interest acquired. In the case of grant of a lease, real estate transfer taxes also apply at the applicable rates on the net present value of the rent payable under the lease.

Annual tax on enveloped dwellings. Since 1 April 2013, an annual tax on enveloped dwellings (ATED) applies to non-natural persons holding UK residential property (if an individual does not own the residential property directly, but owns it, for exam ple, through a company, this tax may apply).

There was an initial valuation date of 1 April 2012, which applied to properties valued at more than GBP2 million owned on or before this date. The regime was extended several times and its current form is that effective from 1 April 2016, properties val ued at more than GBP500,000 as of 1 April 2012 (or on purchase if later) are in scope of the ATED.

There are fixed revaluation dates whereby property (including property acquired after 1 April 2012) must be revalued every five years from 1 April 2012. A subsequent revaluation occurred on 1 April 2017 and is used effective from the ATED year beginning on 1 April 2018. Accordingly, for the ATED period beginning in April 2019, properties valued at more than GBP500,000 as of 1 April 2017 (or on purchase if later) are in scope of the ATED.

The following are the chargeable amounts of ATED for 1 April 2021 through 31 March 2022.

Property value Annual charge (GBP)

More than GBP500,000 but not more than GBP1 million 3,700 More than GBP1 million but not more than GBP2 million 7,500 More than GBP2 million but not more than GBP5 million 25,300 More than GBP5 million but not more than GBP10 million 59,100 More than GBP10 million but not more than GBP20 million 118,600 More than GBP20 million 237,400

Prior to 6 April 2019, non-natural persons within the charge of the ATED were also liable to an ATED-related CGT charge at a rate of 28% in relation to certain disposals of a UK property with a value of more than GBP500,000 at a gain (also, see Capital gains tax in Section A). From 6 April 2019, ATED-related CGT has been abolished and disposals of UK residential property are brought within the nonresident CGT and corporation tax regime.

Certain reliefs and exemptions from ATED are available (for example, to bona fide property rental businesses, property developers and property traders).

Inheritance and gift tax. Inheritance tax (IHT) may be levied on the estate of a deceased person who was domiciled or deemed domiciled in the UK or who was not domiciled in the UK, but owned assets situated there. An individual who does not have a UK domicile for IHT purposes is taxed only on UK-situated assets and, from 6 April 2017, “UK residential property interests” held via certain non-UK trusts, companies and partnerships. For these purposes, a “UK residential property interest” is widely defined and includes certain loans and collateral provided with respect to UK residential property.

A UK domicile is acquired at birth when the individual’s father (if the child’s parents are married at birth) has a UK domicile. An individual may change this by severing all ties with the UK and acquiring a “domicile of choice” elsewhere. Similarly, an individual domiciled outside the UK may acquire a UK domicile of choice by forming an intent to remain in the UK permanently or indefinitely. For IHT purposes, UK domicile is extended to apply to non-domiciled individuals who were resident in the UK for 15 of the past 20 tax years with effect from 6 April 2017 (previously, 17 out of the last 20 years for the period up to 6 April 2017).

Other recent changes include that an individual born in the UK with a UK domicile of origin at birth, who later acquires a nonUK domicile of choice, is treated as being UK domiciled for IHT purposes when the individual resumes UK residence (if the indi vidual has been UK resident for at least one of the two preceding tax years).

In addition, there is a “run-off period” during which deemed domicile status for UK IHT purposes endures for a non-UK resi dent. This applies if deemed domicile status has been acquired under the 15-out-of-20-years rule. Once deemed domiciled, the individual will need to spend at least four UK tax years outside the UK before losing his or her deemed tax domicile status for UK IHT.

The inheritance tax rate is 40% for the estate on death. If a will contains a charitable legacy leaving at least 10% of an individu al’s estate to charity, this reduces the inheritance tax rate applied to that estate by 10%. This means that the effective tax rate is reduced to 36%. A nil rate band of GBP325,000 applies for 2021-22. Any unused allowance of a spouse or civil partner may be transferred to the second deceased’s estate proportionally, provided the second death occurs after 9 October 2007.

Effective from 6 April 2017, a new main residence transferable nil-rate band applies if a “main residence” is passed on to a direct descendant. Broadly, this means a child or grandchild and includes adopted children, foster children and stepchildren. It does not include nieces and nephews. The definition of main residence is very similar to the definition currently applicable to principal private residence relief for CGT. A property that was never a residence of the deceased such as a buy-to-lease property will not qualify. The allowance was initially set at GBP100,000 in 2017-18, increasing to GBP125,000 in 2018-19, GBP150,000 in 2019-20 and to GBP175,000 in 2020-21. The allowance for

2021-22 remains at EUR175,000. A tapered withdrawal of the additional nil-rate band is provided for estates with a net value of more than GBP2 million. The withdrawal rate is GBP1 for every GBP2 over this threshold.

IHT is also levied on gifts made by the deceased within seven years before death and on certain other lifetime gifts.

and deductions are available for inter vivos gifts and for estate transfers at death. Gifts between spouses are exempt, but if the transferor is domiciled in the UK and if the transferee is not domiciled there, the spousal exemption is limited to the same amount as the prevailing nil rate band, which is currently GBP325,000 (GBP55,000 before 6 April 2013). Non-UKdomiciled individuals with UK-domiciled spouses may make an election to be treated as having a UK domicile for IHT purposes in order to obtain the full spouse exemption. Inter vivos transfers over the nil rate band into all types of family trusts are subject to IHT at 20%, subject to certain limited exemptions. Taper relief provisions to reduce the IHT payable on gifts made within seven years before death are shown in the following table.

