Test your understanding: answers

(1). All of Lark’s UK income will be subject to UK income tax because UK source income is always subject to UK income tax.

Lark is UK tax resident and so his overseas income will be subject to UK income tax, unless he makes a foreign income claim. He can make such a claim because he is a qualifying new resident.

(2). The circumstances in which an individual may be regarded as a temporary non-UK tax resident for the purposes of CGT are:

• the individual has been UK tax resident for at least four of the seven tax years prior to the year of departure from the UK, and
• the individual is absent from the UK for a period of five years or less.

(3). Eider will not be UK tax resident when she sells the two properties. However, she will be a temporary non-UK tax resident, as she has been UK tax resident for at least four of the seven tax years prior to the year of leaving the UK and will be absent from the UK for a period of five years or less.

Any gain on the sale of property 1 will be subject to UK CGT in the tax year of her return to the UK as the property was acquired before Eider left the UK.

Any gain on the sale of property 2 will not be subject to UK CGT under the temporary non-UK tax resident rules because the property was acquired during Eider’s period of absence from the UK.