Wealthy British nationals fleeing Gulf conflict bypass UK to avoid tax bills | HMRC
Wealthy British citizens fleeing the war in the Gulf are seeking refuge in countries such as Ireland and France to avoid heavy tax bills at home.
High-net-worth individuals living in the United Arab Emirates and neighboring countries are hoping to wait out missile and drone strikes elsewhere rather than return to the UK in the face of potential demands from HM Revenue and Customs.
With just three weeks left in the current financial year, many overseas residents have “spent” their allotted days in Britain without tax liability. Some are seeking guidance from HMRC on whether they should be given 60 extra days under the “exceptional circumstances” provision.
Nimesh Shah, managing director of consultancy firm Blick Rothenberg, said: “In recent weeks I have received a disproportionate number of calls from people wanting to leave the UAE.
“I told them not to rely on HMRC’s exceptional circumstances provisions. I can’t imagine HMRC being very understanding about this.”
Shah added: “There are UK taxpayers who have decided to leave for places like the UAE. According to HMRC, they have chosen to go there to avoid paying 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-residents for less than five years, it is not just the current year’s income tax that may come under HMRC’s scope if they return. They may also face capital gains tax on any assets or businesses sold during their time away.
A very wealthy business owner told the Guardian he will spend time in Dublin after April 5, when the 2025-26 tax year ends, until they can visit London.
“I’m happy to pay income tax and investment tax next tax year, but I don’t want the sale of a business I sold years ago to come within the scope of UK capital gains tax,” he said. “By the way, I paid for my trip home.”
Another British business owner based in the UAE said that they will spend some time in France for now.
If someone claims non-resident for tax purposes, the number of days the individual can stay in the UK depends on various tests. These measure their ties to the UK and may include accommodation in the country and whether they have a partner or children.
For many people who have left in recent years this may mean they are allowed to stay in the UK for as little as 45 days before returning to the local tax regime. For others, up to 183 days may be allowed in a tax year, depending on their circumstances.
During the Covid-19 pandemic, HMRC allowed some people to exceed their allowance without becoming UK tax resident. This 60-day state of exception provision was adopted for cases where individuals can prove that they cannot leave the country due to the suspension of international travel. To be successful they had to prove that efforts were being made to leave the UK.
That’s unlikely to be the case this time, tax advisers said.
Travel guidance is also a factor. The UK government’s travel advice for most affected countries, such as Bahrain, is “all but essential travel”, but according to guidance HMRC’s website states that the exceptional circumstances clause will only come into play if the Secretary of State recommends “no travel”.
David Little, a partner at asset management firm Evelyn Partners, said: “Even a few extra days in the UK can have big results.” worldwide income and investment gains could potentially become taxable in the same way as in the UK.
He added that repatriation could trigger tax liability for those who relinquished assets and sold them later, with gains from a number of years ago “could come retroactively within the scope of UK taxation”.
