New April 2011 Tax Laws in UK Re Xpats !

We’ve hammered this one elsewhere and I’m not too sure that anything in 2011 will make too much of a difference to what was discussed here

In Feb 2010

The treasury this week has also published draft rules on a tougher ‘residency test’ which will use a greater level of qualitative judgement to determine residency such as family ties and the extent of business interests when determining liability for tax.

I can’t find solid info on 2011 yet (If anyone can please post to this thread)
What you are asking about is probably those draft rules coming into force (law maybe) in the new 2011 tax year.

I still suggest that if you are ex-pat, and wish to remain so, you cut all financial, property and social ties with the UK (and contrary to the post from deepseacon : including bank accounts!).

From the press and Journal (Published: 13/07/2009)
Read HMRC tightening up on 90-day tax rule for those working overseas

More reading:
http://citywire.co.uk/new-model-adviser/court-strikes-down-90-day-tax-residency-rule/a383122

Some of the above references are 2009 and 2010 but you can see where this is all leading.

It has been suggested that eventually the UK may resort to a USA style tax system whereby, no matter where you live or work in the world, if you are a UK citizen you will be liable for tax and will be required to submit an annual tax return to HMRC.

There are a few way of approaching this:

• Pay taxes and be done with it!
• Live in another EU state and pay taxes there instead (often cheaper).
• Become a citizen of another country and revoke your UK citizenship.

Of course you will then pay taxes there anyway

The way the world is going, nobody will get away Scott free in future.
Take Thailand (as a classic example).. the main reason UK citizens are currently not paying taxes locally is because they are on Tourist visas. I’m sure HMRC aren’t too happy about that state of affairs either. Hence the USA style tax system that has been suggested is under consideration by HMRC…

aka: As a UK citizen, no matter where you live, you will be nailed for UK tax, unless you are paying tax under a reciprocal tax agreement and can prove to be doing so.

By having a UK bank account will not make you become a Resident from NON Resident Status.

Alone, on it’s own, you may be correct but….. if you are ever investigated by HMRC consider this…

OK
You are a UK Citizen.
You used to live in the UK.
You used to work a lot in the UK sector of the North Sea.
You left the UK years ago and became ex-pat by initially staying 365 days out of the UK.
Since then you have never been in the UK more than 89 day a year.

But:
You still have a UK bank account that is active (in even a small way) and pays some bills, pension, on-line shopping, whatever.
You still have a UK credit card which you use.
You still have a UK driving licence.

For your convenience, your banks statements go to your Mum and Dads UK address
The billing address for your credit card is the same UK address.
Your UK driving licence is registered to the same UK address.

One day HMRC decide to investigate you for some reason.
They may well decide that you have long term ties to the UK and therefore are resident for tax purposes, plus they might decide you have been liable for years and claim many years back tax is owed. The 90 day rule will mean jot in the above scenario!

That could hurt!!

It’ll all end in Beers!

Subman

I was advised this year that the tax man changed his rules & now if they investigate its only back 4 years.

Point of interest : If your non resident you are not allowed to claim UK SED. However if you do get investigated and the tax mans decides you are Resident for tax purposes you are then entitled to claim SED for the past 4 years. If of course you meet the ever changing rules for SED, which is tough these days.

Hope this helps

I was advised this year that the tax man changed his rules & now if they investigate its only back 4 years

The HMRC can go back indefinitely if they believe the crime of fraud has been committed. Just like any other crime, there is no limit to the length of time an investigation can go back. The often quoted time frames refer to the amount of years you are obliged to keep records. Not the point at which potential fraud is written off.

I agree with 225 on this. HMRC may well go back four or six years and if they find little of interest to they may decide that investigating further back will be a waste of manpower and will produce little revenue, which is what it’s all about after all. An accountant will tell you what they think HMRC will go back to (four years for example) but ask one to quote the relevant UK law that states four or six years and they probably will not be able to.

On investigation, if HMRC find major areas of concern in say years one, two, and four, they may keep digging back beyond six years.. maybe even eight! Whether individuals are obliged by law to keep records or not, it might well fall on the person being investigated to prove they are clean for the whole period they are under investigation.

If any Ex-Pat reading this has kept good records and have met with all the requirements of being ex-pat over the preceding years (including staying well within the 90 day rule) and not having any long term ties with the UK, then there is a good chance they can sleep easy. I say staying ‘well within’ the 90 day rule because sailing close to the wind on the 90 day rule was part of the undoing of the defendant in the Gaines-Cooper tax case.

If you are in any doubt start digging through this thread and others to see what you can do to protect your financial and possibly your family’s long term interests. By all means take financial advice from a UK tax consultant also, but do not allow them to contact HMRC on your behalf or it will pop you up on HMRC’s radar. If HMRC get a whiff of you seeking tax advice within the UK they may start sniffing around themselves.

A note of caution. UK tax consultants are used to dealing with HMRC. Being UK based they know no other way of doing things correctly (in their eyes).. so if you give them permission to deal with HMRC on your behalf, i.e. Power of attorney for tax purposes, it would be very natural for them to ask HMRC if they have any outstanding issues with your tax affairs. You may not have any outstanding issues, but that inquiry could quite possibly create a new tax file and you may become of interest to HMRC simply as a result of an apparently innocent inquiry via your consultant. HMRC might also ask themselves, that if you are Ex-pat, why have you engaged the services of a UK based tax consultant? Yet another UK ‘tie’ you could do without.

Earlier, I saw mention of not working for UK companies or agencies.
In the context of being ex-pat and the 90 day rule, that won’t mean too much to HMRC either. If you break the 90 day rule, or are within the 90 day rule but are viewed by HMRC as having long term ties (I think they call it ‘centre of interest‘ but can’t remember the exact term) within the UK, they may well request that you to provide a tax return and investigate you from that point onwards. HMRC won’t care if you work though a foreign company in a foreign country and spent most of your living life in a foreign country. As a UK citizen, Ex-Pat or not, if you haven’t paid tax in the country you live in through a reciprocal tax arrangement then they will want their cut.

Soon (ish), for those Ex-Pats resident out-with, the UK I suspect that they will be required to provide proof of Permanent Residency and a tax record from the country they are resident in. No proof of residency and no proof of paying tax elsewhere will result in them being required to submit a tax return somewhere. Not hard to guess where HMRC might feel that a UK citizen should submit their return.