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For those changing residency and relocating to the UK, it is key that UK tax advice is taken beforehand. This is because a great deal of the planning opportunities that are available cannot be implemented once you have become UK tax resident.
I am thinking of leaving or coming to the UK – can you provide advice in advance of changing residency to ensure I avoid any tax pitfalls and so that I can take advantage of a change of residency?
As a consequence of the Statutory Residency Test (SRT) you can enjoy more certainty as regards for your residency status for UK tax purposes. That said, the rules still require careful thought and planning especially for those who believe that they are non-UK tax resident but continue to visit the UK. For those relocating to the UK, it is key that UK tax advice is taken beforehand. This is because a great deal of the planning opportunities that are available cannot be implemented once you have become UK tax resident.
What will happen if I arrive or leave the UK?
Under the SRT, an individual is treated as being a UK tax resident for the whole of the tax year even if they arrive or leave part way through. In many cases the ‘split year treatment’, as it is known, will apply to ensure that you are not subject to UK taxes for the period prior to or after having lived in the UK.
When changing residency, in cases where the split year treatment does not apply, it is generally advisable for those leaving the UK to do so just before the start of the new tax year. In contrast those arriving in the UK without the benefit of the split year treatment, should consider relocating to the UK just after the start of the tax year.
For internationally mobile employees who are awarded share options, the regulations have changed. Where options are exercised, they will be liable to UK tax to the extent that the employee has been working in the UK; the earnings will be time apportioned to periods pre and post arrival in the UK.
HOW WILL HMRC MAKE DECISIONS?
As is always the case, HMRC will make decisions on a case-by-case basis dependent on facts and circumstances. Individuals should be able to prove that they had every intention to leave the UK as soon as possible for them to qualify for exceptional circumstances.
We would therefore advise individuals to maintain accurate records of events to have a valid argument to put forward to HMRC if required.
WHAT SHOULD BE MY NEXT STEPS FOR CHANGING RESIDENCY?
If you consider yourself non-UK resident for tax purposes, we recommend you consider the Statutory Residence Test (SRT). Your ties to the UK could bring you within the UK tax net, and careful consideration and planning is recommended. This needs to be kept under continuous review. In the event you are to leave the UK, or else come to the UK, speak to an advisor. For the internationally mobile, who have been awarded share options, give as much consideration to UK tax implications on vesting, exercise, or sale.