With Her Majesty’s Revenue and Customs using an ever-broadening test to establish whether someone is resident in the for UK tax purposes, British expats are having to go to greater lengths to sever their ties.
HMRC’s recently rewritten guidance on these matters (booklet HMRC 6) explicitly emphasises the broader criteria employed in HMRC’s investigations of residence status. And expats must do much more than merely count the days that you spend in and out of the UK every year to qualify as a true non-resident.
Besides income tax, there are several other UK tax traps that could ensnare the unwary expat, even if they have been abroad from some considerable time. These include National Insurance contributions, which can continue for a year after leaving the UK; capital gains, which can be captured upon a temporary resident’s return to the UK if they have been out of the country for less than five years; and inheritance tax, for which an expat remains liable for three complete calendar years after they have left the country.
If you are a recently departed expat, or are planning on leaving the UK, then you should look to take the following steps to ensure that ties with the UK are severed in the eyes of HMRC.
UK Property Owner
- Sell your UK property or let it out for at least 12 months.
- Do not leave your property empty.
- Ensure your property is not available for your use when you visit the UK.
- If you are letting the property, ask a UK agent to deal with the property on your behalf.
- Pay all outstanding property bills before you depart from the UK.
- Notify your house insurers.
- Notify your mortgage lender as appropriate.
- Notify your local council that you have left the property.
UK Business Owner
- Consider resigning from any UK company directorships or company secretarial positions.
- Consider disposing of your UK business interests altogether.
- Ensure that official paperwork filings are completed.
- Send form P85 to HMRC, declaring that you have become non-resident.
- Ideally, do not return to the UK for an entire tax year to emphasise the break in residence.
- Do not return to the UK for more than 90 days a year in subsequent tax years.
- Cancel your UK credit cards and reduce the balances in your UK bank accounts.
- Ensure any outstanding bills are paid in the UK.
- Consider transferring pension arrangements overseas.
- Sell your car and cancel your car insurance and subscriptions to motoring organisations.
- Notify your UK doctor and dentist that you have left the UK.
- Cancel your UK sporting and social club memberships.
- Consider appointing an attorney in the UK who is empowered to deal with your UK affairs.
In Your New Country of Residence
- Establish employment or business links in the new country.
- Obtain a residence permit, where necessary.
- Contact the local tax authorities to inform them that you have become resident.
- Purchase or rent on a long lease a property in your new jurisdiction and buy a car there.
- Register with a doctor and dentist in your new jurisdiction and open a local bank account.
- Move with your family to the new country.
- Establish social and cultural connections in your new homeland.
- Have a will drawn up dealing with your property in the new country.