Non-Resident Britons Facing Tax Bills After New Ruling

by Jason Gorringe, Tax-News.com, London

27 July 2005

Individuals, who are not paying tax in the United Kingdom because they spend less than 90 days in the country, could be facing a hefty tax bill after a ruling given by Special Commissioners, according to a tax expert at the professional services firm, KPMG.

In the ruling that is expected to have wider ramifications on the growing number of Britons working abroad, the Special Commissioners in the case Shepherd v HMRC, decided that the 90-day rule was not the only factor determining whether a person is a UK-resident.

The Commissioners ruled that despite Mr Shepherd, a professional pilot, spending 180 days in the tax year out of the UK on flights, 77 days in Cyprus where he rented a furnished flat, and 80 in the UK in the family home, he had not made a distinct break with his former life and therefore remained resident for UK tax purposes.

“There is no doubt that this is the next stage of the Revenue’s clampdown on those individuals who are benefiting from favourable tax rates by basing their claim on the 90-day rule," commented Narinder Paul, tax partner at KPMG in Birmingham.

Mr Paul went on to add that:

“With increasing ease of travel and homes overseas becoming increasingly common, it is likely that more people may be considering that they could be a non-UK resident for tax.

"Many may have been led by Inland Revenue guidance notes into thinking that the important thing is to count days. However, as this case shows, this on its own is not enough to exempt an individual from paying tax within the UK.”

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