Wealthy Britons fleeing the Gulf war are seeking refuge in countries like Ireland and France to avoid huge tax bills at home.
Faced with potential demands from HM Revenue and Customs, high net worth individuals who were living in the UAE and neighboring countries are hoping to return to the UK rather than wait out missile and drone attacks elsewhere.
With only three weeks left in the current financial year, many foreign residents have already “spent” their allotted days in the UK without incurring tax liabilities. Some people are seeking guidance from HMRC on whether they will be granted an additional 60 days under the “exceptional circumstances” provision.
Nimesh Shah, chief executive of advisory firm Blick Rothenberg, said: “In recent weeks I have received a disproportionate number of calls from people wanting to leave the UAE.
“I have told them not to rely on any of HMRC’s exceptional circumstances provisions. I can’t imagine HMRC being very sympathetic here.”
Shah said: “There are UK taxpayers who have decided to go to, say, the UAE. In HMRC’s mind they have decided to go there not to pay tax in the UK. They will not give you the green light to spend more time here and not pay tax.”
For those who have been non-resident for less than five years, it is not just the income tax for the current year that may be subject to HMRC upon return. They may also face capital gains tax on any property or business they sell the period during which they were away.
One very wealthy business owner told the Guardian he is spending time in Dublin until he can move to London after April 5, when the 2025-26 tax year ends.
He said, “I am happy to pay income tax and tax on investments in the next tax year, but I do not want the sale of a business I sold years ago to be subject to UK capital gains tax.” “By the way, I paid for my trip home myself.”
Another UAE-based British business owner said he would spend some time in France for now.
The number of days a person can stay in the UK if they claim to be non-resident for tax purposes depends on a number of tests. These measure their ties to the UK and may also include whether they have residence, a spouse or children in the country.
For many individuals who have moved in recent years, this may mean that they are allowed a minimum of 45 days in the UK before returning to the home tax regime. For others, depending on their circumstances, they may be allowed a maximum of 183 days in the tax year.
During the COVID-19 pandemic, HMRC allowed some people to spend more than their allowance without becoming tax resident in the UK. This 60-day extraordinary circumstances provision was accepted for cases in which people could prove that they could not leave the country due to the international travel shutdown. To be successful they will have to prove that attempts were made to leave the UK.
Tax consultants said it is unlikely to be implemented in this case.
Travel guidance is also a factor. The UK Government’s travel advice for many affected countries, such as Bahrain, is “all except essential travel”, but according to Guidance On the HMRC website, the exceptional circumstances provision will only apply if the Foreign Office advises “not to travel”.
“Even a few extra days in the UK could have huge consequences,” said David Little, a partner at wealth management firm Evelyn Partners, adding that worldwide income and investment gains would potentially become taxable in the UK as well.
He said that for those who moved and then sold the property, their tax liability could increase on return to the country, with gains from some years earlier “retroactively coming under UK taxation on their return”.