The taxman has set up a new specialist unit to investigate overseas residency claims of up to 5,000 so called high net worth individuals. People who have left the UK for lower tax jurisdictions could find themselves under greater scrutiny from HMRC; and maybe back in the grasp of the taxman.
Until April 2009, tax exiles could usually successfully claim non-residency if they were in the UK for less than 90 days a year. New HMRC guidelines state that tax exiles must prove they have cut almost all connections with the UK. HMRC changed its guidance after winning a case against Robert Gaines-Cooper. He appealed against a tax demand of £30m after the taxman challenged his UK non-resident status. He thought he had successfully moved to the Seychelles in the 1970s. He spent less than 90 days a year on average in the UK. But the taxman persuaded the judges that he was still resident in the UK, partly because he owned a substantial house near London (where he kept his collection of vintage cars) and partly as his son also attended a school in England.
So, the taxman is not just looking at the days you spend here, but your entire lifestyle to see whether you have left for good. Any such Tax Enquiry will focus on lifestyle issues, e.g. homes of family members, children’s schools, club memberships etc. Businessmen commuting to London from tax havens are expected to face particular scrutiny. A number of people who believed they were safely out of the UK tax system could instead find themselves paying 50-70% tax and NIC, plus interest and penalties.
Lynam Tax Residence Specialists have decades of experience in dealing with tax residence and domicile issues.
Call Paul Lynam today for an initial free, confidential, no obligation, discussion: 0845 643 9997