Moving From The UK To The Republic Of Ireland: The Tax Consequences

INTRODUCTION

This article provides an outline of the some of the main tax issues for individuals relocating from Ireland to the UK. It is not intended to be comprehensive and specific expert advice should be taken in all circumstances.

BECOMING IRISH RESIDENT

Residence Status

The Irish tax year runs to 31 December. An individual will be Irish resident for a Tax Year if he is either:
(a) present in Ireland for 183 days in that year (the "current year" test); or
(b) present in Ireland for 280 days or more in that tax year plus the previous year (the "lookback" test).

From 2009 onwards, an individual is treated as being present in Ireland for any day if he is physically present there during any part of the day. For the purposes of (b), a total period of presence of 30 days or less in a tax year is disregarded. Therefore, an individual who comes to live in Ireland will generally not be resident there for the year of arrival, so long as present there for less than 183 days. If he does meet the current year test, then he is regarded as resident for the entire tax year of arrival, although there is an exemption for pre-arrival earnings from employments. However, an individual relocating from the UK should normally be able to rely on the UK-Ireland Double Tax Treaty to shelter all pre-arrival income from Irish taxation.

Ordinary Residence Status

An individual will be regarded as becoming ordinarily resident in Ireland once he has been resident in Ireland for three consecutive tax years. He will retain his Irish ordinary residence status until he establishes a history of three consecutive tax years of non-residence.

THE REMITTANCE BASIS

Income Tax
Individuals resident in Ireland are generally liable to tax on their worldwide income However, non-domiciled individuals are liable only on the remittance basis in respect of non-Irish income, including, since 2008, UK income. In general, pre-arrival income may be subsequently remitted free of tax.

An employment will normally qualify as non-Irish where it is with a non-resident employer and the salary is paid from outside Ireland. However, with very limited exceptions, the remittance basis only applies to such employments to the extent that their duties are performed outside Ireland.

Capital Gains

Individuals who are resident or ordinarily resident in Ireland are generally liable to tax on their worldwide capital gains. However, non-domiciled individuals are liable only on the remittance basis in respect of non-Irish gains, including, from 2009 onwards, UK gains. In general, pre-arrival capital gains accumulated prior to becoming resident in Ireland may be subsequently remitted there free of tax.

ESTATE TAXES

Capital Acquisitions Tax

Individuals relocating to Ireland should note that they will be potentially exposed to Irish Capital Acquisitions Tax (CAT) on lifetime gifts and the passing of assets on death (inheritances) in respect of all their assets once either they or their beneficiaries are regarded as Irish resident or ordinarily resident. Otherwise the tax generally applies only to the extent they hold Irish assets. Special, exceedingly complex, rules apply to trusts.

As a rule, non-domiciliaries will only be regarded as resident or ordinarily resident for CAT purposes once they have been resident in Ireland for five consecutive tax years. There is accordingly a period of grace during which some advance planning may take place.

SOME TAX PLANNING IMPLICATIONS OF RELOCATING TO IRELAND

An individual who is resident in the UK and owns assets with large capital gains could cease residence in the UK on say 3 April 2009 and relocate to Ireland, spending less than 183 days in Ireland between 3 April 2009 and 31 December 2009. Thus, neither UK or Irish tax should apply to gains made during this period. If the individual returns to the UK after realising a capital gain, anti-avoidance rules will need to be considered.

The same individual could also receive a dividend or other distribution from a UK resident company free of UK and Irish tax. Once he becomes resident in Ireland, such dividends will be taxed on the remittance basis, enabling them potentially to continue enjoying tax-free treatment.

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