British tax case ruling unlikely to affect vast majority of expatriates

PUBLISHED : Sunday, 07 March, 2010, 12:00am
UPDATED : Sunday, 07 March, 2010, 12:00am

I am concerned by the content of Howard Bilton's Tax File column ('British taxman may come for a big slice of your cake', February 28).

It is likely to concern a large number of your British expatriate readership unnecessarily.

For example, Bilton suggests that if you are a British national living in Hong Kong, but have maintained connections in Britain (for example, a property), the British taxman (HMRC), following the recent judgment in the Court of Appeal in Gaines-Cooper and Davies & James, is about to subject your worldwide income to 50 per cent British tax on the basis that they can argue that you are a British resident. This is not the case for almost all British expatriates.

If a British expatriate leaves Britain to work full-time abroad under a contract of employment, they will be treated as non-resident if they are absent from the country and the employment abroad both last for at least a whole tax year, and during their absence any visits made to Britain total less than 183 days in any one tax year and average less than 91 days per tax year.

As almost all these expatriates will be non-UK resident under these provisions, what connections they retain in the country will be totally irrelevant.

The only area of difficulty will be for those who left Britain for reasons other than to take up full-time employment overseas. In such cases as with UK domicile, a taxpayer will need to be able to demonstrate that they have, in effect, abandoned Britain and have settled in another country.

While this imposes a greater level of proof of 'departure' for such taxpayers, very few are likely to have difficulty providing the necessary evidence to confirm this non-residence.

In fact, the case of Gaines-Cooper and Davies & James do not raise any material new issues that were not known before. The judgment has, however, clarified a number of issues on which there was uncertainty, and could well push the British taxman to further clarify the laws of residence, IR20 having been replaced on a temporary basis by HMRC6 (IR20 and HMRC6 being statements of practice by HMRC).

N. B. Bentley, Central