Lisa Spearman, partner at chartered accountancy and financial planning firm Mercer & Hole, explains the potential tax consequences of an unexpected return to the UK, in light of the conflict in the Middle East.
In view of the events of the last few weeks, there has been much comment on the choice of the UAE as a destination for people seeking a new home, after the non dom changes in the UK.
At the time of writing, there are few if any flights available to the UK, but when exit is possible, the question then is whether – from a tax point of view – that is wise, and, if so, where to go.
Timing is everything and if people do come back to the UK before 5 April, they will need to look at their circumstances over the whole of the 25/26 tax year and day count to establish if they have actually achieved non residence for that year as many had planned.
One may think the political situation may constitute exceptional circumstances, such as that the 60-day additional days relief could apply, but this may not be the case. The legislation is predicated on the principle of being unable to leave the UK – not on returning here unexpectedly.
In guidance, HMRC does appear to accept that one may need to return to the UK, for example, to attend a close family emergency and also notes the importance of FCO advice.
Nonetheless, we still can’t get to definitive confidence that HMRC will disregard any days of return due to the current political situation. There is talk of an emergency evacuation which would assume that British citizens would be brought back here – we might expect that situation should be covered, but the key message is to look at yours or your clients’ position if any UK days are not disregarded for both the 25/26 and 26/27 tax years.
As we are so late in the tax year, it may be that few people are at risk of an unexpected change of residence status this year – this is what we found during the pandemic – but where destination is under yours/your clients’ control, you would be wise to consider the matter in the round before returning to the UK. Do keep any correspondence, email alerts etc which suggest it is FCO advice to come to the UK.
If you or your client were planning to leave the UK before 5 April to be non-resident for 26/27, tax requirements suggest it will be wise to leave as planned if possible even if there has to be a change of destination, but watch out for periods where employment commencement dates are delayed or there is a period where your only “home” is in the UK, as you have been able only to establish temporary accommodation overseas.
In terms of consequences, if anyone does find themselves unexpectedly remaining UK resident, then 25/26 is a big year for changes in the tax reporting due. UK residents are likely to be taxed on worldwide income, and a year (or part year) of residence will count for establishing whether or not you are a long-term resident or when that status might be acquired.
Personal safety will of course be paramount, but where there is any chance to do so, the unexpected tax consequences of an unexpected return to the UK should not be overlooked.
Lisa Spearman is partner at Mercer & Hole
