Expats give a lot of thought to their tax status when they leave the UK to move permanently overseas or to take up a temporary posting – but few think about tax when they come home.
The problem comes for non –residents who have assets in foreign countries that may attract capital gains tax if they are sold after moving back to the UK.
Another issue is how different inheritance laws between countries affect wills and estate planning if these assets are not sold.
The key is to establish tax residence.
Each country has rules about how long someone stays there affects their tax residence, and the number of visits and days out of the country each tax year can affect this.
Statutory residence test online
Britain now has a statutory residence test that can be accessed on the HM Revenue & Customs (HMRC) web site by expats to give some idea of how their tax status will change when they move.
One telling point is that if you are still able to claim UK tax breaks on savings and investments, like ISAs, pensions and the Seed Enterprise Investment Scheme (SEIS), then you are likely still UK tax resident even if you have worked overseas for a year or two.
Generally, to become non-resident for tax in the UK, an expat needs to have lived outside the country for five full tax years – but that can still be affected if they have a home or other strong ties in the UK.
If you feel you may not have qualified as non-resident for UK tax, then you should go through your financial affairs and make sure4 you tidy up any loose ends before coming back home.
Tax amnesty
For instance, if you hold offshore bank accounts and have earned undeclared interest or have gains from disposing of property or shares, then you should talk to HMRC and take advantage of one of the amnesties offering lighter penalties that are currently running.
The scheme you choose depends on the nature of your undeclared income, country of residence and sometimes, your occupation.
Avoiding the issue is no longer a real option, because you should assume that with new technology and financial profiling, HMRC probably knows as much about your financial affairs as you.
This is due to the government signing tax information sharing treaties with many major former tax havens, including the Channel Islands, Isle of Man, Gibraltar, Cayman Islands and British Virgin Islands.
