Did your client actually leave the UK?
Have you had clients who have left the UK in the past for a new life in the sun? No doubt, they packed their bags and headed off, but was there something they may have forgotten?
HM Revenue & Customs!
It is all too easy to forget HM Revenue & Customs (HMRC). Part of the reason your client left the UK may have been to escape the taxman – that is, to avoid having to do a tax return each year. But is that right, or maybe they hadn’t actually left the UK (for tax purposes)?
Avoiding an unwanted tax investigation
In this day and age, there is a lot of Big Brother (and I don’t mean the TV show). People are tracked through airports, in and out of countries and then there is the Common Reporting Standard (CRS).
CRS is the automatic exchange of financial information between most governments in the world with the exception of just a few countries for example, North Korea, Columbia. So, unless your client is seeking that new life in the sun in those few countries, Big Brother is still watching them.
If your client didn’t inform HMRC of their intention to leave the UK, HMRC will still have kept in touch with them if they were required to complete a UK tax return each year. That’s because HMRC will have had no reason to update their tax file.
Domicile and residence
From 6 April 2025, the UK removed the concept of domicile status from the tax system and implemented a new residence-based regime. However, for clients who left the UK before the change, their pre April 2025 tax affairs will still be subject to the old rules.
For UK tax purposes, before 6 April 2025, it was difficult to change a taxpayer’s domicile, and separately, anyone could have been resident and taxable in more than one country at the same time.
These two concepts have caught out a number of UK taxpayers. As a result, these taxpayers may just get a “nudge letter” about the interest earned on their new bank account in their new country for example.
Some taxpayers are cautious and do not sell the UK home – just for now. Then they realise the UK is no longer for them so after say 6 months they decide still not to sell but to rent out the UK property instead – the UK property is in a nice area, and they have been approached through family and friends to rent it out. But for whatever reason, they forgot to declare the UK rental income to HMRC.
Knock, knock
In this typical scenario, taxpayers can get caught out and find themselves under investigation and facing not just the tax, but interest and penalties. HMRC may be able to contend that the UK rents are taxable in the UK let alone where the taxpayers are now living.
Help is at hand
Our focus here is on the past and the UK tax system – not tax planning nor “overseas tax”.
If these are the circumstances that your clients find themselves in, help is at hand.
By taking action now and before HMRC tracks your clients down, I can almost certainly reduce the tax penalties. Depending on all the relevant facts, I may even be able to offset some of the tax in one jurisdiction against another.
Don’t leave it too late – Big Brother is watching your clients. Contact me for help and advice.