Many of our clients are Executives or key individuals who in the course of their employment leave the UK to work in other countries.
This move may be permanent or temporary but both involve opportunities to save UK tax and to be aware of the paper work involved with notifying HMRC.
It is important that when you notify HMRC that you are leaving the UK, that you consider first the tax basis on which you want to leave. This important step will help decide your tax status and therefore help or hinder a tax saving strategy.
The UK position on residency is not as clear cut as HMRC guidance sometimes points out as there are presently no fixed tax rules on residency, only guidance and interpretation. You should always take independent advice from more than one source on your residency to help you have certainty over what interpretation risks you are happy to take.
Generally speaking you have 3 main options when leaving the UK to obtain a non residency position.
1. Leave the UK and do not step foot inside the UK at all for a complete tax year. On this basis you cannot be considered a UK resident in that tax year if you did not actually visit the UK at all in that tax year. This remains the most certain of the options but in many cases is not practical to achieve due to work or family commitments.
2. Leave the UK to take up full time employment or self-employment that will span a complete UK tax year and both your absence and your employment/self-employment will span the UK tax year. You may visit the UK during the intermediary period but for no more than a rolling average of 91 days each tax year on a pro rata basis.
3. Leave the UK permanently; ie for something other than occasional residence abroad and typically HMRC are seeking that you can demonstrate you have settled in another country. This tries to prevent serial travellers who do not settle somewhere else and the UK will attempt to keep you as UK resident throughout.
These are the 3 main bases for leaving the UK but it is worth mentioning that in occasional and particular circumstances an individual will have particular ties to another country that put them in the situation of being tax resident in more than one country at a time. This dual residency position will either be solved by interpretation of the tie-breaker clause in the relevant tax treaty between the two countries or by mutual agreement between the two taxing authorities.
Once your residency status has been defined we can then look at what tax you may be entitled to reclaim.
This is another big topic but generally as a non-resident you won't pay UK tax on the earnings that arise after you leave the UK and if you leave the UK part way through a tax year an additional refund is probably due because the rest of your tax free amount is unlikely to have been fully used.
