British expatriates face greater tax scrutiny

Judgement Hammer

A wealthy British entrepreneur has lost a historic court case, the fall-out of which could affect British expatriates the world over.

The unnamed business man, who was based in the Seychelles, lost an appeal in the High Court regarding a dispute over his tax status. He must now pay a colossal tax bill thought to be in the region of £30m.

Even though the expat had stuck to the guidelines and had spent less than 91 days a year in the UK the court decreed that the United Kingdom was still “the centre of gravity of his life and interests”. This further underlines the fact that British Expats will now need a wealth of evidence if they are to achieve the status of non-resident, and if not then many more affluent expats could feel the hammer blow of a court-inflicted multimillion pound tax bill.

This ruling also goes to show that HMRC’s aggressive stance on tax will not be abated anytime soon, leading to worries that expats all over the world will be targeted. It also puts another nail in the coffin of the ‘91 day rule’. Many expats have previously been under the impression that spending less than 91 days a year back in Britain would be enough to leave them exempt from tax, however as this case shows there is much more to think about then simply spending minimal time in the country.

HMRC recently published a new booklet, HMRC6, which illustrates the importance of severing ties that “previously bound the taxpayer to the UK” and that “just because you leave the UK to live or work abroad, it does not necessarily prove that you are no longer resident here”. Therefore even having family in the UK could be detrimental to ones case.

Michelle Kotz, an international tax services employee, offered these words: “The court ruling is a definite eye-opener. It clearly demonstrates the implications that one needs to consider when dealing with taxation and residency issues. As much as Britons across the world may seek exemptions, it is clear that the facts surrounding an individual's lifestyle will be considered on a case by case basis and one should not ignore the possibility of similar judgments in situations where an individual makes few visits to the UK. Clearly, one needs to navigate this with sensible tax counsel and make no assumptions whatsoever”.