Are You A Sexpat Or Do You Ride The Backwards Morality Train?

[chiang mai]

I've just caught sight of a new consultation paper on UK residency for tax purposes, it's not that new so others may well have already seen it. For those that haven't it's worth noting that the rules are about to change yet again, of particular interest are the highlighted phrases:

TAX Consultation on Residence in the UK for Tax Purposes

TAX

A new statutory set of rules are proposed, to apply from 6 April 2013, to determine UK

tax residence. The current rules will continue to apply for tax years prior

to theintroduction of the statutory test, including 2012/13. Initially the new rules were to have

applied from 6 April 2012 but the Government has decided that further consultation is

required.

The proposal rules, which remain subject to consultation, are as follows.

Non UK Resident

You are not resident in the UK for a tax year if:

1) you were not resident in the UK in all of the previous three tax years and you are

present in the UK for fewer than 45 days in the current tax year; or

2) you were resident in the UK in one or more of the previous three tax years and you

are present in the UK for fewer than 10 days in the current tax year; or

3) you leave the UK to carry out full time work abroad, providedyou are present in the UK for

fewer than 90 days in the tax year and no more than 20 days are spent working in the UK in the tax year.

UK Resident

You will be resident in the UK for the tax year if:

1) you are present in the UK for 183 days or more in a tax year; or

2) you have only one home and that home is in the UK (or have two or more homes

and all of these are in the UK; or

3) you carry out full timework in the UK

If you don’t fall into either category your status will depend on how many ‘connection

factors’ apply and the number of days you are in the UK; the combination differing

according to whether you are an ‘arriver’ or a ‘leaver’.

[SantiSuk]

It has moved on already Chiang Mai. The statutory residence test, which is what you quoted a bit of, was included in the Finance Bill attached to the budget a couple of weeks ago. Finance Bills are, by custom and practice, authoritative even though they have not formally been signed off as an Act (which will happen later this year). It is rare for Parliament to fiddle around with Finance Bills when it comes to tax legislation that has been thoroughly aired within parliamentary committees and especially when there has been such an extensive public consultation period. Finance Bills are however notorious for containing fine print that significantly changes perceptions of how HMRC expect a piece of taxation to work compared to tax specialists pre-Bill understanding. Specialist tax advisers are currently trawling the fine print of the Finance Bill to make sure they understand all the nuances of the new rules.

The new rules seem to be far more straightforward - a rules based approach rather than the old precedent and case law driven approach. As an example - at first blush it seens as though I may have qualified for non-resident status for the last two years despite having a house in the UK which I occupied for about 70 to 80 days a year (rented as it happens, but the same would have applied had I owned it). Having a family and home in Thailand seems to be an antidote to such a level of occupation in the UK that would previously have been a non-resident status killer. Many of the old badges of residence which HMRC seemed to be able to wheel out to deny leaver status (eg do you have club memberships, do you have bank current accounts in the UK) seem to have disappeared.

Your extraction above is only a snippet of the rules and anyone who is going to try to get leaver status on the basis of the new rules should get specific tax advice from a UK expatriate tax specialist, which I am in process of doing myself. Its either that, or suffer the uncertainty of waiting for a challenge that may undo all your careful planning. I would say that wouldnt I, being an ex (retired) Chartered Accountant. The other way of looking at that though is that I, of all people, should be able to do my own research and advise myself, and I mostly do on tax and investment matters; but this is a bit of a specialised area and it needs someone who has been involved through the consultation period IMO.

This is the best overview that I found on the net - albeit based on this financial advisory company's understanding of the rules as they approached finalisation of the consultation period

http://www.statutoryresidencetest.co.uk/

Edited April 11, 2013 by SantiSuk

[Billmont]

Thank you Chang Mai and Santa Suk for you informative posts. I normally return to the UK each year for a period of just less than 90 days to maintain non residency but due to the changes my account has recommended not returning during the present tax year i.e. April 13 to April 14 and then on my next visit to stay for less than 46 days. This becomes the most important point as far as I can understand because the act only mentions working abroad and therefore staying here as a retiree, as I do, excludes qualifying as a non resident just by being abroad.