Percentage of relief on Exceeding Not exceeding IHT due

Years between gift and death

Business Relief and Agricultural Relief are available at either 100% or 50% on the transfers of certain assets if various condi tions are satisfied.

To prevent double taxation, the UK has entered into IHT or estate tax treaties with the following jurisdictions.

France Netherlands Sweden India Pakistan Switzerland Ireland South Africa United States Italy

Unilateral relief may also be available.

Apprenticeship levy. The apprenticeship levy, effective from 6 April 2017, is a charge on UK employers to fund apprentice ships. It potentially affects all employers across all industry sectors, regardless of whether apprentices are employed. The levy is charged at a rate of 0.5% of an employer’s “pay bill,” which is defined as earnings subject to Class 1 secondary National Insurance contributions (UK employer social security contribu tions on cash and deemed cash payments, but not on benefits in kind; also, see Section C). All employers receive an annual allow ance of GBP15,000 to offset against their levy, meaning that only those employers with a pay bill in excess of GBP3 million per tax year actually have to pay the levy. Groups of connected compa nies are considered one employer for the purposes of calculating

the levy and have only one allowance to cover all of the group companies’ payrolls.

Employers need to calculate, report and pay the levy on a month ly basis via the normal payroll process alongside the normal PAYE (see Section D) and National Insurance contribution remit tances. The levy, which is an employer charge, cannot be deducted from the earnings of an employee.

C. Social security Contributions. In general, National Insurance contributions are payable on the earnings of individuals who work in the UK. Special arrangements apply to individuals working temporarily in or outside of the UK. Under certain conditions, an employee is exempt from contributions for the first 52 weeks of employment in the UK.

The contribution for an employed individual is made in two parts — a primary contribution from the employee and a secondary contribution from the employer.

For 2021-22, the employee contribution is payable at a rate of 12% on weekly earnings between GBP184 and GBP967 and at a rate of 2% on weekly earnings in excess of GBP967.

An employer contributes at a rate of 13.8% on an employee’s earnings above GBP170 per week, with no ceiling.

Except under certain circumstances related to the exercise of a share option or the award of restricted securities, the employer is not entitled to reimbursement for any secondary contributions made, but these contributions are an allowable expense for pur poses of determining the employer’s income tax or corporation tax. Contributions are collected under the PAYE system (see Section D).

Since 6 April 2015, employers no longer pay employers’ National Insurance contributions on weekly earnings up to the upper earn ings limit (GBP967 for 2021-22) for employees under the age of 21. From 6 April 2016, this exemption from employer National Insurance contributions also applies to apprentices under the age of 25. Employers’ contributions are payable at a rate of 13.8% on weekly earnings above GBP967.

Employers must also pay National Insurance contributions on the provision of taxable benefits in kind (for example, employerprovided cars or housing). Class 1A contributions are also pay able at 13.8% on the cash equivalent of the benefit provided.

Different rules apply to self-employed individuals. For 2021-22, a weekly contribution of GBP3.05 is due if annual profits are expected to exceed GBP6,515. In addition, a self-employed indi vidual must make a profit-related contribution on business prof its or gains, which is collected together with income tax. The 2021-22 profit-related contribution rates are 9% on annual prof its ranging from GBP9,569 to GBP50,270 and 2% on annual profits in excess of GBP50,270.

Nonresident self-employed individuals are not subject to profitrelated contributions.

2021-22

Insurance

Employee’s contributions

weekly earnings

To

Employer’s contributions

To rate

Employer National Insurance contributions are only payable on earnings above GBP967 for employees under

under the age of 25.

Totalization agreements. From 1 January 2021, contribution lia bility for employees and self-employed individuals moving to or from the UK varies, depending on whether the individual is covered by the old EC social security legislation by virtue of the UK/EU WA (and equivalent Citizens Rights Agreement [CRA]/ Separation Agreement [SA] with Switzerland and the EEA coun tries), the new social security legislation in the UK/EU TCA or a reciprocal agreement, or whether the assignment is to or from a country with which the UK has not entered into a social security agreement.

Each of these categories is discussed below.

EC social security legislation. EU social security legislation (EEC Council Regulation No. 883/2004) is effective from 1 May 2010 until 31 December 2020 and beyond for certain individuals covered by the WA, CRA or SA. This legislation applies to all inter-EU moves for EU nationals. This legislation covers moves to Switzerland, effective from 1 April 2012, and moves to Iceland, Liechtenstein and Norway, effective from 1 June 2012. However, the UK did not extend the application of EEC Council Regulation No. 883/2004 to non-EU nationals. The previous EU legislation (EEC Council Regulation No. 1408/71) continues to apply to non-EU nationals if grandfathering under the WA is in point (although the new TCA will apply to such individuals).

Under the old EU legislation, a covered worker normally pays social security contributions in a single member country, usually the country where his or her employment duties are performed, even though he or she may not live there.

Under an exception to this rule, a worker seconded to work in the UK from another member state normally remained subject to social security contributions in his or her home country if the assignment was for 12 months or less (if Regulation 1408/71 applied) or 24 months or less (if Regulation 883/2004 applied). Individuals may remain in their home country scheme for sig nificantly longer periods if they are deemed to work partly in more than one member state (multistate workers), or if they are considered special cases by virtue of specific skills or knowledge.

