EU Settled Status: Applications and Impact on Domicile Status

26 October 2020

This article was written by BDO’s private client services team alongside leading immigration law firm, Fragomen.

The UK left the EU on 31 January 2020, and free movement rights in the UK will end on 31 December 2020, now less than 3 months away. EEA and Swiss nationals are still able to come to the UK and establish residence in the UK in reliance on free movement rights.

However the window for this is closing fast. Those who arrive in the UK by 31 December 2020 will be able to obtain temporary leave to remain in the UK (‘pre-settled status’) under the EU settlement scheme. The deadline for applying is 30 June 2021, although practically speaking it may be difficult to live and work in the UK after 31 December 2020 without evidence of an application. 

EEA and Swiss nationals who have lived in the UK in the past may also be able to benefit from the scheme.  If the individual can demonstrate that they have had a continuous period of 5 years living in the UK in the past, then they will qualify for permanent residence ('settled status') under the EU settlement scheme, provided they have not subsequently been absent from the UK for a continuous period of more than 4 years in the case of Swiss nationals, or more than 5 years in the case of EEA nationals. 

Members of a Swiss national’s family may also qualify for settled status, or pre-settled status, under the scheme.

When applying for settled status (and therefore obtaining an indefinite leave to remain in the UK) Swiss nationals should also consider how this may impact their domicile status. Acquiring a domicile in the UK has broad implications for UK tax, including the loss of the ability to claim the remittance basis of taxation when UK resident (which broadly protects foreign income and capital gains from UK tax unless remitted to the UK), and widening the scope of UK Inheritance Tax to the individual’s worldwide assets rather than just their UK assets.  

A domicile could be acquired in the UK by being present there with an intention to remain permanently. This is known as a domicile of choice. Therefore, if remaining permanently is not the individual’s intention, because they plan to leave the UK at a later date, evidence should be obtained to support their non-UK domicile status on an application for settled status in the UK.  

For example, a Swiss national has been working in London for 10 years, but plans to return to Switzerland on retirement.  An application for settled status in the UK could be made, but it would be prudent to also demonstrate that their domicile status has been considered at that time in case HMRC were to argue that the application shows that there is an intention to remain in the UK indefinitely.  

It should be noted that applying for settled status is different from acquiring a UK passport and may be viewed differently from a domicile perspective. On the whole, with care, it should be possible to maintain a non-UK domicile whilst having settled status. Whereas, we have found that applying for a UK passport since March 2019 is likely to have a larger bearing on an individual’s domicile status.  This is a separate matter from the application for settled status, and should be considered carefully.

UK Budget Update

The Chancellor Rishi Sunak has confirmed that there will not be a Budget this Autumn to allow him to concentrate on his recovery plan for the economy following the impact of the Covid-19 pandemic.

There are a number of potential tax changes rumored to be in the pipeline, particularly in relation to Capital Gains Tax and Inheritance Tax. Capital Gains Tax is currently the subject of a review by the Office of Tax Simplification, whilst a cross-party paper into the reform of Inheritance Tax was released earlier this year.  However, with the Autumn Budget cancelled, the Chancellor has decided not to implement anything at this stage.

If you have any questions about the current EU settled status situation or would like to know how the latest guidance impacts your clients, please let us know.

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