Own a home abroad? Check your UK tax residency status
With the UK’s tax authority, HMRC, set to launch its new Statutory Residence Test (SRT) on 6th April this year, those who divide their time between homes abroad and homes in Britain should urgently verify their UK tax residency status.
The idea behind this project, which is arguably the biggest shake-up of the residency regulations in a century, is to make it quicker and easier for HMRC to catch perceived tax evaders – and, I suspect, a ploy to bolster the government’s coffers by bringing more people into HMRC’s net.
Under current rules, if you’re in the UK for 183 days or more within any one tax year, or for more than 90 days averagely over four tax years, you’ll be automatically classed as a tax resident of Great Britain; and, if you spend no time or less than 183 days there, you’ll probably not be deemed a UK tax resident.
However, when the SRT comes into effect in April, not only will the days be counted to see if you fall under or above the 183-rule, there will be an additional section that will track your connections and ties to Britain. Such links are likely to analyse property, family, social acquaintances and professional life.
With this in mind, I would urge expats to work with their financial adviser to clarify their residency status as it could mean that in order to remain a non-tax resident of the high-tax jurisdiction UK, they may need to alter the structure of their arrangements.
For example, expats who frequently visit the UK for work or family reasons might need to think about how many days they’re actually in the country; and, on the other hand, those who live in the UK but spend a lot of time abroad might need to consider spending longer overseas to be counted as non-tax resident.
Thankfully, a good financial planner can offer a variety of solutions to mitigate your tax liabilities in whichever country you choose to spend most of your time.
This is one of those issues that many expats tend to put off – but they shouldn’t as 6th April, the day SRT comes into effect is just around the corner.
And, perhaps even more importantly, HMRC, is said to have been actively tracking UK citizens who live for at least some of the year abroad. One of the most high-profile recent cases was that of Robert Gaines-Cooper, who has lived in the Seychelles since 1976, but who in 2011, was hauled into the Supreme Court in the UK after the British taxman brought a case against him for not paying UK taxes. The judge decided that he had not managed “a clean-break” with his native UK and cited an Oxfordshire home and trip to British sporting venues as evidence.