Cessation of UK membership in the EU (Brexit). Effective from 1 January 2021, the UK and the EU only (see information regarding the EEA and Switzerland below) are subject to new rules under the UK/EU TCA. As under the old rules, a covered worker normally pays social security contributions in a single member country only, and this is usually the country where his or her employment duties are performed, even though he or she may not live there.

Under the new rules, exceptions to that principle still apply but are somewhat diluted in comparison to the old rules.

A worker seconded to work in the UK from an EU member state will only remain subject to social security contributions in his or her home country if the assignment is for 24 months or less and if the home state has opted in to the new “detached worker” pro visions.

It is noteworthy that as of April 2021, every EU member state is opted in to the new “detached worker” rules in the TCA.

Individuals may no longer remain in their home country social security scheme for periods expected to exceed 24 months at the outset or for periods that are extended beyond 24 months.

The only exception to this is for workers who work partly in more than one EU member state (multistate workers) for which the old rules are mainly carried forward.

These new rules do not apply to the EEA countries, which are Iceland, Liechtenstein and Norway, or Switzerland. In the inter im, moves between the UK and Iceland and Norway are covered by the old bilateral agreements that the UK has with these coun tries, Liechtenstein will be treated as a non-agreement country and Switzerland is subject to the old UK/Switzerland bilateral agreement.

These agreements generally have “detached” worker provisions, but not all are as generous as the old EU rules. In the case of Norway and Switzerland, no multistate provision exists. This is expected to cause some issues in the interim period.

It is expected that, as a result of signing the TCA, the UK’s old bilateral agreements with the EU states (other than with the Republic of Ireland; see below) will continue to be dormant other than where specifically provided for within the new TCA (or old EU regulations where the WA or equivalent applies).

In addition, the UK had already arranged a new agreement with the Republic of Ireland, which broadly replicates the terms of the old EU social security regulations and which will take effect if the new TCA provisions are not as beneficial as those rules or grandfathering under the WA is not in point.

It will be interesting to see how the TCA may be replicated with the EEA/Switzerland once the negotiations are complete and then how those separate agreements interact for individuals crossing multiple borders. A new agreement has since been reached with Switzerland. This is subject to formal parliamentary ratification but effective from 1 November 2021. This replicates much of the UK-EU TCA but may still result in issues for UK

nationals who work in the UK, Switzerland and any other EU member state simultaneously. It appears that this completely revokes the old UK-Swiss bilateral agreement from 1968, so there are no transitional provisions from old to new and revised certification may be required for anyone currently subject to the 1968 agreement.

WA impact. As mentioned above, the UK and the EU entered into a legally binding Brexit WA (equivalents with EEA and Switzerland) to protect the rights of citizens currently working or residing in an EU member state or in an EEA country or Switzerland as of 31 December 2020.

Given the more limited nature of the TCA in terms of geograph ical coverage and periods of home country coverage that will now be available, it is imperative that businesses assess the applicabil ity of the WA in terms of any post-1 January 2021 cross-border activities that include the UK, as the WA and equivalents may provide access to a more beneficial social security position.

Reciprocal agreements. The UK has reciprocal social security agreements with several non-EEA countries, although the terms of the agreements vary. Therefore, to determine an individual’s liability or benefit entitlement, it is important to consult each agreement relating to the individual’s home/host country.

To prevent double social security taxes and to assure benefit coverage, the UK has entered into reciprocal agreements with the following jurisdictions.

Barbados Israel Philippines Bermuda Jamaica Switzerland Canada Japan Turkey Chile Jersey United States Guernsey Korea (South) Yugoslavia* Isle of Man Mauritius

* The UK honors the Yugoslavia treaty with respect to Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia. The EC social security rules have applied to Slovenia since 1 May 2004 and to Croatia since 1 July 2013.

In the interim, the old agreements with Iceland and Norway also apply in certain scenarios when cross-border activity with the UK commences on or after 1 January 2021 until new agreements (an EEA-wide agreement) are reached.

Without reciprocal agreement. If no reciprocal agreement exists between the home country of an individual and the UK, the indi vidual is subject to both the domestic law of his or her home country and the domestic law of the UK. For these individuals who come to work temporarily in the UK, exemption from pay ment of certain contributions for the first 52 weeks of their stay is common. The exemption depends on both the employee and the employer meeting various requirements.

For individuals leaving the UK to work overseas who remain employed by a UK company, there is generally a continuing lia bility to mandatory Class 1 (employee and employer) National Insurance contributions for a period of 52 weeks from the date of departure from the UK.

Other considerations may be appropriate if directors or “office holders” attend UK board meetings or otherwise undertake UK duties, if rotational workers from the UK are concerned or if individuals break or do not break UK tax residency.

Special rules can also apply to mariners, air crews and those who work in oil and gas exploration on the UK continental shelf.

UK National Insurance contributions compliance and reporting. If an individual or employer remains or becomes liable for UK Class 1 (employee and employer) National Insurance contribu tions, this is normally assessed on worldwide earnings (income) from the employment(s) concerned and must be reported in UK payroll each pay period under the UK’s Real Time Information (RTI) process. Also, see Advance payment of taxes regarding PAYE in Section D.

D. Tax filing and payment procedures

General. The tax year for individuals in the UK runs from 6 April to 5 April of the following year.

