UK Citizen? So you thought you were non-resident!

[James McLauchlan]

Note: This post is for those UK citizens that consider themselves ‘Ex-Pat’ by not living in the UK. If you are a UK resident the information below is of no use to you.

UK Citizen? So you thought you were non-resident!
You may have to think again and watch out for the UK HMRC knocking on your door!!

It’s the recent (Feb 2010) Gaines-Cooper court decision (HMRC won on appeal) that will stuff many of those of you that have been (shall we say) ‘a bit casual’ with breaking all ties with the UK (other than holding a UK passport).

This is my personal take on the deal – it is not to be construed as UK legal nor accounting advice. If you have any doubts contact your accountant.
In general terms (and not in any particular order) to ensure you do not fall foul of HMRC you need to make sure that as a UK Citizen ROV type ex-pat you:

• Do not own or rent or have your name appear on any UK property deeds, rental contracts or service bills such as Electricity, Gas, Phone etc.
• Do not own or lease or have your name appear on any UK based vehicle registration documents, be they Cars or Motorcycles
• Do not ever spend more than 90 days in the UK in any one year.

Forget being clever on this.. you need to be way under that rather than running it tight up to say 89 days. A day in the country is taken as where you were at midnight and not a full a full 24hr period.

• No limited company? You are probably OK to work for a UK agency but do not work in the UK North Sea if you wish not to have to submit a UK tax return at some point. It does appear that some UK agencies are under investigation by HMRC. Believe me, when asked, any UK company will cough up your contact and payment details to any tax authority quicker than you can down your first beer after a 4 week trip offshore!!
• Form a foreign limited company and work as an employee of that company. Better still (for proof of gravity of interest) registered in the overseas country you reside in. UK companies will employ your services, provided through your company, as long as you have sufficient insurances eg. Employers liability/public liability covering your employees (you) internationally to a min £5,000,000 of cover (UK statutory minimum). Canada & USA needs special arrangements.
• Do not have any banking interests in the UK (I would included Jersey, Guernsey, IOM to that). If you need an EU bank account for small stuff then bank in another EU country but steer clear of UK banks altogether.
• Break all ties with DVLC – including your UK driving licence.

If you are non UK resident you are not entitled to a UK licence anyway.
If you have a UK licence then you have probably used a relatives address for it. HMRC would just love that on as they would deem it as you having accommodation available to you in the UK. Then, based on that, they might suggest you are still resident. You can see where that would lead.

• Your wife also need to be Ex-Pat (Non resident).
• Register as a resident in the country you live in. Get a local driving licence. Note: Even if you are registered as a resident of another country HMRC may still deem your gravity of interest as being the UK but foreign residency adds another layer of proof to your gravity of interest being out-with the UK.
• Make sure that HMRC were indeed advised that you left the UK and have not been resident since then.
• Do not become a director of a UK company for any reason (as an Ex-pat this is allowed). I did years back (briefly) and HMRC came sniffing for a tax return. I had never drawn salary from the company and by then I was no longer a director and was firmly based in Thailand.
• If HMRC ever write to you via a relatives address… get them to send it back – ‘not at this address’. You do not live there so they should not send correspondence there. If you do answer their letters (sent to a UK address) then it will be clear to them that you have a UK postal address… add a UK driving licence and a UK bank account and they’ll be laughing all the way back to the tax office.

In All… have no property,vehicle, banking/fiscal/admin ties at all within the UK.
If you currently ‘break‘ any of my suggested personal guidelines above… you may wish to start re-evaluating your position sooner rather than later.

Below quoted text sourced from accountancyage.com

Gaines-Cooper snub could spark 20-year residency probes
High Court ruling on Robert Gaines-Cooper’s latest attempt to challenge HMRC over residency status cold open the way for more investigations

Robert Gaines-Cooper is licking his wounds again after High Court judges shot down his latest attempt to challenge the taxman about his residency status, and the ruling could have serious repercussions for others in the same boat.

Although the taxman has played down the significance of the Gaines-Cooper ruling, advisers are saying that the decision will adversely affect current cases in the taxman’s pipeline, even opening up the door to a potential 20 years of residency investigations.

Judges said HMRC was within its rights to go outside the IR20 rules, which say non-residents can only stay in the UK for 90 days, in its interpretation of the tycoon’s status. The taxman was allowed to go beyond relying on its narrow distinction of non-residency because of Gaines-Cooper’s lifestyle – which showed he still had strong links with the UK.

“People think the ruling is a complete whitewash,” said one source close to the issue. “I think we will see more discovery assessments on people but how far back are they going to go? They have the ability to go back to 20 years.”

There has been a flood of clients anxious about non-residency in the run-up to the introduction of the 50% tax rate on 6 April, and advisers warned they will have to ensure they meet the taxman’s standards if they wish to avoid a similar fate to Gaines-Cooper.

