I deal with tax issues for many clients who now live in another country, but they also retain a business in the UK.
Some of the wealthier client cases I deal with are even more complex than that. They can own numerous properties around the world and spend time in multiple countries in the same year. But so many times they do so without taking advice in advance and then end up ‘paying tax all over the world’.
And then we need to factor in the fact that UK tax law can change over time as well.
Life is complicated, but moving overseas doesn’t have to be. Dealing with HMRC whilst overseas will almost certainly be complicated.
So, how does a taxpayer prevent this from happening?
Anyone can be resident and taxable in more than one country at the same time.
To quote from HMRC’s own website:
You must tell HM Revenue and Customs (HMRC) if any of the following apply, you’re:
- leaving the UK to live abroad permanently
- going to work abroad full-time (including for a UK-based employer) for at least one full tax year
- a foreign national leaving the UK
Why?
Telling HMRC you’re moving means that they can:
- work out if you’re due a tax refund
- advise if you need to pay tax in more than one country
- make sure you pay the right amount of tax on the pension you receive if you retire abroad
Despite this, over the years, a number of UK taxpayers have been caught out. And this can be the start of a slippery slope into a full-blown UK tax investigation by HMRC.
Nudge letters
The starting point for some taxpayers may just be 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. Just in case it doesn’t work out.
Then they realise the UK is no longer for them, so after say 6 months, they decide still not to sell but to rent the UK property out instead – it is in a nice area, and they have been approached through family and friends to rent it out, but may not declare the income to HMRC.
Big brother
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.
The Common Reporting Standard (CRS)
CRS is the automatic exchange of financial information between most governments worldwide, with the exception of a very few number of countries. In the UK, HMRC will be told your address(es), the balance on each account at each 31 December
So, not only can Big Brother be watching them coming and going through the airport, but HMRC also knows where they live.
It follows that if they haven’t told HMRC that they are leaving, they will keep in touch with them if they are required to complete a UK tax return each year. That’s because HMRC will not have updated their tax file.
This typical scenario demonstrates how former UK taxpayers can get caught out and find themselves under investigation, facing not just tax but interest and penalties of up to 200% of the tax again in some circumstances. This is because HMRC may be able to contend that the UK rents are taxable in the UK, as well as in the country where the taxpayer is now living.
Help is at hand
The focus here is on historical UK tax. That is what I specialise in – the past and only the UK tax system – not tax planning nor “overseas tax”. Knowing and applying the relevant UK legislation is key to resolving such disputes that can last for years.
If these are the circumstances that your clients find themselves in, help is at hand.
By taking action now and before HMRC track your clients down, I can almost certainly reduce the tax penalties. I may even be able to offset some of the tax in one jurisdiction against another, depending upon all the relevant facts.
Don’t leave it too late – Big Brother is watching your clients.