Whether compensation is subject to UK tax and how it is taxed depend on the employee’s residence status at the time the com pensation is earned. Taxable compensation is actually taxed in the year of receipt. Earnings, including bonuses and commissions earned in one year but not paid until a subsequent tax year, are taxed when received. For example, if an individual receives a sal ary of GBP30,000 during the year ending 5 April 2022, and earns a bonus of GBP20,000 for that tax year that is not paid until December 2022, the salary is subject to tax in 2021-22, but the bonus, earned in the same period as the salary, is subject to tax in 2022-23, when it is received. The term “receipt” is broadly defined for this purpose and includes payment as well as entitle ment to payment. The payment does not have to be made to the employee; for example, a payment of an employee’s earnings to an employee’s family remains taxable.

Married persons are taxed as separate individuals. Spouses are responsible for their own tax returns, are assessed on their own income and gains, and are given tax relief for their own allowable deductions and allowances. Individuals are entitled to their own tax-band rates and capital gains tax exemptions.

Income from jointly held assets is divided equally between spouses and taxed accordingly. However, if a husband and wife are beneficially entitled to unequal shares of an investment in certain property and to the resulting income, or if either spouse is benefi cially entitled to the capital or income to the exclusion of the other, a declaration may be made to HMRC to ensure that the income is assessed according to its beneficial interest.

Advance payment of taxes. Income tax and social security contri butions on cash earnings are normally collected under the PayAs-You-Earn (PAYE) system. All employers must use the PAYE system to deduct tax and social security contributions from wages or salaries.

Although expense reimbursements and many noncash benefits are not normally subject to PAYE withholding, they must be

reported to HMRC by employers after the end of the tax year and by employees on their tax returns. HMRC may also take them into account in determining the employee’s PAYE tax code, which in turn adjusts the amount of tax to be deducted from the employee’s cash pay. Alternatively, employers may agree with HMRC that most benefits in kind may be subject to payroll with holding rather than reported separately after the end of the tax year.

Tax returns. The UK has a self-assessment tax system. Under the self-assessment system, individuals who receive a notice to file a tax return from HMRC may choose to have HMRC calculate and assess their tax liability or to calculate and assess the tax due themselves. Individuals who choose to have HMRC calculate and assess tax must complete and submit their tax returns by 31 Octo ber following the end of the tax year. Individuals who choose to calculate and assess tax themselves must complete and submit tax returns by 31 October following the end of the tax year if they want to file paper returns. Returns can be filed electronically, together with a calculation of the tax due, up to 31 January fol lowing the end of the tax year.

If tax is due as calculated on the return, it must be paid by 31 January following the end of the tax year. Provisional on account payments of tax on income not subject to withholding are usually payable in two installments, on 31 January in the tax year and on the following 31 July.

Each installment must equal 50% of the previous year’s income tax liability not withheld at source.

Interest is automatically charged on tax not paid by the due dates. A 5% penalty is also imposed if the tax is not paid within 30 days after the final payment date. A further penalty of 5% is imposed if the tax is not paid within six months following the final pay ment date. An additional penalty of 5% is imposed if the tax is still not paid within 12 months following the final payment date. A fixed penalty of GBP100 is imposed if a return is not filed by the applicable deadline (that is, 31 October or 31 January) even if no tax is due. If the return is three months late, HMRC may seek to impose daily penalties of GBP10 a day for a period of up to 90 days (GBP900 per return). A further fixed penalty of the higher of GBP300 or 5% of the tax due is imposed if the return is six months late. An additional penalty, which can be up to 200% of the tax due, is imposed if the return is 12 months late and if facts are deliberately concealed. Penalties also apply to incorrect returns.

Individuals who are not subject to tax withheld at source and who do not receive a notice to file a tax return must inform HMRC by 5 October following the end of the tax year if they are likely to have a UK tax liability for the tax year concerned. Individuals with simpler tax affairs may receive an assessment of their tax liability from HMRC, which negates the requirement to file a tax return. This would not normally apply to non-UK domiciled individuals and individuals working in more than one country.

Capital gains tax. Capital gains are generally reported on the selfassessment tax return, and any CGT due must be included with

the final payment of tax for the year. An exception is that dispos als of UK land should be reported and any tax paid within 30 days after disposal. An additional reporting requirement, the NRCGT return, also applies with respect to disposals of UK residential property by nonresidents up to 5 April 2020 (see Disposal of UK residential property by nonresidents in Capital gains tax in Section A). From 6 April 2020, however, individuals need to report and pay nonresident Capital Gains Tax using the Capital Gains Tax on UK property service.

Inheritance tax. Inheritance tax is usually payable by the deceased’s personal representative when probate (confirmation of the estate) is obtained. Some liabilities, however, must be paid by trustees of settled property and by recipients of lifetime gifts.

E. Double tax relief and tax treaties

If income is doubly taxed in two or more jurisdictions, relief for double taxation is typically available through a foreign tax credit or exemption. In the absence of a treaty with the country impos ing the foreign tax, unilateral relief may be claimed under UK domestic law. However, to claim relief, it is essential that the income be regarded as foreign source under UK law and arise from sources in the jurisdiction imposing the tax. The taxpayer also usually needs to be resident in the UK unless he or she has an ongoing liability for UK taxes as a nonresident (for example, because he or she is a Crown employee).

The relief usually takes the form of a foreign tax credit if an individual is resident in the UK for the purpose of a double tax treaty. In this case, any foreign taxes paid on doubly taxed income arising from sources in the other jurisdiction can be taken as credit against the UK tax liability on the same source of income. The credit that can be claimed is limited to the lesser of the for eign taxes paid or the amount of equivalent UK tax on the doubly taxed income.

