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If you think the HMRC will be questioning your non-residency status because you own a UK mobile but have lived in Thailand for years, fear not.
225
Fear Not? On it’s own maybe not, but combined with other (fear not) type events it could be a contributing factor to an investigation going against you.
I am tempted to feel that your faith in HMRC is very ill informed unless you are able to advise otherwise. Question: Are you ex-pat?For example there is a person I am aware of whom has lived in Thailand for years (House in Thailand, Thai wife, kids at local school etc) who is currently being investigated by HMRC mainly due to information supplied by his UK employers. Despite his long term residential/family circumstances HMRC are out to prove that he is not Ex-Pat (i.e. where they feel his gravity of interest lies) and are looking at anything (including no doubt phone bills/contracts) to prove their case. So, living in Thailand for years is not necessarily a ‘get out of jail free’ card, especially if you have been bouncing back and forth between the UK for work offshore with extra days in country (either end of your trip) that could now be viewed by HMRC as regular UK holidays. Even a holiday so the grandparents can see the kids or whatever (more ties that the HMRC would love to make use of) would not be wise. Fly them out to you or meet them in some other country for a holiday.
You need to make sure the complete ex-pat package is secure.Also see this link (posted by liddelljohn) from the Bangkok post: http://www.bangkokpost.com/business/economics/35617/british-expatriates-face-higher-tax-bills
Closing Loopholes (See image below)
This clearly highlights.. UK phone contracts as just one item that HMRC will look into. (Member: 225 please take note)Article in full below:
Published: 5/04/2010 at 12:00 AM
British expatriates face higher tax billsBritish expatriates who still have connections with their homeland may face a challenge over their residency that could put them at the mercy of the taxman, say international accounting and consultancy firms.
Under the new guidance, UK tax authorities will scrutinise more closely the non-resident status of British citizens living overseas, said Paul Gambles, managing director of MBMG International Co.Until last year, British expats could claim non-residency status if they spent no more than 91 days a year in the UK.
"Any UK expats could be affected [by the new rules]. The number of days spent in the UK is only one factor now. They’re going to look at all other things about the way you arrange your life and decide whether the UK is the centre of your life," said Mr Gambles.
The new guidelines from Her Majesty’s Revenue and Customs (HMRC) require British nationals claiming non-resident status to prove they do not retain connections with the UK.
These links include having a property, holding sports or social club memberships, keeping a mobile phone contract and having family there or children going to schools or universities in the UK. A Briton who makes regular visits home could also be liable for UK tax.
UK residents are required to pay British taxes on their worldwide assets and income, whereas generally non-residents only pay UK tax on income that originates from UK sources.
The changes in UK tax practice followed the case against Robert Gaines-Cooper, a British business tycoon who lost his appeal in February this year to HMRC. Mr Gaines-Cooper, who has established a business empire since the 1970s in the Seychelles, claimed to be wrongly denied non-resident status since he complied with HMRC guidance. He is now facing a tax bill estimated to be in the region of 20 million.
Mr Gambles advises British expats to make three checks. The first is to ensure they really are clearly non-resident under the new UK rules. If they could be seen as UK residents, the second step is to decide whether they want to change their lifestyle to sever the connections, which may mean not flying back to the UK every summer to visit their family and friends. Third, they might need to change their approach to tax-planning:
"If you are not prepared to change your life, then the thing you might need to change is your entire tax planning," he said. "You might need to think about planning your affairs from the point of view of being a UK resident, which is a very different outlook to planning your affairs as a non-resident."
John Andes, a partner at KPMG Thailand, said British expats with property offshore should take the necessary steps to convince UK authorities they are not UK residents. "If you are leasing out your home, make sure you have a lease contract to support the lease," said Mr Andes. "If you are working overseas, ensure that you have a proper employment contract at a minimum."
But there are many remaining grey areas to be investigated, such as whether full-time employment is required or how regularly one needs to work.
Transferring a British company pension outside the UK, disposing of non-investment property as well as holding an offshore bank account are also recommended as ways to indicate non-resident status.
With more than 50,000 British expats living in Thailand, the new UK tax rules are expected to have an immediate and long-term impact on Thailand’s economy.
"Any UK expats who felt they were non-residents but who are now classed as UK residents may not spend and invest as much in Thailand as the money will be spent on paying UK taxes," said Mr Gambles.
In the long term, the ruling could also affect people planning to retire in Thailand, he added.
"It’s going to make a big difference on their views of the cost and benefits of living in Thailand. Maybe they thought they’re going to be 40% or 50% better off by living in Thailand or on investment income, but it might not be the case now."
It will also be harder to set up businesses in Thailand and elsewhere as companies in the UK may have to bear the rising costs in sending British nationals overseas, he said.
The rule change could also herald a host of measures from Western tax authorities seeking to boost their tax revenues from nationals overseas.
"The big concern is that the next step by the UK and all the other indebted Western governments will be to move to an American-style tax basis, where all citizens are liable to tax on worldwide gains and income, irrespective of their residence status. This could affect millions of expats worldwide and have a huge impact on the economy of countries such as Thailand," said Mr Gambles.
The bits that stands out for me the most (based on new guidelines) are:
The new guidelines from Her Majesty’s Revenue and Customs (HMRC) require British nationals
claiming non-resident status to prove they do not retain connections with the UK.and
These links include having a property, holding sports or social club memberships, keeping a mobile phone contract and having
family there or children going to schools or universities in the UK. A Briton who makes regular visits home could also be liable for UK tax.This list below is not exhaustive but, as an Ex-pat, you should seriously consider if the HMRC would view the following as ‘retaining connections with the UK’
- UK bank account
- Phone contract
- Regular UK family visits
- Vehicle in your name
- Owning UK property
- Renting UK property
- UK driving licence registered to a relatives address
- UK mailing/contact address
(Note: Never give HMRC a UK contact address, or UK phone number.. that is suicidal! The only contact information they should have is your foreign address. Lets face it, you say you live overseas so why would you want mail delivering to the UK? Instruct relatives to return HMRC letters back marked ‘not resident at this address’
I would suggest that if you have been guilty of this and have received mail from HMRC (to a UK address) do not respond to it, plus.. write to them now and ensure they know in no uncertain terms that they correct your correspondence address to that of an overseas address.I’m not suggesting that if you are ex-pat you will be investigated today or in five years time, but it cold happen any time, so I would advise against a short term strategy of sticking your head in the sand. Plan for the longer term.
If/when an investigation does trigger you need to be 100% solid on your tax planning or HMRC will cut your goolies off!!Lets face it. You are either in one of two categories.
1) Ex-pat with all UK ties (as suggested) severed
2) UK resident with ties in the UK, living overseas for years on tourist visa’s with no registered residency anywhere, trying not to pay UK tax.
I would suggest No. 2) will eventually get you.
As a UK citizen if you can’t handle meeting the required ex-pat criteria (as suggested) then, no matter where you live, you may have to throw your hands up in the air, admit defeat, and send in your tax return to HMRC as a UK resident. It just ain’t that easy no more boss!
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