Several of the Budget Notices dealt with the treatment of those who are either not resident in the UK or not domiciled here. We looked at the position of those who are not UK domiciled in the November 2007 Tax Insider, and the Budget broadly confirmed the position as it was announced in October 2007, but there was a small but potentially significant change to the rules for deciding whether a person is UK resident which was announced in the Budget. Whether you are “resident” in the UK for tax purposes can have a significant effect on your tax liability here. Whether or not you are “resident” in the UK is decided by a confusing mixture of statute law and case law – there is a marvellously silly tax case (Cooper v Cadwallader) which established that an American attorney who rented a grouse moor (complete with shooting lodge) made himself UK resident because the shooting lodge counted as accommodation in the UK that was “available” to him. This case was overturned by legislation some years ago, but it gives you the flavour of the obscure rules that come into play when one has to decide where a person is resident for tax purposes. Tax for Non-Residents If you are not resident in the UK, your liability to UK tax is limited to income arising in the UK, and perhaps even more significantly, you are not liable to UK CGT, even if the asset concerned is in the UK – there are some esoteric exceptions to this rule, but in general this is the case. It can therefore be very significant for tax purposes whether you are UK resident or not. Dave Clark, of the 1960s band The Dave Clark Five (in my view, their soulful ballad “Bits and Pieces” is the finest song about a failed love affair ever recorded, and it has the added merit that I can actually play the drum part) saved himself a fortune in UK tax by making himself non-resident for a crucial tax year during which he was due to receive huge royalty payments from offshore. Days Spent in the UK One of the simplest tests for residence or non-residence is the “182 day” test. If an individual spends more than 182 days in the UK during a tax year (that is, a year ending on 5 April), then he is deemed to be resident in the UK for the whole of the tax year concerned. HMRC’s manual on the subject (IR20) used to say that “days of arrival and departure” were not “generally” included as days spent in the UK, though in one or two cases (one, for example, involving an airline pilot), they chose to argue against this proposition and were successful. On Budget day, Alistair Darling announced that the rule for deciding whether a day was spent in the UK for tax purposes would be put on a statutory footing, which was good news given the uncertainty which had surrounded the issue after the unfortunate airline pilot lost his case. Initially, in the Pre-Budget Report in October 2007, the proposal was to include days of arrival and departure as days spent in the UK, but in the Budget Note dealing with the issue, this had been softened slightly. For the tax year 2008/09 and following years, you will be treated as being in the UK for tax purposes on any day on which you were present here at midnight at the end of the day. I suppose that, effectively, this means that days of arrival will now be counted, whereas days of departure will not, as long as you have left by midnight. Back in the 1980s, when I was still a tax inspector, Heathrow airport was fogged in on a night near to the end of the tax year. Bearing in mind that in those days, the day of departure did not count as a day spent in the UK (as apparently it still will not), those of the international non-resident set had a significant vested interest in not being in the UK after midnight, so that the day in question would count as their day of departure and thus not be counted for tax purposes. I was not present, but the story goes that as midnight approached and the airport remained unable to allow any planes to take off because of the fog, some ugly scenes developed between the airport staff and some seriously rich people who had been carefully counting their days in the UK during the tax year and really needed to be off UK soil before midnight! James Bailey
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