If an individual is resident in the UK and treaty-resident in a jurisdiction with which the UK has entered into a double tax treaty, a claim may be made in the UK to exempt from UK tax the income that would otherwise be taxed in both jurisdictions if the treaty contains the relevant articles.

The UK has entered into double tax treaties covering taxes on income and capital gains with the following jurisdictions.

Albania Greece Oman Algeria Grenada Pakistan

Antigua and Guernsey Panama Barbuda Guyana

Papua New Guinea

Argentina Hong Kong Philippines

Armenia Hungary Poland Australia Iceland Portugal Austria India Qatar

Azerbaijan Indonesia Romania

Bahrain Ireland Russian Federation

Bangladesh Isle of Man Saudi Arabia

Barbados Israel Senegal

Belarus Italy Serbia

Belgium Jamaica Sierra Leone

Belize Japan Singapore

Bolivia Jersey Slovak Republic

Bosnia and Jordan Slovenia

Herzegovina Kazakhstan Solomon Islands

Botswana Kenya South Africa

British Virgin Islands Kiribati Spain

Brunei Darussalam Korea (South) Sri Lanka

Bulgaria Kosovo

St. Kitts and Nevis

Canada Kuwait Sudan

Cayman Islands Latvia Sweden

Chile Lesotho Switzerland

China Mainland Libya Taiwan

Colombia Liechtenstein Tajikistan

Côte d’Ivoire Lithuania Thailand

Croatia Luxembourg Trinidad and Cyprus Malawi

Tobago

Czech Republic Malaysia Tunisia Denmark Malta Turkey

Egypt Mauritius

Turkmenistan Estonia Mexico Tuvalu

Eswatini Moldova Uganda Ethiopia Mongolia Ukraine

Falkland Islands Montenegro United Arab

Faroe Islands Montserrat Emirates

Fiji Morocco United States

Finland Myanmar Uruguay France Namibia* Uzbekistan

Gambia Netherlands Venezuela

Georgia New Zealand Vietnam Germany Nigeria Zambia

Ghana North Macedonia Zimbabwe Gibraltar Norway

* The 1962 South Africa treaty applies to Namibia (formerly known as South West Africa).

The UK has agreed to a tax treaty with Kyrgyzstan, but this treaty is not in force because it has not yet been ratified by the governments of the two jurisdictions.

F. Entering the UK

Brexit. The UK left the EU on 31 January 2020. The transition period ended at 11:00 p.m. on 31 December 2020. Freedom of movement ended on 31 December 2020. The rights of EU nation als who were residing in the UK on or before 31 December 2020 will remain the same subject to applying for status under the EU Settlement Scheme.

EU Settlement Scheme. EU nationals residing in the UK on or before 31 December 2020 can apply to the EU Settlement Scheme to continue living in the UK after 30 June 2021 (the deadline for applications under the Scheme). The application will confer either settled or pre-settled status. Non-EU national fam ily members of EU nationals can also apply under the Scheme. Individuals who did not apply under the Scheme prior to the deadline have until 31 December 2021 to make a late application with an explanation of why the deadline was missed.

Settled status. EU nationals who started living in the UK by 31 December 2020 and who have lived in the UK for a continuous five-year period (known as “continuous residence”) will be granted settled status. This status will allow individuals to remain in the UK indefinitely and apply for British citizenship if eligible. The status will be lost if individuals spend more than five con secutive years outside the UK.

Pre-settled status. EU nationals who started living in the UK by 31 December 2020 but who have not yet lived in the UK for a continuous five-year period will be granted pre-settled status. This status will be issued for a five-year period. After spending five years continuously in the UK, the individual can apply for settled status. Pre-settled status will be lost if individuals spend more than two consecutive years outside the UK.

New immigration system from 1 January 2021. In February 2020, the UK government published a paper outlining its plans for the new immigration system, which took effect on 1 January 2021 after freedom of movement ended. The new immigration system transforms the way in which all migrants come to the UK to work, study, visit or join their family.

The new system is a points-based system, which prioritizes highly skilled workers. Existing mechanisms and thresholds were amended to take into account the broader scope of the system, which applies to both EU nationals (except Irish citizens) and non-EU nationals.

General principles. In general, to enter the UK, you must have a valid travel document (in most cases, a passport).

Regardless of the duration or purpose of their visit, nationals of certain countries must obtain entry clearance (a visa) before traveling to the UK. Individuals from the relevant countries are known as “visa nationals.”

In contrast, “non-visa nationals” are not required to obtain entry clearance if traveling to the UK as visitors or business visitors (performing certain permissible activities) for a period not exceeding six months.

If the purpose of the visit is for employment or study, all nonBritish/Irish nationals must obtain appropriate entry clearance (a visa) before traveling to the UK.

Entry clearance applications must be made to a British Embassy, Consulate General or High Commission (collectively known as British diplomatic posts) through one of the UK’s Commercial Partners’ offices in the individual’s home country or country of legal residence.

Applications for entry clearance may be refused if the applicant has breached UK immigration rules during the preceding 10 years. Providing misleading or false information when applying for entry clearance or leave to enter may result in an individual being barred from entering the UK for up to 10 years.

A British diplomatic post approving entry clearance for longer than six months may stipulate that the individual must register with the police within seven days of arriving in the UK. Nationals

of EEA or Commonwealth counties are not required to register with the police.

