Accountancy group UHY Hacker Young has claimed that UK expats being forced to return from Ukraine, Russia or Belarus could face “huge, unexpected tax liabilities”.
The outbreak of conflict in Ukraine is likely to have seen British nationals suddenly return back to the UK.
UHY Hacker Young said that these individuals are at risk of getting caught in the UK tax net upon their return, incurring tax bills they had not planned for. The firm explains that to ensure they do not pay UK tax on their overseas income, taxpayers need to have been absent from Britain for a complete tax year.
Neela Chauhan, partner at UHY Hacker Young, added: “The shocking outbreak of conflict in Ukraine has been so rapid that there will be many individuals that moved to Russia, Ukraine or Belarus and are now having to return to the UK well within that timeframe.
“They may find that income they expected to be taxed on overseas is now going to be taxed in the UK. They face the prospect of this tax bill at the same time as dealing with the costs of their relocation back to the UK, finding a new school for their children and finding a new job.”
Lenient approach
Chauhan also said that many expats could also find themselves facing substantial capital gains tax (CGT) bills for the sale of UK-based assets such as shares or property investments that the expats thought would have been exempt from UK tax.
For the sale of UK-based assets, which they owned whilst UK resident, to be exempt from CGT, expats have to be non-resident in the UK for five tax years.
UHY Hacker Young said HM Revenue and Customs (HMRC) should treat people forced to return to the UK due to the Ukraine conflict as still domiciled in Ukraine or Russia for tax purposes. The taxman did provide a similar concession for people stuck in the UK for longer than they planned during the pandemic – though this only lasted 60 days.
Chauhan argued that the UK government should clarify that they will take a lenient approach for returning UK taxpayers. This means ensuring people do not have to apply individually to HMRC to avoid a huge tax bill.
She added: “People fleeing conflict or leaving jobs because their company now no longer operates in Russia unfortunately did not have the luxury of being able to plan their return to the UK properly.
“These people have found themselves in a very difficult situation through no fault of their own. HMRC now needs to offer them some clarity.”
A UK government spokesperson said to International Adviser: “The existing rules provide the right protection while following the basic principle that individuals living in the UK should pay tax in the UK. Exceptional circumstances, such as being affected by a war, are taken into account.”
