Expats Asked for Their Views on Residency Rule Reform

Expatriates are being asked to assist the UK’s HM Revenue and Custom’s (HMRC) department to define what constitutes residency for tax purposes.

HMRC launched a consultation last week that aims to address the means by which a statutory residence test can be implemented. At the present there is no legally accepted definition of tax residency and this has led to the rules determining who is, and is not, resident for tax purposes being perceived as “unclear, complicated and seen as subjective” and has caused many expatriates to become unclear as to what their tax status actually is.

Speaking to UK newspaper, The Daily Telegraph, John Whiting from the Chartered Institute of Taxation (CIOT) commented: “The rules on tax residence are jumbled and uncertain and are far from what we need for a modern tax system. The aim must be for a statutory test to give businesses and individuals certainty in this increasingly mobile world.

“We cannot have rules dating from the age of sail and Morse code and heavily dependent on HMRC’s views governing what happens in the 21st century.”

While three categories of residence do currently exist in the United Kingdom: resident, ordinary resident or domicile, the rules defining which category expatriates fit into are unclear and ambiguous. In order to improve the current system the HMRC are considering a number of proposals to reform the non-resident tax status.

In a press release, David Gauke, Exchequer Secretary to the Treasury, said:

“The Government wants to ensure that the rules of our tax system are fair. That is why we are increasing the tax charge for those non-domiciles who have been resident in the UK for long periods of time. At the same time, it is important that skilled individuals and investors are encouraged to come to the UK from abroad and we recognise the fact that non-domiciles can make a valuable contribution to the UK economy. That is why we want to make it easier for them to invest in UK business.”

The full proposals and details of how you can participate in the consultation are available on the HMRC website.