UK authorities may impose financial penalties on airlines and shipping companies that bring unauthorized passengers to the UK. This legislation was introduced to reduce the number of persons who are turned away at the port of entry because they do not have the necessary visa.

The UK government has introduced an Immigration Health Surcharge (separate from the visa fee). The surcharge is payable by non-EEA migrants coming to the UK for more than six months. The surcharge is currently set at GBP624 per year for the main applicant and each dependent who is 18 or older, and GBP470 per year for children younger than 18, students, depen dents of students and Youth Mobility Scheme Visa applicants. Since 1 January 2021, EU nationals applying under the new immigration system (see New immigration system from 1 January 2021) are also required to pay the surcharge.

Visitors. Individuals coming to the UK as tourists or business visitors are normally granted admission for a period of six months. The rules regarding business visitors are complex and should be considered on a case-by-case basis. In general, business visitors are prohibited from working while in the UK or receiving a salary in the UK. However, they are allowed to attend meetings, transact business and negotiate contracts with UK companies. It is advisable that an individual planning to come to the UK as a business visitor carry a letter from his or her employ er stating the purpose and duration of the visit.

The UK government has identified specific categories of indi viduals who are permitted to perform paid activities in the UK. They are allowed to perform “work” for which they can receive payment, but only for a period of up to one month. These catego ries are visiting academic examiners, lecturers, pilot examiners and advocates/lawyers, and activities related to the arts or enter tainment. Academic visitors who are experts in their field can extend their stay in the UK to a total of 12 months.

Visa nationals coming to the UK must obtain entry clearance before traveling to the UK. Although non-visa nationals coming to the UK as visitors for up to six months do not require entry clearance, they must restrict their activities to those prescribed and permitted under the business visitor rules.

G. Entry for the purposes of employment, self-employment, studying, government-exchange program and other purposes

Under the Immigration Act of 1971 and the British Nationality Act of 1981, certain individuals have right of abode, which in most cases entitles the bearer to live and work in the UK without restric tion. These acts preclude the necessity for entry clearance for cer tain qualified individuals. Individuals who do not have right of abode and who wish to live and work in the UK must apply for the appropriate immigration document and/or entry clearance (visa). Whether a combination of these items is required depends on the individual’s circumstances.

EEA and Swiss nationals. The EEA consists of the following countries.

Austria Germany Malta

Belgium Greece Netherlands

Bulgaria Hungary Norway

Croatia Iceland Poland

Cyprus Ireland Portugal

Czech Republic Italy Romania

Denmark Latvia Slovak Republic

Estonia Liechtenstein Slovenia Finland Lithuania Spain

France Luxembourg Sweden

Freedom of movement between the UK and the EU ended at 11:00 p.m. on 31 December 2020.

Nationals of EEA countries who entered the UK before this date are required to register under the EU Settlement Scheme to con tinue to live and work in the UK after 30 June 2021 (see EU Settlement Scheme in Section F). Non-EEA dependents who wish to join an EEA family member in the UK should obtain an EU Settlement Scheme Family Permit (if the family relationship started and the family member was living in the UK by 31 December 2020) from a British diplomatic post before traveling to the UK. The permit is usually valid for six months.

Nationals of EEA countries entering the UK from 1 January 2021 will need to apply under the new immigration system (See New immigration system from 1 January 2021 in Section F).

The governments of the UK and Ireland have committed to ensure that there will be no changes to the rights enjoyed by Irish nationals in the UK and UK nationals in Ireland. Irish citizens continue to have a right to live and work in the UK without restriction.

Individuals without the right of abode. In general, all non-British/ Irish nationals, and persons without settled status or a right of abode who wish to come to the UK for the purpose of employ ment must obtain the requisite entry clearance for that purpose before traveling to the UK.

The UK’s Points Based System (PBS) is a points-scoring system under which applicants are awarded points to reflect earnings, experience and the demand for skills in certain sectors. Illegal working legislation has increased the penalties for employers who breach the requirements. These measures are aimed at strengthening the government’s ability to control immigration more effectively.

Tier 1. Tier 1 has several subcategories:

The Tier 1 (Global Talent) category is intended for individuals who are internationally recognized in their field as either a rec ognized leader or an emerging leader in their field. The Global Talent route replaced the Tier 1 (Exceptional Talent) route, which was closed for new applicants from 20 February 2020. Every initial application must be endorsed by a “designated competent body” before a visa application can be made.

The Tier 1 (Investor) category applies to individuals who intend to make a large investment in the UK. Such individuals need access to a minimum of GBP2 million that is disposable and held in a regulated financial institution and must have a UK bank account for investment purposes. Accelerated routes to settle ment are available to individuals who can invest GBP5 million in three years or GBP10 million in two years.

The Tier 1 (Start-up) and Tier 1 (Innovator) categories were opened on 29 March 2019. Applications under these categories require an endorsement by an approved body, which will assess whether an individual’s business idea is new and viable and has potential for growth. The Tier 1 (Start-up) category is available for those looking to set up a business in the UK and permits a stay for up to two years without the option of extension. The Tier 1 (Innovator) category is available for those wishing to set up and invest at least GBP50,000 of funds into a business and initially permits an stay for three years with the option to extend for fur ther three-year periods with the potential to apply for settlement after five years. Business organizations with a history of support ing UK entrepreneurs may be eligible to apply to become endorsing bodies.

The Tier 1 (Entrepreneur) category was closed to applications to enter the scheme on 28 March 2019. However, the category, which applies to individuals who intend to invest in the UK by setting up or taking over the running of a UK business, is still open to those eligible to extend their visa.

