Retiring abroad – the tax consequences

If you are thinking of retiring abroad to enjoy a better climate and escape the UK tax system, you might find it harder than you expect, especially after a recent well publicised tax case in the Court of Appeal concerning a man who went to live in the Seychelles.

The man in question was a certain Mr Robert Gaines-Cooper who had made a considerable fortune in business and wanted to enjoy it as someone whom the UK tax authorities would treat as non-resident, and so broadly free from tax on all his income and gains outside the UK.

There are two main ways of becoming non-resident. If you leave the UK and work under a full-time contract of employment that will last for at least one complete tax year, you can become non-resident from the day after departure, provided your return visits are limited to fewer than 91 days per tax year.

But if you retire abroad or you are leaving for some other purpose, there must be a demonstrable change in your normal pattern of living which clearly shows that there is a break from UK residence. In future, would-be non-residents should ensure that they can demonstrate that they have cut meaningful ties with the UK. In particular, such emigrants should:

• Sever all business, social and family ties with the UK. For example, resign from employment, close bank accounts, take their family with them, cancel membership of clubs etc.
• Sell any accommodation, or at the very least let it out on a long lease (even then, HM Revenue & Customs will want a good explanation as to why the property is being retained).
• Create meaningful ties with the new country of residence – for example, buy a property, register to vote, make a will there or have children educated there.

If you are going to live abroad, but not under a full-time contract of employment, you will need to take care to sever your ties with the UK. Even if you manage to achieve non-resident status, remember that when you are counting days in the UK, any day in which you are here at midnight is normally considered to be a day spent in the UK, unless your presence here is due to circumstances beyond your control.