Lifetime ISA query - temporary non-UK resident

Izzymawson

Hi,

I have a cash LISA with Skipton BS and I’ve paid in for the 17/18 and 18/19 tax years. I ended up moving temporarily to Cyprus in February 2019 and haven’t paid in to it since. I know you have to be a UK resident to open the LISA but I’m not sure whether I’ll be penalised for contributing into it whilst being a temporary resident of Cyprus.

We are planning on moving back to the U.K. at the start of next year however I would like to make a contribution again this tax year if possible. Do you know if there will be any tax implications or problems with receiving my bonus if I am to make a payment into my LISA whilst not living in the UK at the moment?

Many thanks,
Isobel

eskbanker

As explained at https://www.gov.uk/individual-savings-accounts/if-you-move-abroad, you're not allowed to make contributions to any ISA during the 2019/20 tax year if you're not a UK resident for tax purposes, the definition of which is covered at https://www.gov.uk/tax-foreign-income/residence and further links from there - the ISA page highlights that "You must tell your ISA provider as soon as you stop being a UK resident".

bowlhead99

Izzymawson wrote: »

We are planning on moving back to the U.K. at the start of next year however I would like to make a contribution again this tax year if possible. Do you know if there will be any tax implications or problems with receiving my bonus if I am to make a payment into my LISA whilst not living in the UK at the moment?

You can't pay into your ISA when you're not a UK resident.

When you subscribe to a LISA you are effectively saying you're UK tax resident, and the LISA provider will be reporting you and your contributions to HMRC along with your NI number - both to claim the bonus and again as part of the annual returns that they need to make.

This is NOT what you want if you are planning to come back to the UK in 2021 and say to HMRC, "hey, I've just come back to the UK and ready to start paying UK taxes again from now, and no I shouldn't have paid you tax on all of my income from Limassol in 2019/20 because I was definitely not a UK resident at that time"

Basically the LISA is a tax wrapper into which you can only contribute when a UK tax resident. You're clearly not one, and don't qualify to use the product or take a bonus on it. If you pretend to be one, to fraudulently get them to pay you a bonus, you're exposing yourself to bigger questions being asked about your tax status; this will be is unwelcome when you have been earning thousands of Euros of employment income in Cyprus and want to convince HMRC that you are non-UK resident because UK tax rates on that income would be higher than what you pay in Cyprus.

Sorry if that sounds a bit blunt

20SmthngSver

You can't expect to receive a UK tax efficient benefit if you're not a UK tax resident, temporarily or otherwise.