Expats need to clarify their tax residency status
Individuals who divide their time between homes in Britain and abroad, in other words expats and those who own homes overseas, should check their tax residency status as soon as possible, because HMRC’s Statutory Residence Test (SRT) is likely to be implemented from 6th April 2013.
The statutory residence test is, according to the tax authority, being launched to make it easier to determine someone’s residency status for tax reasons.
Currently, if you’re in the UK for more than 183 days per tax year, or you average more than 90 days per tax year over a four year period, you’re deemed to be a UK resident. However, when it comes into force, the SRT will not only count the days you’re in Britain, it will also study your connections with and ties to the UK, and these will, we’re told, include family, friends, property and work links.
Seek advice on tax residence status
With this in mind, it’s highly advisable that anyone who is not exclusively based in the UK clarifies their tax residency status at their earliest convenience and to speak to their financial adviser to see how their financial planning strategies might be impacted – and how they can take advantage of being an expat, if that is how they are classified in the eyes of HMRC, or how they can use financial planning to become more tax efficient.
Legal implications
It really is worth ensuring you’re up-to-date on these important changes to UK tax residency laws as HM Revenue & Customs has been, in recent years, ‘chasing’ UK citizens who live abroad.
A fairly recent example of this ongoing campaign is the case of British-born, Seychelles-based Robert Cooper-Gaines, who despite adhering to the ‘day counting test’ was told by the Supreme Court in 2011, after he appealed a decision by HMRC, that he was liable for taxes in Britain because he had “not made a clear break” with his country of birth. The judge cited a Henley-on Thames home and visits to Ascot races for the decision.
Nathan Tarr
I agree, with the current economic climate in the UK and in fact throughout Europe, never has it been more important to clarify and lock down where you are considered tax resident. Governments across Europe are seeking revenue and this is an area of major focus.