Gary Heynes, head of the private client division at Baker Tilly, said: “A large number of people have been talking to us about going non-resident before the new tax rate starts. This case shows HMRC can say IR20 isn’t the be all and end all.

“They can go back 20 years if they think the individual has taken a fraudulent view, but we would hope for six.”

Legal experts say a major problem lies in case law for residency stretching back to the last days of the British Empire, where a “gentleman” might reside in a hotel for the shooting season or spend months sailing between the UK and India, which are clearly unsuitable when applied to the modern world.

“Until the government addresses the issue properly we may see many more cases like this, simply because there is such a gap between the legal precedents and modern life,” said Louise Somerset, tax director at RBC Wealth Management.

HMRC confirmed more cases were in the pipeline, but would not speculate on whether they would look at historic tax returns. “Each case is unique because every person has a particular set of circumstances. But we’re looking at more compliance cases across the board.”

With the rules having been in flux for years, the Treasury is looking to codify them with the introduction of statutory residence tests, which is the first concrete piece of legislation around residency, but no timescale has been put on its plans.

In Our View

HMRC has clearly gained the upper hand on non-residency and the ruling could not come at a better time for the taxman. It has successfully shifted the goalposts for non-residency leaving tax advisers stunned at the court victory. The game has changed and anyone looking at non-residency will have to make sure every box has been ticked if they don’t want a huge tax bill.

Further reading:

Gaines-Cooper loses another High Court battle

If anyone else wishes to add to any of my suggestions above feel free :tup:
I also welcome any corrections on my comments that anyone can add to the thread.
The more that we debate this the better for those that may feel a little concerned about these recent developments.

Note: The law hasn’t changed but HMRC’s interpretation of the law has.

[Anonymous]

"HMRC’s new high net worth unit, which monitors the tax contributions of the country’s wealthiest 5,000 people, will examine the non-residency claims of the super-rich. Businessmen commuting to London from tax havens are expected to face particular scrutiny…

Until this year, tax exiles could claim non-residency if they were in Britain for fewer than 90 days a year, under rules devised before private jets made it viable to commute…"

I dont think too many ROV guys need worry much

[James McLauchlan]

I dont think too many ROV guys need worry much

Sadly, I already know of one ROV guy myself that’s going through the wringer. Possibly small beer in the overall tax plan of things but he is being hassled and he’s been resident in Asia for years.
No UK property, less than 90 days in the UK in any given year. Some North Sea work (outside the 12 mile limit).
So living in Asia, married to a local, locals kids at local school and the tax man is still not convinced that he is an ex-pat!

The best approach is don’t think it may not affect you. Make sure you know you can’t be pulled!

[Anonymous]

I dont know the case, but I’l bet is has less to do with Expat Status and more to to with tax liability (as an expat) when working in the UK sector. As HMRC class the UK sector as days in the UK for tax purposes for Expats, 12 mile limit or otherwise.

The list of "ties to cut" is unessasary and scaremongering. Be sensible and fair with the HMRC and they usually the same. Renouncing your UK citizenship and never stepping foot back in Blighty is a way of not getting pulled also…

The real issue with the Robert Gaines-Cooper case was him flying into London on his private jet and landing at 00:01 spending the day at his exlcusive London club, at his 27 acre estate, or his kids private UK school and then flying out at 23:59…traditional thinking says he was never in the UK at midnight and not tax liable. Clearly he has more to answer too than the simple 90 day rule and midnight location.

If any expat ROV guys have a similar lifestyle, then they need to start to worry. Others can rest assured.

[Theblackfingernail]

Once again the UK powers that be ,would rather suff it up it’s own, instead of sorting out the real problems.

How many can you list here?

1. Dole dodgers.
2. Immigrants.

[James McLauchlan]

The list of "ties to cut" is unessasary and scaremongering.

Are you a non resident Brit? If you are then I will accept your comments on merit.
However, if you are not, how about you butt out of this thread and start one on ‘Paying tax as a UK resident‘?

I feel the list is necessary and is not scaremongering which is why I posted it. There are those that may well benefit from it. I’d be interested to hear comments from other British ex-pats to whom this thread is aimed at…. as clearly mentioned in the paragraph at the head of the first post.

Note: This post is for those UK citizens that consider themselves ‘Ex-Pat’ by not living in the UK. If you are a UK resident the information below is of no use to you.

[timebandit]

Well James I sincerely hope what you have reported is not to be the case with us expats.
Its a worry for sure .
I am just in the process of telling the taxman where I have been for the last 2 years.
My only crime is to have a mobile phone contract and a bank account in the UK.
My understanding of UK law is that all cases are taken on a case by case basis however if a precedent is set then I dont really understand how you can take the case by case approach . I have sat through many a trial and seen QCs refer to previous cases and the judge politely notes it and or perhaps says that it is not relevant in this case carries on with the trial. I hope one of our learned friends out there has the answer.
From my experience with the tax man he is generally understanding and very helpfull if you tell the the truth , we will see what happens and hope that common sense prevails….

