• HMRC more inquisitive about the true intentions of migrants
  • New leavers will find it more difficult to become non-residents
  • Also affects foreign visitors

Britons that move abroad intending to become non-residents for tax purposes could still face huge tax bills even if they spend less than 90 days in the UK according to HMRC guidance introduced this year, warns Wedlake Bell, the City law firm.

Emma Loveday, Private Client Partner at Wedlake Bell says that many expatriate Britons and foreign visitors traditionally travel to Britain in the summer to escape the intense heat of many of their resident countries and to attend summer’s society events such as Royal Ascot and Henley. She warns that now is the time for nonresidents to think of whether some of their lifestyle choices could jeopardise their non-resident status.

Wedlake Bell explains that non-residents have been relying on HMRC’s old requirement that they do not spend more than 90 days in the country. However, the new HMRC guidance makes explicit that residency status will not be determined only by the 90-day measure. The new guidance came into effect on April 6 of this year and so this summer will represent the first big challenge to the normal practices of non-residents.

Says Emma Loveday: “Merely counting days is just not enough to maintain nonresidency status. HMRC will be considering many other factors, and it will be trying to assess what the intention of the individual is when applying for non-residency and whether their lifestyle indicates that they have left the UK and become non-resident. This could stretch to checking whether they are members of gentlemen’s clubs or sports clubs.”

She adds: “The new guidelines mean that those leaving the UK for the first time will find it particularly hard to become non-UK residents, especially if they return to the UK often or if they maintain strong social and business ties here.”

“It is also easier for short term visitors to become UK residents unintentionally, depending on the extent of their UK connections and the number of days they spend in the UK on an annual basis. This could potentially affect overseas visitors who spend a lot of time in the UK, and their tax bill could be huge.”

What should non-residents do?

Wedlake Bell explains that any individual who wants to be considered a non-UK resident needs to be able to prove to HMRC that they had a significant break in their lifestyle when moving abroad, i.e. that they no longer maintain all their ties with the UK..

Wedlake Bell says that, although HMRC has not specified in detail what it will consider when assessing residency, individuals should consider that the following factors may determine their residency, even if they spend less than 90 days in the UK:

  • Retaining a property in the UK: Keeping a home in the UK in which you stay in when you visit or that is occupied by members of your family could affect your non-resident status.
  • Continuing to conduct business in the UK: If an individual still visits the UK regularly to carry out UK-based work they are likely to be considered a UK resident. This is more the case if that business is the main source of income of the aspiring non-resident.
  • Club and society memberships: Maintaining strong social ties such as memberships for private clubs and other societies might be held against you by HMRC which can use this to prove that you have not sufficiently changed your lifestyle when you left the country.
  • Family ties in the UK: Sending your child to a British boarding school or allowing members of your immediate family to remain in the UK and in the family home is also a factor that could potentially determine if you truly are a non-resident.

Other potential risks are keeping yourself on an electoral roll or having post sent to you UK address.

Also, individuals should know that having a property abroad does not protect them from being considered a resident of the UK. 

Root of the problem the UK's outdated residency rules 

Says Emma Loveday: “Determining residency issues can be very hard to do, as there is currently no statutory definition that sets out clearly and concisely what activities make an individual a non-resident. What we relied on was HMRC’s guidance and other case law, which has only served to complicate matters and make residency rules even less clear.”

She adds: “Ultimately, the root of the problem is that much of the UK’s case law is old and does not fit with modern travel habits. What is needed is a re-think of what constitutes UK residency and for the Government to create a statute by which all cases can be fairly assessed.”