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Tax Residency Rules Warning for British Expats

Tax Residency Rules Warning for British Expats

British expats have long-suffered the confusing “˜rules’ relating to the definition of residency in the UK for tax purposes.  I use the inverted commas around the word “˜rules’ deliberately, because until now there have actually been no rules defined in law. British expatriates have, as a result, relied on interpreting the guidelines that HM Revenue and Customs publish relating to what may or may not constitute having your residency in the UK.

British expats have long-suffered the confusing “˜rules’ relating to the definition of residency in the UK for tax purposes.  I use the inverted commas around the word “˜rules’ deliberately, because until now there have actually been no rules defined in law.

British expatriates have, as a result, relied on interpreting the guidelines that HM Revenue and Customs publish relating to what may or may not constitute having your residency in the UK. 

And why do these “˜rules’ matter anyway? 

Well, because they determine whether a British expat has to pay tax in Britain or not.

Before 2008, if you were living abroad and just visiting the UK occasionally, your days of arrival and departure weren’t counted for example, then that interpretation of the “˜rules’ changed, and all of a sudden you could spend far less time in Britain if you wanted to remain non-resident.

Then came the infamous case of British businessman Robert Gaines-Cooper who believed himself to have been an expat with no taxable ties in the UK for decades.  However, perhaps because of his considerable wealth, the British taxman singled him out and told him that his connections with the UK meant he could be considered a resident for tax purposes after all.

British expats the world over have followed the case closely, because in deeming Gaines-Cooper to be a taxable resident whose short but regular trips back to the UK pushed him beyond the boundaries of the residency “˜rules,’ many other Brits abroad are aware that they too could fall retrospectively into the UK’s tax trap.

As the case rolls on through appeals processes, perhaps one positive thing has transpired as a result of this high profile scrutiny on HMRC’s failure to provide a legal definition of residency for anyone to rely upon.  The taxman has decided to introduce a statutory definition of residency in the future.

There is a consultation phase running at the time of writing, during which period the taxman wants to hear from British expats who may be affected when the new residency rules are written in to law. They want to be sure their new rules are as clear and as fair as possible.

Whilst the creation of a legally binding set of rules to prove residency or non-residency is absolutely and unquestionably an excellent idea in most people’s minds, there is one word of warning for expats to heed.

The number of days the taxman is proposing a Briton can visit the United Kingdom for in any one tax year may be slashed dramatically.  So, if you’re someone who regularly travels home, you may have to cut back on your holidays in Blighty or risk falling back into the taxman’s net in the UK.

Author: Rhiannon Davies editor of www.shelteroffshore.com

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