The Revenue?s Booklet HMRC 6 – HMRC 6 replaced IR20 in 2010. It emphasises that many different factors apply to determine whether or not you are a UK tax resident: it is not
The Revenue?s Booklet HMRC 6
HMRC 6 replaced IR20 in 2010. It emphasises that many different factors apply to determine whether or not you are a UK tax resident: it is not simply a matter of day counting.
The withdrawn IR20 leaflet is subject to a judicial review in the Supreme Court due to be heard in July 2011. It arises from the famous Gaines Cooper case. The UK Court of Appeal found against HMRC who had argued that they were not bound by IR20, which is the same argument HMRC now make about HMRC 6 when they claim that it is mere guidance and they are not bound to apply it.
HMRC 6, and various recent cases, show that there are really two sets of rules: one for leavers, and one for arrivals. It is far easier for an arrival to avoid becoming a UK tax resident, than it is for a leaver to shrug off his or her UK tax residence.
Options for Leavers
There are really only three options:
(1) A short and complete absence abroad that covers one UK tax year
(2) Working full-time abroad for at least one UK tax year
(3) Absence for at least three UK tax years
Short Complete Absences
Not stepping foot at all in the UK for one whole UK tax year could mean that you are not a UK resident for that year, provided you have left the UK for a settled purpose. You would need to have a permanent home and a place of business in one specific place overseas to fall within this heading.
In practice this is quite difficult for most expatriates since they usually wish to return to the UK at times during the year, and in any case the rule only applies to that particular single year. Under this heading, however, you could keep UK available accommodation.
Working Full-Time Abroad
You must have arranged a job before you leave, and it must be a real full-time job. You can, if you are careful, be self-employed, but again it must be full-time. Your employment must extend for at least one complete UK tax year. Leaving on 1st April 2011, say, and starting work on 9th April 2011 will not make you become a non UK tax resident until 6th April 2012.
Evidence such as employment contracts, how the job was found by you, work permits etc should be available. Days of work in the UK should be kept to under 10 as otherwise HMRC might class you a UK resident. Keep a careful diary showing exactly why you are in the UK and what activities (such a seeing family) you were undertaking as opposed to working.
Under this heading, you can keep your UK available accommodation and indeed your spouse and children can continue to live in the UK.
Absent for at least three complete and consecutive UK tax years
This is the usual heading for retired or retiring expatriates. Here you must be non-resident for at least three complete UK tax years. I would also advise the following:
1. Leave for a clear settled purpose with a distinct break from living in the UK.
2. You should be present for well over 183 days a year in your new country, and become tax resident there.
3. You should no longer have any available accommodation for your use in the UK. Ideally sell your UK home or let to a third party.
4. HMRC state that the midnight day counting only applies for the 183 day rule ? otherwise they will include any time spent in the UK i.e. including arrival and departure days. My general advice is to keep your days in the UK to under 30.
5. Only return spasmodically ? not for a fixed period of time, or at the same time, since this could imply that you have a continuing link with the UK.
6. Keep a careful record of visits to the UK, including dates, flight numbers, accommodation, purpose of visit etc.
7. While you are not legally obliged to complete Form P85 for individuals leaving the UK it will generally assist in establishing yourself as a non UK resident. Take advice before submitting the form.
8. Keep evidence of overseas accommodation (leases, purchases etc), residence permits and work permits.
9. Get all your mail sent to you overseas.
10. Deregister from NHS doctors and dentists and register with overseas services.
11. Tell DVLA your overseas address and dispose of cars in the UK.
12. Move all your personal possessions overseas.
13. Resign from UK clubs and associations ? join overseas equivalents instead.
14. Make your life in a new country.
15. Inform ISA providers of your overseas address and that you are no longer UK tax resident.
16. Cancel any UK gun, UK travel and UK parking permits which usually require you to be a UK resident.
17. Complete overseas tax returns.
18. Resign from UK directorships if possible.
19. Have your bills sent overseas.
20. Inform life assurers and pension providers that you have moved.
21. Inform UK private medical companies that you live overseas.
There is some flexibility in some of the above points ? they do not necessarily have to all be rigidly applied – but in general terms you should try to achieve them all to have certainty of non UK tax residence.
For reassurance about your tax residency you should seek professional advice, preferably from an adviser who knows the residency and tax rules of both the UK and your counntry of residence, such as Blevins Franks.
By David Franks, Chief Executive, Blevins Franks
2nd May 2011
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; an individual must take personalised advice.