Other visa categories. The Skilled Worker Visa category applies to skilled workers with a licensed sponsor that has offered them a job in the UK. A key feature is that employers must obtain a sponsor license in order to sponsor non-EEA nationals coming to the UK. Sponsors are required to estimate their use of Certificates of Sponsorship (CoS) in different categories on an annual basis. They are also subject to reporting and compliance requirements to maintain their status as licensed sponsors.

Applications can be submitted from within the UK if permissible (for example, extensions’ applications for existing Tier 2 migrants, students, individuals seeking to change employment, and those switching from applicable immigration categories to Skilled Worker Visas) or from outside the UK. The skill level for the job is set at RQF Level 3 (equivalent to A-Level) or above. Except for nationals from a handful of majority-English-speaking countries, individuals who wish to work in the UK as a Skilled Worker must provide specified documents to show that they have a good knowledge of English of at least Level B1 on the Common European Framework of Reference for Languages (CEFR) scale. The minimum salary requirement for roles in this category is currently GBP25,600 or the occupation code minimum (whichever is higher) per year for experienced workers and GBP20,480 for new entrants. Salaries must also meet the minimum set out in the relevant Standard Occupation Classification (SOC) Code published by UK Visas and Immigration. There is also a maintenance requirement to be met if the individual’s sponsor does not certify the maintenance associated with the individual’s application.

The initial Skilled Worker Visa is granted for up to five years. The rules allow unlimited extensions of up to five years at a time.

Once a migrant has spent a continuous period of five years in the UK as a Skilled Worker, he or she is eligible to apply for indefi nite leave to remain provided that he or she meets the require ments at the time of application.

The Intra Company Transfer (ICT) visa category has two subcat egories, which are the Intra Company Transfer and the Intra Company Graduate Trainee.

The Intra Company Transfer subcategory applies to overseas employees of multinational companies who are being transferred to a UK-based branch of the organization. These employees must have normally worked abroad with the company for at least 12 months unless their salary is at least GBP73,900, in which case this requirement is waived. Individuals who enter the UK under this category must fill roles at RQF Level 3 (graduate level or above). The minimum annual salary threshold for this category is GBP41,500. Individuals must also receive at least the minimum salary specified in the relevant SOC Code for their particular occupation. Individuals are not required to demonstrate Englishlanguage ability for the ICT category. Individuals earning GBP73,900 and above can stay in the UK for up to 9 years in any 10-year period. Those earning less can stay for up to 5 years in any 6-year period.

The Intra Company Graduate Trainee subcategory applies to recent graduate employees of multinational companies with at least three months of overseas’ service who are being transferred to the UK-based branch of the organization as part of a structured graduate training program for no more than 12 months. Only 20 graduate trainee visas may be issued per sponsor per financial year. Graduate Trainees must be paid a minimum salary of GBP23,000 per year, or the minimum salary threshold as specified in the relevant SOC Code, whichever is higher.

UK employers are required to pay an Immigration Skills Charge (ISC) for employing Skilled Worker and Intra Company Transfer migrants with some exceptions. The exact amount depends on the size of the organization and how long the worker will be employed. For large sponsors, this amount is GBP1,000 per per son per year.

The Minister of Religion Visa category applies to individuals coming to the UK as religious workers for religious organiza tions. Individuals coming to the UK under this category are required to meet the English language requirement at CEFR Level B2.

The Sportsperson Visa category applies to elite sportspersons and qualified coaches who are internationally established at the highest level and will make a significant contribution to the development of their sport. Individuals coming to the UK under this category are required to meet the English language require ment at CEFR Level A1 in speaking and listening.

The Student Visa category covers individuals wishing to study in the UK. Such individuals must be sponsored by a licensed

educational institution in the UK and meet the English language and maintenance requirements.

Temporary Worker Visa routes covers the following temporary workers:

• Individuals coming to the UK to work or perform as sportsper sons, entertainers or creative artists

• Individuals coming to the UK to do voluntary work for charity

• Individuals coming to the UK to work temporarily as religious workers

• Individuals coming to the UK through Government Approved Exchange Programs for the purposes of internships or work experience

• Individuals coming to the UK under a contract to do work that is covered under international law

This visa route also covers young people (aged from 18 years to 30 years) from participating jurisdictions who would like to experience life in the UK under the Youth Mobility Scheme for up to two years. Each jurisdiction has an annual allocation of places under the Youth Mobility Scheme. The following is the current list of jurisdictions:

• Australia

Canada

Japan

Hong Kong

Korea (South)

Monaco

New Zealand

San Marino

Taiwan

The Frontier Worker Permit allows EEA nationals to work in the UK but live in another country. This category is appropriate for individuals who began working in the UK by 31 December 2020 and must usually have worked in the UK at least once every 12 months since they started working in the UK.

The British National Overseas Visa allows those residing in Hong Kong who are British Nationals (Overseas) to come to the UK to live, work and study. Such individuals must be over the age of 18 and meet a maintenance requirement.

Permit-free employment categories. Individuals who fall into certain categories do not need permission to work in the UK but must obtain prior entry clearance from a British diplomatic post before entering the UK. These include the following:

• UK Ancestry: Commonwealth nationals with a British-born grandparent or right of abode

• Representatives of an Overseas Business: Representatives of a business that does not have a branch, subsidiary or other representation in the UK, including representatives of foreign newspapers, broadcasters or news agencies on a long-term assignment to the UK

• Individuals coming to the UK as representatives of foreign governments or as employees of the United Nations or other international organizations

Further details regarding the first two categories are provided below.

