British expats and non-residents stuck in the UK due to Coronavirus lockdowns worldwide may be hit by “major unexpected and heavy tax bills”, warns UHY Hacker Young.
UHY Hacker Young said that if non-residents breach the maximum number of days they are allowed to spend in the UK to retain their non-resident status, HMRC could start charging them UK tax on all their worldwide income.
The government is advising those in the UK against all foreign travel due to the Coronavirus. A growing number of countries globally are also closing their borders, including the US, Italy, Spain, France and several Gulf states, such as Oman.
Depending on their circumstances and ties in the UK, non-residents can spend between 16 to 183 days in the UK before they have to start paying UK tax and above 183 days they are always considered as a resident in the UK.
HMRC grants each non-resident an additional 60 days for exceptional circumstances; such as births, deaths, sudden and life threatening illness or injury, which can be used throughout the tax year.
UHY Hacker Young added that UK expats that are being forced to return to the UK as a result of the Coronavirus outbreak could also face unexpected tax bills. These individuals may be returning to take care of family members or may have been advised to leave by the country they currently live in.
The firm advised that to avoid paying UK tax on the money they are earning overseas they have to have been absent from the UK for at least a complete tax year (i.e. 6 April to 5 April).
Many expats could also find themselves facing Capital Gains Tax (CGT) bills for the sale of UK assets such as shares or property. For the sale of UK assets (which they owned whilst being a UK resident) to be exempt from CGT, they have to be non-resident in the UK for at least five tax years.
Neela Chauhan, partner at UHY Hacker Young, said: “Non-residents need to be on top of their day count – otherwise they could face huge tax bills.Overstaying by just one day could result in HMRC reviewing the income a non-dom has made overseas for the whole tax year and then charging UK tax on that. Needless to say, that tax rate will be a lot more than they are used to.
“We often see individuals use up the number of days they can spend in the UK towards the end of the tax year. This means those who are stuck may not have enough days left to cover their stay.”
She added: “Given the circumstances, we hope that HMRC may be more lenient in its approach. However, there are no guarantees and we would recommend that anyone up against their day count limit seeks professional advice as soon as possible.
“Expats also need to be careful as time limits for how long they have been outside the UK could be shortened due to the Coronavirus outbreak. HMRC will be happy to charge tax on offshore income and gains so it is important you know where you stand.”