Money Matters - Spring 2007

Non-residents may face crackdown

If you enter and leave the country often, you can no longer assume that your days of arrival and departure will be left out in tests for deciding whether you are a resident in the UK. A decision by the Special Commissioners in late 2006 contradicts HM Revenue & Customs’ (HMRC) current guidance to taxpayers and leaves many people in an uncertain position.

The individual concerned in the case had argued that he was not resident in the UK because he spent an average of fewer than 91 days a year here. But the Special Commissioners, who are the first line of appeal in tax disputes with HMRC, said that ignoring all travel days gave a distorted picture of the time that this person spent in the UK and agreed with HMRC that nights in the UK should be counted instead. The upshot of this decision is that a person who has come here on a Monday and then leaves on Tuesday, the following day, is treated as spending one whole day in the UK instead of none.

The ruling is not binding on other cases but the case is likely to go to the High Court, and its eventual decision will be binding. It leaves many questions unanswered, in particular whether it applies to all people and all lengths of stay in the UK, or only to frequent travellers or short visits.

For the moment, the only way of being sure you are treated as not resident in the UK for tax purposes is to assume the worst case scenario. This means being in the UK fewer than 91 nights a year on average and fewer than 183 nights in any one tax year.