If you are a British expatriate, it is crucial to establish your tax residency and understand how UK rules apply to you, especially as Brexit approaches.
You may be settled in another country, but if you spend time in the UK each year or retain property there, you could still be treated as UK resident. This would make your worldwide income and gains liable to UK income tax, capital gains tax and potentially inheritance tax.
This could also complicate things if you are looking to prove your EU residence post-Brexit.
It is not just those who have recently left the UK who are potentially affected. Even if you have lived abroad for many years, you may still be required to report and pay tax to HM Revenue & Customs (HMRC). Avoid an unexpected tax bill or even a potential tax investigation by taking care to understand the UK rules.
The SRT determines your UK residence status for tax purposes. Assessing your position is not just about counting days spent in Britain; you need to work through the following three tests in order. If you meet one of the tests, there is no need to continue to the next test. Note that all references to ‘years’ mean a UK tax year (6 April to 5 April), and a ‘day’ means where you are present at midnight.
You are treated as not resident in the UK if you meet any of these conditions:
You are deemed resident in the UK if you meet any of these conditions:
If your residence position has not been determined under the first two tests, the next step is to consider your connections to the UK.
The sufficient ties test works on a sliding scale – the more ties you have with the UK, the less time you can spend onshore without becoming UK resident; the fewer ties you have, the longer you can spend in Britain before UK residency applies. The number of days varies depending on whether you are an ‘arriver’ (non-UK resident in any of the previous three years) or a ‘leaver’ (UK resident in any of the previous three years).
The rules allow for up to 60 days spent in the UK under ‘exceptional circumstances’ to be disregarded. However, this only applies where you have no choice and circumstances are unforeseen and beyond your control – this is unlikely to include visiting an ill or dying relative in the UK (although even the definition of a qualifying “relative” is restricted).
Generally, you will only be treated as tax resident in one country or another, but it is possible to be dual-resident in both the UK and another country, such as Spain, France, Portugal, Cyprus or Malta under the respective domestic laws. While the double tax treaty may offer protection from paying tax twice on the same income, you may still be liable for taxation in both countries, so take advice to get it right and minimise your exposure.
See more about residence and your tax obligations
This is just a summary of the UK rules, which are detailed and highly complex. Remember, spending just 16 days’ in the UK could unintentionally trigger UK tax residency, so you should take specialist advice to establish exactly where you stand. Wherever your liabilities lie, a tax planning review could let you take advantage of legitimate arrangements to minimise your tax bill and meet your obligations in the most suitable way for your personal situation.
Contact us for a tax planning review
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.