Brits Abroad Beware! Don’t trigger a tax charge by coming home too soon
13 September 2019
Ben moved to France (or any other country) from the UK four years ago. He is now thinking of returning to the UK. “That’s not going to give me any tax problem is it?” he asks. Unfortunately for Ben, it probably will.
A person who has lived in the UK and who is “temporarily non-resident” can be liable for UK tax on certain income and gains received whilst they were non-resident when they come back to the UK.
A person will be temporarily non-resident (TNR), broadly, if they were previously UK resident, become non-resident then return to the UK if their period of non-residence is not more than five years. In other words, to avoid the TNR trap you must be non-resident for more than five complete tax years (6 April to 5 April).
Strictly, if you are UK resident for any part of a tax year, you are UK resident for the whole of it. If you were living abroad and you come back to live in the UK, the rules provide for “split year treatment” in limited circumstances, mainly where you are taking up full time employment in the UK (or are married to someone who is doing so) or where you move to a home in the UK and have no home anywhere else. If you meet all the detailed conditions for split year treatment, you are treated as non-resident up to the day before the “split year date”, broadly, when you come to the UK, and resident from when you arrive.
If you get split year treatment, you can count the part years when you are treated as non-resident as part of your total period of non-residence. In the above example, if you get split year treatment, you would be treated as non-resident from 2 January 2019 to 31 July 2024. Your absence is now more than five years and you would not be TNR
If you are non-resident for five complete tax years and you do get split year treatment in the year in which you left and/or in the year in which you return, the five year absence is sufficient. If, in the above example, you get split year treatment you would be treated as non-resident from 2 January 2019 to 5 April 2019 and from 6 April 2014 to 31 July 2024 as well as for the five tax years in between. As you can add on the parts of the years when you are treated as non-UK resident this makes your absence more than five years. In this case, you would not be TNR.
Temporary non-residence matters. If you are TNR you may potentially be liable for UK tax on the following even though they were received whilst you were non-UK resident:
- Money taken from a pension scheme
- Dividends received from a UK family company
- Capital gains made
- Payments received from a trust
- Money taken from an insurance bond
The tax liability bites in the year you come back to the UK.
The rules are complicated. Make sure you don’t get caught out.
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If you would like specific advice on your circumstances, please contact a member of the team on firstname.lastname@example.org .