Called by some “the ultimate form of tax planning”, emigration from the UK can have a seriously beneficial effect on your worldwide tax planning. As a UK resident, you are liable to tax (generally speaking) on all of your worldwide income and capital gains. As a non-UK resident, on the other hand, it’s only some UK income and gains that come within HMRC’s grasp: and no non-UK income etc.
A few years ago, HMRC had the opportunity to replace the previous tangle of unwritten law, derived from cases over the years, with a simple and easily understood system. Did they grasp this opportunity?
Cue for mirthless laugh! The statutory rules which were piled into the 2013 Finance Act to replace all the old mess of case law are anything but simple and straightforward. Fortunately, though, some clever people at accountants KPMG have drawn up a flowchart to help you work out what the rules are. Google KPMG Non-Resident Flowchart.
Basically, we thought it would be useful to give a flavour of the way the rules work here, and specifically how many days you are able to stay in the UK in a given year whilst remaining non-resident for tax purposes.
So here are a few case studies which set out “typical” situations where we’re asked to advise.
Jane decides she wants to spend a period outside the UK in order to crystalise some big gains and dividends from her company. She needs to be a non-UK resident in the year in which the gains arise and the dividends are paid. She’s been resident in the UK all her life up until now, and her husband and children remain in the UK in the family home. She has no job or anything of that sort to go to abroad, but she does acquire a very nice villa to live in overseas whilst she is there.
Answer: as an “outbound” individual who has three UK ties, Jane needs to ensure that she is not in the UK for more than 45 days in the tax year. She also needs to ensure that she does not spend more time in the UK than in any other country.
Ameet is an oil expert, who goes to the Middle East to work as a consultant, employed by his own company, Ameet Consultancy Limited. His work for this company will be full time.
Answer: Provided he is in the UK for less than 91 days and spends less than 31 days working in the UK, he will be a non-UK resident for tax purposes.
Paul has been resident in the UK up to now, but leaves the country and has no home or family here; nor does he work here. He spends more time in the country of destination than in the UK.
Answer: Paul has only “one tie” with the UK, and therefore he can spend up to 120 days in the UK without being a UK resident.
Sandrine comes to the UK to work, but she has no family here. She rents a flat near her place of work.
Answer: Sandrine, as an inbound person, with two UK “ties” (her UK employment and UK accommodation) can spend up to 120 days in this country without becoming UK resident.
Alexander was in the UK for 100 days in the year before last, and 40 days last year, but didn’t become a tax resident here in those or the previous tax year. He has no job or accommodation in the UK.
Answer: his 100 days here in the UK in the year before last counts as a “tie”, but it is the only one that Alexander has. Therefore he can spend up to 182 days in the UK without being resident here.
Of course, we could go on multiplying examples forever, but the important point to note is that there is no simple and straightforward rule of thumb under which you can be treated as non-UK resident if you keep out of the country for X days. First of all the rules are different depending on whether you have been resident in the UK up to now or are coming from somewhere else; and the set-up with regard to your accommodation, employment, and family can be crucially important in deciding how many days you can spend here without incurring all the disadvantages of UK tax residence.
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