British expats returning to the UK from Dubai and the Middle East, as well as those planning to move there but delaying their departure due to regional instability, could face unexpected Capital Gains Tax (CGT) liabilities, according to accountancy firm Price Bailey.
The firm said that many people may inadvertently fall foul of the UK’s five‑year temporary non‑residency rule – an anti‑avoidance measure designed to stop individuals leaving the UK briefly to dispose of assets tax‑free in low‑tax jurisdictions, such as the UAE, before returning soon after.
Under these rules, if an individual becomes UK‑resident again within five full tax years, capital gains realised while abroad are effectively “brought back” into the UK tax net and taxed in the year of return in certain circumstances.
The same trap will impact Brits who were preparing to emigrate to Dubai and are in the advanced stages of selling businesses or second non-UK homes, but who have delayed leaving over safety concerns or travel advice.
Price Bailey said it is aware of clients who were planning to emigrate to Dubai but have now paused the sale of businesses and second homes while they reassess their options.
Returning to the UK increases an individual’s “day count” under the Statutory Residence Test. If this results in UK residency being triggered before five full tax years have elapsed, the temporary non‑residence rules can apply.
Price Bailey said that while HMRC can disregard up to 60 days spent in the UK due to exceptional circumstances, this relief is unlikely to apply because individuals could travel to alternative destinations.
“The immediate focus is usually on income, which is taxed as it’s earned, but the far bigger issue is CGT, which is often overlooked. Someone returning to the UK from Dubai for a short period may face some income tax, but that is manageable, unlike a large one‑off CGT bill,” said Nikita Cooper, director in the tax team at Price Bailey.
“What catches people out is that if they return within five years, gains on assets held before departure and sold while in Dubai are effectively ‘revived’ and taxed in the year of return. It’s the retrospective nature of the rules that tends to surprise people.”
She added: “People may have sold UK businesses or second non-UK homes while tax‑resident in Dubai and could now face paying CGT at 24%. For many, that could amount to tens or even hundreds of thousands of pounds”
