Passport? Check. Lights off? Check. Cancelled the utilities? Check. Ensured you are compliant with the latest HMRC latest residency and domicile guidance on moving abroad? Errrm……
Probably not, according to tax adviser PKF, which is warning emigrants that they may continue to be liable for a number of UK taxes unless they get proper advice.
The accountant and business adviser said recently rewritten HMRC guidance for those leaving the UK “explicitly” emphasised broader criteria for establishing that an individual has severed ties with the UK.
Matt Coward, director of private client tax services for PKF said: “It is all too common for people to go to live abroad only to find out later that they have not in fact left the UK as far as UK tax rules are concerned. This leaves the ill-informed vulnerable to attack from HM Revenue & Customs (HMRC) and could lead to hefty tax bills, plus interest and penalties.”
Coward said the now well-publicised Gaines-Cooper versus Revenue and Customs Commissioners case demonstrated, for instance, that simply counting the number of days you are out of the country was not enough to ensure non-residence for tax purposes.
“You must have established yourself as non-UK resident before the day counting rules come into play,” said Coward.
And he highlighted that even if people have demonstrated you are no longer resident for income tax purposes, there are numerous other taxes for which they could continue to be liable.
Factors to consider include:
• A liability to National Insurance Contributions can continue for 52 weeks after leaving the UK
• Capital gains made by temporary non-residents – those who have been outside the UK for less than five complete tax years – will be captured on the taxpayer’s return to the UK; similar rules apply to foreign income of temporary non-resident non-domicilaries, which will be treated as remitted in the year the individual returns to the UK.
• A person retains their UK domicile for inheritance tax purposes for three complete calendar years after they leave the UK even if they are able to change their domicile status in general law.
Coward noted: “Recent Court decisions on residence have generally gone against the taxpayer and HMRC is actively pursuing cases where, in its view, the taxpayer has not done enough to demonstrate that they have ceased to be UK resident.
“The key to proving that you have become non-resident for tax purposes is to sever as many ties with the UK as possible – just staying overseas and counting days spent in the UK is not enough. It’s essential to be able to demonstrate a decisive break.”
Tips for proving you have left the UK are:
UK property
• Sell your UK property or let it out for at least 12 months.
• Do not leave your property empty.
• It should not be 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 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.
Your UK business
• Consider resigning from any UK company directorships or company secretarial positions.
• Consider disposing of your UK business interests altogether.
• Ensure that official paperwork such as Companies House filings are completed.
Other UK connections
• 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.
Taxes
• 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.
Finances
• 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.
Cars
• Sell your car and cancel your car insurance and subscriptions to motoring organisations.
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.
• Purchase a car.
• Have a Will drawn up dealing with your property in the new country.
Coward concluded: “The overall pattern of your life must reflect your declared non-resident status and the fact that you have left the UK for the foreseeable future. Maintaining significant links with the UK is dangerous and could prove costly, as HMRC will argue that you have not quit the UK.
"The best way to keep your taxes down is to cut most UK ties when you go overseas. That doesn’t mean you can never come back for events or to see your family, but just that you need to establish yourself conclusively as non-resident before you start making such visits.”
