British expatriate tax plans explained

Tax experts explain a proposal that would require British nationals in the UAE to pay income tax back home.

DUBAI // Experts yesterday sought to clarify proposals from UK tax authorities that could result in some British expatriates having to pay personal income tax.

The proposals are part of a consultation paper that examines the number of days British expatriates spend in the UK, and suggests linking their residency status to a list of four criteria.

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But tax experts stressed that most Britons were unlikely to be affected by the changes.

"Fundamentally, I do not believe that the government is trying to bring more people into the tax net by stealth," said Martin Rimmer, a tax technical manager for the UK-based Fry Group, which advises British expatriates financially. "For many people who have sought to stick by the current rules, we will probably find that the new guidelines produce broadly the same outcome - non-resident status," he said.

As The National reported yesterday, the UK treasury has drawn up plans that could see British nationals facing a residency test to determine their tax status. The paper is expected to become law in its current or modified form on April 6.

The four criteria are: whether they have family in the UK, whether they spend a substantial time working in the UK, whether they have available accommodation such as an unrented house in the UK, and whether they have been in the UK for more than 90 days in the past two years. These factors are then linked to how much time they can spend in the UK before being classified as residents.

Tax experts advised people who spend between 10 and 183 days in the UK per tax year to seek professional advice to clarify whether they have to pay income tax.

Those who spend more than 183 days in the UK and who also meet one of the four criteria are most likely to have to pay income tax. Those least at risk are those with legal residency status abroad and who spend limited time in the UK every year.

"This would particularly be the case for those who are working in continuous, full-time employment in the UAE and work for less than 20 days in the UK per tax year," said Mr Rimmer. Those who would be affected most, he said, were those who worked for more than 20 days in the UK per tax year and those who had retired or only had part-time work in the UAE. "In a nutshell, the more connections back in the UK such a person has, the lower the number of days they can spend in the UK without becoming resident," he said.

Click here for some hypothetical situations provided by Dean Rolfe, tax and legal services leader for PwC in the Middle East. The answers are for guidance purposes only, and should not be considered a substitute for formal advice based on individual circumstances.