Expat British bankers could soon be exposed to full UK taxes - based on visits to the UK THIS YEAR
As the British government seeks ways of supplementing its tax take, the British residency test is changing.
As we've noted before, it's becoming a lot more punitive and many more people are going to find they've become British residents for taxation purposes in future. If you're a British citizen who's working in Dubai, Hong Kong or Singapore because you want to pay less tax, this is going to become a big issue.
The new rules are very complex and described in detail here. The upshot is that from April 2012, some British citizens who live abroad but visit the UK for no more than 10 days a year could find themselves subject to UK income tax.
"If you want to break residency to the UK, you really need to limit your time in the country to less than ten days," says Andrew Pennan, an international taxation specialist at accountancy firm PKF. "If you don't, you will be into the connections tests."
These connections tests look at various things, including whether you still have a house in the UK, whether your family are based in the UK and whether you have financial ties to the UK. Although children at boarding school are not counted as being 'family in the UK' during term time, Pennan points out that they will count as 'family in the UK' if they remain in the country staying with grandparents or friends during school holidays.
Equally, he points out that when the new rules come into effect in April, there will be a "look back" over three years at people's previous visits and connections. "It may be necessary to reduce or cancel planned visits to the UK or prepare to sell or let out
UK property in 2011/12 to ensure that non-residence status can be maintained in 2012/13," PKF advises.
"This will be absolutely judged on a case by case basis," says Rhona MacKinnon, assistant director in the tax group at accountancy firm Campbell Dallas. "People need to start thinking about their situation if they want to continue to be a non-resident next year."