[Robert Branch]

This might sound very stupid and it probably is,but tell the UK Tax man where to stick it.The more everyone co-operates with these Morons,the more they will rip out of you.I personally ignore all correspondence from them and have been for years,and I do this as a matter of principal as they are the lying,cheating scum of the earth,and the sooner more people refuse to pay their taxes and suffer the consequense the better.Lets face it if everyone refused to pay taxes what would these scaremongers do…They always hassle the easiest targets.Remember that..Like I said Fuck the Majesty and her Inland revenue service.

[Robert Branch]

Dont be scared of the taxman.They go for the easy targets.I hope the theiving fuck-wits are reading this.Yes I cheat you motherfuckers out of every cent I can,and what are you going to do about it.Stop pandering to these treasonous theives.

[Dolphin-Trainer]

James,

This is not a new situation with the tax man, when i started working offshore 4 years ago i went to see a tax advisor about trying to reduce my tax liability and using the 90 day rule. He advised me that the tax office no longer take your case on a financial basis only but also consider your family circumstances. In other words because my wife lived in the UK and my children school in the UK i could stay out of the country for the entire year and still be liable for UK tax.

He did say however that if i was to submit my tax return and claim using the 90 day rule i would probably would receive this claim, but warned me that the tax man is a very patient beast and will eventually do an audit on my returns then expect all taxes due plus interest plus fines.

In the end i decided against this option as i don’t want to have to remortgage my house to pay my taxes.

The only fully safe option of not paying taxes in the UK is to cut all ties as suggested and move out!!!!!

[James McLauchlan]

Guys

Thanks for the comments. Having read through them….

I do agree this is not a new rule (or law) but, as a UK ex-pat, you do need to make sure you are one step ahead of the game.

Please ignore comments from those that are not ex-pat and might well be a little embittered by the scenario of those who legally do not pay UK tax.
We all live by the choices we make. As far as I am concerned those that choose to live the UK government ‘approved’ lifestyle leave themselves little room to comment!

Soon, and I would go as far as suggesting that if you have any family (spouse/children) in the UK and you are working overseas, you may well not be able to avoid tax legally. It’s only a matter of time.

For British overseas residents living with family overseas… you may need to review your overall approach and go for a ‘belt and braces’ strategy.
Retaining any ties (vehicles/property/bank accounts/UK driving licence etc.) in the UK and hoping to escape the attention of HMRC is probably not the best approach.

[James McLauchlan]

I have just been supplied with some information straight from the horses mouth as it were. It was sent to me directly by an interested party. If I were to say that the source is somebody currently working within a tax office then it would be fair to say that it’s worth noting.

Below is a slightly sanitised version……

The tax office will chase people deemed to be an easy target, with letters of demand for info, evidence of situation etc, and then only follow up those who they believe would be of great benefit to the public purse, that is considering the costs involved in mounting an investigation, is it worth their while chasing tens of thousands from one individual if they also spend tens of thousands chasing them?
Knowing how various worldwide tax offices share so much info, and clearly procedures, I expect the other tax offices to follow similar options.

Hence I support the post of surf, suggesting those who believe they can ‘sufficiently’ argue their case to be deemed a non resident to simply ignore the demands sent to them. Of course each individuals case will depend on what their local tax office and other authorities believe to be worthy of chasing.

[ANCHORMAN]

I became an ex pat just over a year ago. I looked into it a lot and did my research. Took advice and tried to do everything by the book. I was told keeping my home in the Uk with my wife still living in it was OK. I was told keeping Uk bank account was OK. But do not have my wages paid into it. I bought property abroad and was told that if I had this as my main residence if I were to sell my uk home I would incur tax on that sale. I took an accountant in my new home land and go through their tax system. It’s a lot more forgiving than the UK one. I make sure I am not in the UK for more than 90 days a year. I keep all proof of leaving and entering the country and pass this to my accountant. I don’t know where others have got their information from. I got mine from Inland Revenue. An accountant is there to advice you and cannot be held responsible for bad advice if you give them wrong information but if you are truthful with them it’s their job to keep your tax returns correct with the information you have given them. I did all the relevant forms before leaving the uk and answered all the question truthfully. I hope I am on the correct side of any investigation that may happen in the future all I can say is I have done all I think possible to avoid a hefty bill.

[Robert Branch]

As I said the Inland Revenue are scaremongering,theives who go for the easiest targets…Look at all the eastern Eurpoeans working in the UK cash in hand and alot of them not paying a single cent in tax..,and they gat away with it.The UK government / inland revenue despises its own people and its own people British Citizens are those easy targets and the ones they are targeting..The UK Government dont deserve people to be honest to them..because they are Theives.

[liddelljohn]

Read this if you think they are not serious !!!!!

http://www.bangkokpost.com/business/economics/35617/british-expatriates-face-higher-tax-bills

[Author]

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