Huge tax bill for expats who failed non-residency test

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An expat couple who left Britain to live permanently overseas a decade ago face paying a £600,000 tax bill after HM Revenue & Customs challenged their non-residency claim.

Stephen and Pauline Rumbelow left Salford, Greater Manchester to retire abroad over 10 years ago.

After living for a short time in a flat in Belgium, the couple moved to a villa in Silves, Portugal, to make their new home.

Meanwhile, they still owned a farmhouse in the UK where they stayed on trips back to the country to visit friends and relatives.

HMRC argued that the farmhouse was still their family home and that the couple had not broken their social and financial ties with the UK by retaining the property.

£600,000 tax bill

A tax tribunal upheld the argument and ruled the couple were still resident in the UK for tax purposes despite spending most of the past 10 years living overseas.

Now, the couple have a tax bill of around £600,000 to pay for income and capital gains taxes that accrued during the time they lived in Portugal.

The bill relates to unpaid taxes for the pair between 2001 and 2005.

The tribunal heard that builder and property developer Mr Rumblelow was ‘suspicious’ about the HMRC case.

The couple told the tribunal they had never breached the 90-day visiting rule when they returned to the UK and considered themselves non-resident expats.

As a non-resident, Mr Rumblelow believed he had no obligation to pay income tax in the UK and no as a non-resident was exempt from capital gains tax on the disposal of property and other assets here.

Permanent home

Dismissing the couple’s appeal against the tax assessment, Judge ruled that their departure had not marked “a distinct break” with the UK.

The Rumbelows countered that making their permanent home in Portugal was surely a demonstration of their intentions.

However, the judge concluded that although they had relaxed social and family ties with the UK, they had failed to do enough to become non-residents.

The Rumbelow case is one of many similar rulings over recent years that cements HMRC’s stance over non-residency claims.

HMRC has won a succession of tribunal and court judgments when expats have mainly retained a home in the UK as a base for visits back to the country from overseas, even if stays in Britain have not breached the 90-day limit.

The rules have recently changed with a statutory residence test to establish whether an expat is non-resident.

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