COUNT THE DAYS!
February 2008
A couple of weeks ago the UK Revenue and Customs (known these days as HMRC- After the fiasco of the loss of data on a large part of their “customer” base some think that this stands for How Many Records Compromised) launched the draft bill on the amendments to the treatment of UK tax residence and the taxation of non-UK domiciles.
A couple of weeks ago the UK Revenue and Customs (known these days as HMRC- After the fiasco of the loss of data on a large part of their "customer" base some think that this stands for How Many Records Compromised) launched the draft bill on the amendments to the treatment of UK tax residence and the taxation of non-UK domiciles.
The changes announced in the draft legislation are much further reaching than anticipated and should ring alarm bells for all those who have left the UK for warmer and more friendly climes but still have reason to visit the UK.
In particular the freedom to travel back to the UK to see family and friends and, perhaps, a favoured football team have been severely curtailed and placed into a risk area.
Up to 5th April 2008, the rules which have been around for the best part of 80 years apply and if someone averages 91 days per annum in the UK over a period of [four years] they are regarded as resident in the UK for tax purposes for the period. IF the average per annum is 90 days, they are not (unless more than 183 days are spent in the UK in any one tax year). For the purpose of counting the days, the days of arrival in and departure from the UK are disregarded. As a special concession is someone is forced to stay in the UK by pressing circumstances, e.g. hospitalisation or a close bereavement, HMRC will usually ignore those days on a concessionary basis.
In the last couple of years HMRC have tried to add a proviso to the operation of their rules to only allow the 90 day rule, as they call it, when there is evidence of a definite break from the UK. This issue has been meandering its way through the UK courts and HMRC may well have to drop or modify this approach.
The new bill, however, does make life considerably more difficult for the ex-pat who still has connections in the UK. The days of arrival in and departure from the UK are now counted; the concession for unavoidable stays in the UK is now withdrawn; and even days of transit through the UK where the passenger has to exit and re-enter air side are counted as a full day in the UK.
For example, up to 5 April 2008 a traveller can arrive in the UK at five minutes past midnight on Monday and fly off at five minutes to Friday in the same week and only count the three full days in between as part of his allowance of 91. From 6 April, this will cost 5 days.
It can be even worse for passengers in transit. If a passenger travelling from, say the USA to Malaga, arrives and exits UK customs at 5 minutes to midnight on Monday, books in for the Malaga flight and re-enters customs half an hour later at 25 minutes past midnight on Tuesday, he has lost two of his 91 days without blinking.
This may not be so much of a problem if the traveller can travel on an airline which allows booking through, such as BA but it will be a problem for those who need to travel on an airline that does not or has to change airlines where there are no booking through arrangements.
So, if you are a grandmother who wants to visit the grandchildren or a Manchester United fan anticipating a good season with a couple of good cup runs, you really need to start counting before you decide when you are seeing the grandchildren or which matches you want to watch.
The legislation is still in bill form and may be subject to changes before it is passed into law. There are also technical legal issues on how the new rules can be imposed on a rule which is HMRC practice without the practice being legislated but these are the HMRC intentions and, no doubt, they will eventually get all that they want (provided that they do not loose the disc with all the proposals on before they get to parliament!)
As if the legal position were not bad enough, the attitude of some of the officers of HMRC to those who have settled abroad but have residual connections in the UK is aggressive, bordering on the arrogant and not based on the relevant law.
We at Has sans International Law Firm are aware of clients who have long departed the UK but left a pied-à-terre to make family visits easier who have been presented by three and four page demands for intrusive and expensive to assemble information, running from requests for lists of days, all airline boarding cards through to copies of statements of all bank accounts world wide. We have not seen one yet asking what colour socks someone was wearing on Christmas Day, but it is close!
This is clearly worrying (and potentially expensive) for the individuals concerned. Individuals receiving such enquiries need to consult specialist advisors quickly and before they reply. Often the HMRC officials are on a frolic of their own and exceeding what they are allowed to do in terms of the HMRC internal rules. Invasive questions can only be asked where there is good reason to believe that there may be a liability and a specialist can usually head off the majority of the questions by a clear explanation of the position.
At Hassans we are in a particularly good position to assist in these issues, our tax partner was a senior HMRC off shore investigator for many years before he saw the light and changed sides. He has around him a team who have an impressive accumulation of experience in dealing with HMRC. In their former UK life one of his team was a self employed tax advisor who also lectured trainee accountants in taxation in Scotland, another a tax partner at Halliwell Landau and the third was the tax partner at Chantrey Vellacott.
We have the experience of moving out from the UK and can, not only, assist you if you have a troublesome enquiry from the HMRC, but also, advise on the records to be kept to ensure that such an enquiry is brought to a swift and stress free conclusion.
We have recently overseen the opening of the offices of an associate company in Sotogrande, Hassans SL to ensure that our services can be available to ex pat clients with the minimum disruption to them and we can be contacted at the Gibraltar office, phone number (00 350) 200 79000. Chris White, Angela Smart or Paul De Beresford will be happy to take a call.
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