[wordchild]

Thank you Chang Mai and Santa Suk for you informative posts. I normally return to the UK each year for a period of just less than 90 days to maintain non residency but due to the changes my account has recommended not returning during the present tax year i.e. April 13 to April 14 and then on my next visit to stay for less than 46 days. This becomes the most important point as far as I can understand because the act only mentions working abroad and therefore staying here as a retiree, as I do, excludes qualifying as a non resident just by being abroad.

this is not strictly the case, full time work abroad is relevant to the first part of the test ie in determining whether are you conclusivly non resident/resident? if you are not conclusivly non resident/resident then you need to look at the connecting factors that you still have with the UK in the second part of the test; ie do you have close family there? are you employed there? do you have available accomodation there? did you spend more than 90 days there in any of the last 3 years?

Depending on the number of these connecting factors that you have, that will determine the number of days you would need to spend in the UK in order to be considered tax resident. For some people the new rules could offer much greater flexibility eg For someone who has been non resident for more than 3 years and with less than 2 of the above connecting factors it is possible that they would not be considered resident as long as they spent no more than 182 days in the UK. However, in certain cases, other factors can come into consideration such as do have your only home in the UK? as always best to get expert advice.

I agree with what SantiSuk says above the new rules are a big improvement on the situation that existed before and should give people a much clearer picture of their UK residency situation.

Edited April 12, 2013 by wordchild

[Billmont]

Thank you Chang Mai and Santa Suk for you informative posts. I normally return to the UK each year for a period of just less than 90 days to maintain non residency but due to the changes my account has recommended not returning during the present tax year i.e. April 13 to April 14 and then on my next visit to stay for less than 46 days. This becomes the most important point as far as I can understand because the act only mentions working abroad and therefore staying here as a retiree, as I do, excludes qualifying as a non resident just by being abroad.

this is not strictly the case, full time work abroad is relevant to the first part of the test ie in determining whether are you conclusivly non resident/resident? if you are not conclusivly non resident/resident then you need to look at the connecting factors that you still have with the UK in the second part of the test; ie do you have close family there? are you employed there? do you have available accomodation there? did you spend more than 90 days there in any of the last 3 years?

Depending on the number of these connecting factors that you have, that will determine the number of days you would need to spend in the UK in order to be considered tax resident. For some people the new rules could offer much greater flexibility eg For someone who has been non resident for more than 3 years and with less than 2 of the above connecting factors it is possible that they would not be considered resident as long as they spent no more than 182 days in the UK. However, in certain cases, other factors can come into consideration such as do have your only home in the UK? as always best to get expert advice.

I agree with what SantiSuk says above the new rules are a big improvement on the situation that existed before and should give people a much clearer picture of their UK residency situation.

Thank you Chang Mai and Santa Suk for you informative posts. I normally return to the UK each year for a period of just less than 90 days to maintain non residency but due to the changes my account has recommended not returning during the present tax year i.e. April 13 to April 14 and then on my next visit to stay for less than 46 days. This becomes the most important point as far as I can understand because the act only mentions working abroad and therefore staying here as a retiree, as I do, excludes qualifying as a non resident just by being abroad.

this is not strictly the case, full time work abroad is relevant to the first part of the test ie in determining whether are you conclusivly non resident/resident? if you are not conclusivly non resident/resident then you need to look at the connecting factors that you still have with the UK in the second part of the test; ie do you have close family there? are you employed there? do you have available accomodation there? did you spend more than 90 days there in any of the last 3 years?

Depending on the number of these connecting factors that you have, that will determine the number of days you would need to spend in the UK in order to be considered tax resident. For some people the new rules could offer much greater flexibility eg For someone who has been non resident for more than 3 years and with less than 2 of the above connecting factors it is possible that they would not be considered resident as long as they spent no more than 182 days in the UK. However, in certain cases, other factors can come into consideration such as do have your only home in the UK? as always best to get expert advice.

I agree with what SantiSuk says above the new rules are a big improvement on the situation that existed before and should give people a much clearer picture of their UK residency situation.

In the main I agree with what you say but you are missing the point I raised. In your first sentence you mention "full time work abroad" A retiree does not work and therefore cannot qualify with regarding to working abroad although a retiree may spend more time abroad than someone who works full time abroad. According to my accountant the wording is quite specific so retirees must not be misled into thinking because they spend time abroad, as if they are in full time employment, this will not qualify them to be non resident under this particular section and other means must be achieved which are still available.

[chiang mai]

Yes I agree, about the only way now that a retiree can gain non-resident status is to spend very little time in the UK and not own property there, Treasury will have their pound of flesh!.