UK Ancestry Visa. A Commonwealth citizen with a British-born parent or grandparent may be given permission to live and work in the UK for five years. At the end of this period, the individual may be eligible to apply for Indefinite Leave to Remain (ILR; see Section H) in the UK.

Representatives of an Overseas Business Visa. The purpose of the visa category for Representatives of an Overseas Business is for a business to introduce its products into the UK market by bringing senior-level overseas employees to the UK to set up operations.

To obtain entry clearance as a representative, an individual must prove that he or she will be a representative of a particular overseas company in the UK. He or she must also demonstrate that a need exists for his or her presence in the UK and that it is his or her intention to establish a subsidiary or branch of the foreign company after entering the UK.

A representative must remain under the direct control of the overseas company. Initially, entry clearance is usually granted for up to three years. After this period, the individual can apply for an extension if certain criteria are met. Indefinite Leave to Remain (ILR; see Section H) is also possible after five years, subject to meeting further eligibility criteria.

H. Indefinite Leave to Remain

If an individual has been living and working in the UK continuously for five years with valid leave in a relevant immigration cat egory, he or she and his or her dependents may be eligible to apply for Indefinite Leave to Remain (ILR).

An individual who has obtained leave as the partner of a British citizen or person settled in the UK must reside in the UK con tinuously for five years before he or she qualifies for ILR.

ILR status removes the time and employment restrictions that were imposed when an individual first entered the UK. This means that the individual may be able to settle permanently in the UK and take up any employment. The individual is free from immigration restrictions.

An individual can retain his or her ILR status during a period of absence if he or she is not away from the UK for a continuous period of more than 24 months and if he or she retains close ties with the UK during his or her absences; that is, when the indi vidual returns to the UK, he or she is returning to reside, not to visit.

I. Family and personal considerations

Family members. The dependent family members admitted to the UK under most categories are admitted for the same period as the main applicant and are eligible to take up employment. Subject to some restrictions, dependents generally include the permit holder’s spouse, unmarried or civil partner and children under than 18 years of age. However, dependents must obtain entry clearance before accompanying the principal applicant to the UK.

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The spouse or civil partner and dependents (including children under 21 years of age, parents and grandparents) of an EEA national or a Swiss national living in the UK by 31 December 2020, regardless of whether they are EEA or Swiss nationals themselves, and who are applying for an EEA Family Permit or EU Settlement Scheme Permit are also granted entry rights, including the right to work for an initial period of six months. On entry into the UK, they may apply under the EU Settlement Scheme (see EU Settlement Scheme in Section F).

The UK immigration rules contain provisions to accommodate non-EEA family members of British citizens. However, such applications should be assessed on a case-by-case basis. Individuals are typically issued entry clearance for a period of 33 months with the option to extend this status from within the UK and make an application for ILR on the completion of 5 years’ continuous lawful residence in the UK.

Driver’s permits. Most foreign nationals may drive legally in the UK with their home jurisdiction driver’s licenses for 12 months. After 12 months, foreign nationals must either exchange their license for a UK license or apply for a provisional driving license and then pass the theory and practical driving tests to continue driving in the UK.

J. Other matters

British citizenship. In certain circumstances, an individual may be eligible to apply to naturalize as a British citizen after a con tinuous period of five years’ residence in the UK, the last 12 months of which must have been as a holder of ILR. In most cases, an individual should be eligible for naturalization after a continuous period of residence of six years in the UK (five years to obtain ILR and one further year free of immigration conditions).

An individual married to a British citizen may be able to apply to naturalize as a British citizen if he or she has continuously resided in the UK for three years and is a holder of ILR at the time the application is made. In practice, because the partner of a British citizen can now only obtain ILR after five years, it still takes five years to qualify for naturalization in most circumstances. The UK allows dual nationality. However, not all countries allow dual nationality. Consequently, this should be confirmed before making an application.

Identity cards for non-EEA nationals. The government has intro duced identity cards (Biometric Residence Permits, or BRP cards) for foreign nationals in the UK. BRP cards replace the stickers or vignettes in passports. Identity cards have now been introduced for all migrant worker categories, applications for ILR and applications for leave as an unmarried partner, same-sex partner or spouse. Individuals granted entry clearance now receive a vignette in their passport valid for 30 days and are required to collect their BRP cards from a participating post office in the UK on arrival.

Tuberculosis testing. Individuals resident in certain countries who are coming to the UK for more than six months are required to have a tuberculosis (TB) test.

An individual is given a chest X-ray to test for TB. If the result of the X-ray is not clear, the individual may also be asked to give a sputum sample (phlegm coughed up from the lungs).

If the test shows that the individual does not have TB, he or she is given a certificate that is valid for six months. This certificate must be included with the UK visa application.

A TB test is not required for the following individuals:

• Diplomats accredited to the UK

• Residents of the UK who are returning within two years of leaving

• Holders of certificates of entitlement (right of abode in the UK) for more than six months who are applying for another visa within six months of leaving their country of residence

All children must see a clinician who decides if they need a chest X-ray. Children under 11 will not normally have a chest X-ray. A parent must take his or her child to an approved clinic and com plete a health questionnaire. If the clinician decides the child does not have TB, the clinician gives a certificate to the parent. This certificate must be included with the child’s UK visa application.