Can you still be a fiscal nomad and avoid UK taxes?
Being a fiscal nomad is an attractive status for many. It allows UK tax to be avoided and also solves the problem of finding an overseas country of residence that won't tax you too heavily (as you won't be resident overseas in any case). This is covered in more detail in this article on fiscal nomads and tax avoidance . There have been a few changes to the UK rules relating to residence in the previous twelve months or so (we've covered these in articles such as this article on changes to the UK tax residence rules) and for anyone considering following a fiscal nomad type strategy these rules should be considered. If you're a member read through these articles to give you an idea. The changes to residence rules are subtle but are important. In essence they represent more a change in emphasis than anything else. You've only got to look at the new notes to the tax return as well as some additional content sections to see that there has been a change. (Note we'll be writing an article on these 'offshore' changes to the tax return shortly.) In essence the amendments follow a couple of Commissioners decisions where the residence status of individuals was held to be in the UK even though it appeared that based on the Revenue's published guidance they should be non UK resident. The crux of the decisions was that the 90 and 183 day limits as stated in published Revenue guidance should not be viewed as conclusive. Even if you're in the UK for less than 90 days per tax year you can still be classed as UK resident. To be fair though, Revenue guidance in this area is just that - only guidance and they can and do move the goalposts. Having said that they've since published a statement saying that the original guidance still applies even in light of the Commissioners decisions. So where does this leave a prospective emigrant - particularly a fiscal nomad? Well I'd say:
- The key point is to establish that you've left the UK permanently. In the Commissioners decisions this was the main problem for the tax payer. If you can't show that you've clearly left the UK the 90 day rule won't even apply.
- So you should be looking at severing ties with the UK as soon as possible. This includes selling or long letting your UK main residence. Having UK available accommodation can indicate you still live in the UK. If your close family is in the UK this makes it more difficult to argue that you've left the UK permanently unless you've separated. By close family I mean spouse and children. This is coming more into line with the centre of vital interest test as is stated in the standard OECD model tax treaty.
- You should be looking at actively establishing yourself overseas. If you're a fiscal nomad this could be a problem if you are engaging in a genuinely transient lifestyle. However for most this will not apply. Many individuals will look to have a home base somewhere (usually in a low tax state) and travel for the remainder of the year. In this case having an overseas property to point to as the new home will usually be sufficient (combined with the other points as noted above) .