[SantiSuk]

Thanks for that. Ill read the rules myself again and post anything of use/relevance to the retired situation when I get my paid-for advice. Looks like non-residence is still next tax year or the tax year after away for me, after all (thought the new rules looked too good to be true!): I can't leave the UK for an entire year while I am tidying up deceased family members estates and I'm not quite ready to clear out of my aunt's house.

I don't care about the tax but I need to be non-resident in order to adopt a daughter we have been looking after; she'll be no longer a minor before I can get this sorted!

[Billmont]

Yes I agree, about the only way now that a retiree can gain non-resident status is to spend very little time in the UK and not own property there, Treasury will have their pound of flesh!.

I own a residential property and 3 commercial properties but according to my accountant I will still be non resident providing my time spent in the UK is strickly limited to the days mentioned in the new regulations. I hope he is right. Like Santi Suk Income Tax does not worry me as I have to pay tax on my rental income as per the Overseas Landlord act but being non resident will help with Capital Gains Tax if I should sell my businesses and also I have a QROPS and to obtain the full benefit I must remain non resident for 5 tax years and I have two more to go.

[Baerboxer]

Yes I agree, about the only way now that a retiree can gain non-resident status is to spend very little time in the UK and not own property there, Treasury will have their pound of flesh!.

I own a residential property and 3 commercial properties but according to my accountant I will still be non resident providing my time spent in the UK is strickly limited to the days mentioned in the new regulations. I hope he is right. Like Santi Suk Income Tax does not worry me as I have to pay tax on my rental income as per the Overseas Landlord act but being non resident will help with Capital Gains Tax if I should sell my businesses and also I have a QROPS and to obtain the full benefit I must remain non resident for 5 tax years and I have two more to go.

Like you I own a residential property and therfore complete a tax return under the OLA. I have been given the same as advice. Make sure that any days in the UK are limited in accordance with the new regulations. I have been non-resisident for 3 tax years, so this year and next to go like you. I haven't been back to the UK for 4 years, which also helps.

[wordchild]

Under the new rules you must consider your residency position in two parts firstly do you meet the criteria for being either conclusively resident or conclusively non resident. if you are working abroad for a full tax year and also do not exceed 90 days in the UK and also do not engage in more than 20 UK work days then that is one of the criteria under which you could consider yourself to be conclusively non resident. if your position is clear and conclusive under part one you have your answer and stop there.

If your position is not clear and conclusive from considering your position under part one then you should consider your position under part two this is where the connecting factors that i listed above come in. These connecting factors are all about what you do whilst in the Uk and also what ties you have that may suggest that you are still resident, there is nothing here about what you do abroad it is not relevant (in part two) whether you work (abroad) or are retired.

On the issue of property ownership the new law does not distinguish between owning or renting a property. Under the conclusive residency part you can be considered resident if you only have one home and that home is in the UK. There are a couple of paragraphs on what constitutes a home and it can mean rented property it can also mean eg a houseboat. But obviously if you have a home in,say thailand, (rented or owned,) then that rule would not be relevant. The other area where having a UK property is relevant is under part two where one of the connecting factors is "do you have available accomodation in the UK", again it is not relevant whether this is a place you own or a place you rent; in fact having a hotel room for greater than 90 days without a gap would give you this connecting factor.

Obviously property ownership is relevant to your tax (as opposed to residency) position as a non resident as income from UK property has a different treatment, for non residents, than the ownership of other UK assets eg shares

To be frank (Billmont) your accountant seems to be a little OTT (ie no visit to the UK for one year) but then there may also other factors in your situation.

For anyone interested it is well worth reading the draft legislation and guidance notes which you can find on the HM Treasury website.

Edited April 12, 2013 by wordchild

[Orac]

Can anyone recommend a a tax advisor who could help me get my affairs sorted out under the new rules - preferably Pattaya but can travel to Bangkok?

[mccw]

The best thing about having an account when the tax man calls asking questions is:

"I'm not sure how its all structured exactly; you better just talk to my accountant .................... . Good bye."

Everybody should use one and not listen to forum proclamations of its this way or that way bla bla bla

[wordchild]

HMRC has just publishedhttp://www.hmrc.gov.uk/international/rdr3.pdf (10th may) detailed guidance notes on this, there are some small changes (since the last guidance) but nothing major, worth a quick scan for any UK expats concerned about this issue. also it is worth noteing the finance bill has not yet passed into law so there maybe further changes, though it is thought significant changes are unlikely at this late stage.

Edited May 26, 2013 by wordchild