How to Become Non-Resident for Tax Purposes

Despite the fact that we have covered the rules relating to ‘how to become non-resident for tax purposes’ in articles about residence, non-residence, not ordinary resident and domicile status and the effects that each status has on an individual’s taxation burden in the UK previously on ShelterOffshore, a shock ruling by The UK Special Commissioners at the end of October has effectively turned everything previously reported on its head.

The Special Commissioners were forced to rule in a case brought before them by Her Majesty’s Revenue and Customs relating to multimillionaire Robert Gaines-Cooper who HMRC decided broke the non-resident rules - not by the number of days he lived in the UK, but by his intentions and attitude towards the UK…

There is no question about it, Mr. Gaines-Cooper is an incredibly astute businessman, he bought real estate and established his residency in the Seychelles back in the 1970s and since then has been incredibly careful to remain well within the guidelines set by HMRC relating to the number of days he could reside in the UK before being deemed resident for taxation purposes.

According to the HMRC leaflet IR20 ‘Residents and non-residents: Liability to tax in the United Kingdom,’ if one regularly returns to the UK but does not remain in the UK for more than 90 days a year over a four year period then one does not qualify as resident.

According to this rule Mr. Gaines-Cooper followed the pattern that many wealthy professionals follow…because days of entry and exit were not previously counted towards the 90 day limit, businessmen arrive in the UK on a Monday morning and leave on a Wednesday evening therefore according to the rules they are only in the UK for one day a week.  Even if they do this 52 weeks of the year they only notch up 52 days out of the allowable 90 thus giving themselves plenty of spare days for unforeseen circumstances and plenty of spare days to ensure that they stay well within the guidelines and avoid paying UK tax.

However, despite the fact that Mr Gaines-Cooper was oh so careful to follow the letter of the law as dictated by HMRC, they felt that because he allowed his wife to live in the UK, educated his son at a UK private school and maintained an active membership of a number of British clubs, societies and committees, it was always his intention to remain ‘British’ and therefore they asked The Special Commissioners to take into account the number of nights Mr. Gaines-Cooper remained in the UK annually and of course this doubled the amount of time he was resident and made sure that he became liable for complete UK taxation on worldwide income and gains.

The Special Commissioners have granted in favour of HMRC and this has created turmoil and uproar in many circles and it has left taxation specialists asking what HMRC rules if any we can actually rely upon…naturally Mr. Gaines-Cooper will appeal the decision, but his appeal could take months to be heard and in the meantime those who wish to remain non-resident but who regularly return to the UK need to take specialist advice about any remedial action they should be taking and about how they should act in the future.

Further Expatriate Tax Saving Articles

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