Are you resident in the UK or not?

Establishing that you are not resident in the UK for tax purposes can lead to substantial tax savings. In the modern world it has become easier to travel and, over recent years, the cost of flights has fallen considerably. This means that more people have become interested in the concept of becoming non-UK resident for tax purposes.

Strangely, tax law does not say much about what the term non-resident actually means. HMRC’s interpretation and guidance is set out in their booklet IR20 which, in some situations, has provided a pragmatic approach when looking at the issue of residence. The language of the booklet includes words like ‘normally’, which illustrates that HMRC will not always be bound by IR20.

A recent case has highlighted this issue. The case concerned an individual who had travelled widely during his lifetime and had kept some records of days spent in the UK. He had based his figures on HMRC’s practice of ignoring days of arrival and departure.

HMRC argued that if days of arrival and departure and also single days of presence were ignored then the picture was distorted. They argued that if an individual arrived on one day and left on the next that it should count as one day. The Commissioner accepted HMRC’s approach.

This case illustrates the difficulties in establishing non-residency, especially where there is a lot of potential tax involved. Please talk to us if this issue is of importance to you.