Your Next Tax Move

There's been a significant fall in the number of expats applying for UK non-resident tax status. Latest figures from HM Revenue & Customs show that in 2008/09 130,000 people registered compliance, whereas in the previous year the total was 148,000.

Opinion is divided as to why. Some advisers speculate that the 12% decrease is due to the fact that fewer expats are working abroad, others say it merely reflects the difficulties experienced in meeting the changing criteria. Over the course of the last year, HMRC has imposed new limitations on the factors governing non-resident tax status but, to date, has not issued a definitive rule book. This has left both new expats, and those who've already qualified as non-resident, confused about their current status.

Ronnie Ludwig from chartered accountants, Saffery Champness, explains that for an expat to justify his or her non-resident tax status it is no longer just the number of days spent back in the UK which are taken into account, but additional factors such as 'lifestyle'. And so you must expect to be questioned about any occupation of a UK home (either by yourself, our spouse or children), what UK clubs you belong to, whether a UK bank account is the hub of your economic activities, and whether you use a UK credit card or UK mobile phone. Find out more from Mr Ludwig by listening to him here.

Despite the taxman's intrusiveness, non-resident tax status for qualifying expats is undoubtedly worth applying for. British tax-payers who are resident in the UK are liable for tax on their worldwide income and capital gains. Once you've become a qualifying non-resident expat, the rules change and so your tax obligations. When such status has been confirmed, tax exemptions are granted according to the length of time spent abroad. Expats will full-time employment abroad and who are non-resident for the requisite time span with a 'settled purpose' are exempt from paying UK tax on foreign earnings and income. And those who've been non-resident for five complete tax years become eligible for UK capital gains tax (CGT) exemption, too. See the checklist here.

Even with the current and lamentable lack of clarity governing the rules, it's worth doing what you can to underpin your eligibility for qualification. At the very least restrict your non-essential visits back to the UK. Make sure you do not exceed the 90 day allocation per annum over any one four-year period. Always keep a record of travel dates (ideally supported by travel documentation such as flight details confirming arrival and departure dates). Bear in mind, that for the past two years HMRC's calculations take into account midnights spent in the UK which means the inclusion of arrival and departure days in the overall quota. So you must do the same. Read the update here.