Long Queues At The Airport Being Predicted

The UK is in political crisis. It seems that nobody can agree on anything. Boris wants an Election, but Jeremy won’t let him have one. At least not yet.

It seems certain however that there will be an Election soon, probably before Christmas, and that brings the spectre of a Corbyn government which might well trigger long queues at the airport for people wanting to escape the terrors of a Labour tax regime.

We are increasingly being asked what needs to be done to leave the grip of the UK tax system. Both Portugal and Italy have attractive “tax deals” to attract wealthy foreigners; for example, Portugal offers a fixed rate of tax of 20% for Portuguese source income, and most foreign sources of income are exempt from tax, for a period of 10 years from commencement of residence.

Qualifying for such deals is usually quite easy as often it does not take much to become tax resident in an overseas country. Portugal only requires residence of 14 days to qualify for their golden residence permit programme when you buy real estate in Portugal valued at more than €500,000. The problem is that establishing residence in another more favourable tax jurisdiction is only half the equation. In addition, you also need to make sure you are also not tax resident in the UK, otherwise all the effort will have been for nothing.

Most people emigrating for tax reasons will want to return regularly to the UK, and probably also keep some accommodation here. The UK has a statutory test of residence which looks at 5 factors, or UK ties, and then specifies a maximum number of days that the individual can be present in the UK during a tax year to avoid being UK tax resident. These ties are summarised briefly below:

1. Accommodation tie

If you have accommodation available for your use in a tax year, then you will have a UK accommodation tie

2. Family tie

If you have a spouse or a minor child who is UK resident in a tax year then you will have a UK family tie

3. Work tie

If you work for more than 3 hours per day for 40 days or more then you will have a UK work tie

4. Country tie

If you spend more time in the UK than in any other country in the tax year, then you will have a UK country tie

5. 90-day tie

If you spent more than 90 days in the UK in either of the previous 2 tax years then you will have a UK 90-day tie.

The rules then determine the number of days you can spend in the UK depending on the number of ties you have as follows:

So let us look at a couple of examples.

1. John is retired and has a house in Portugal and decides to take advantage of the Portugal non-habitual residents tax regime. He has 2 teenage children still at school, so his wife will stay in the UK, and he will travel to and from Portugal as often as he can. He will however make sure he spends more days in Portugal each tax year than he does in the UK.

John has an accommodation tie, a family tie and a 90-day tie, so he has 3 ties with the UK and he can therefore only spend a maximum of 45 days in the UK to make sure he is not resident here. After 2 years of spending less than 45 days here, he will lose his 90-day tie so will be able to spend up to 89 days in the UK after that.

2. Sally is recently widowed and also has a house in Portugal and also wants to join the Portugal non-habitual residents tax regime. All her children are over 18, and she will rent out her UK house and stay with family or friends or in hotels when she returns to the UK. Sally does not work and will spend more time each year in Portugal than she does in the UK.

Sally will only have a 90-day tie after she leaves the UK. She can therefore spend up to 120 days each year in the UK.

Note that the above is only a brief summary of the UK statutory residency test and professional advice should be taken on your specific circumstances before taking any action.