Perpetual Tourist

Question:

I left the UK in March 2008 to live in the Canary Islands. I advised HMRC using form P85, and they appear (although they have never formally said so) to have accepted that I am now not resident in the UK. In the first year I spent 86 days in the UK and last year 68. I rented a house in the Canary Islands which was my permanent home and of which HMRC were advised.

Although I was technically tax resident in Spain in 2008 and 2009 (over 180 days a year) there would be little additional tax to pay in Spain had I received a tax return.

I receive income from a partnership in the UK and unavoidably (for now at least) pay UK tax and class 4 NI on this. The benefit to me at present is only in terms of UK CGT, tax on investment income and possible inheritance tax in the future. My biggest tax advantage will be on disposal of my UK business whenever that is.

I have now decided to vacate the house in The Canaries and spend several months in the Far East (Thailand, Cambodia, Vietnam, etc) so I will no longer have a permanent home. I have advised HMRC of my departure and requested that they use my business in the UK as a forwarding address for correspondence. I have emphasised that I am not returning to the UK to live.

I plan to arrange my travelling this year (and probably in future years too) so that I am not tax resident in any one country. I will probably spend about 65 days a year in the UK, 130 days in both Thailand and mainland Spain/Canary Islands (neither of which should make me tax resident) and the remainder in other countries.

Do you think HMRC, or indeed the tax authorities in any other jurisdiction, will be interested in this state of affairs? Or will I be simply regarded as a bona fide perpetual tourist?

Answer:

You don't necessarily need to establish tax residence overseas to avoid being classed as UK resident. Whilst it certainly helps, not least because you then also often establish treaty residence abroad, it's not necessary. There are lots of individuals who travel to avoid being a resident of any country (eg known as 'fiscal nomads'). Nevertheless it can make it more difficult to show that you have permanently left the UK if you have no overseas permanent home.

If you wanted to have a particular residence to point to you could utilise a low tax jurisdiction such as Malta, however I would expect that in your case HMRC would assume you are non resident as from the date of departure. Your visits to the UK would be monitored for the next 3-4 years. Providing these are well within the 90 day average requirements they'd then confirm your non resident status.

You should note that even if you are non resident you would still be within the scope of UK CGT on UK business assets (eg for the disposal of a UK business).

About the Author

He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.

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