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I currently work in the UK, where I am a resident. My employer is suggesting that I work from UAE, under a UAE contract, for a few years — my organisation has an office there. I own a home in UK and may choose to rent it out if I move to UAE. What should I be mindful of to ensure that I am not considered a UK resident for the purposes of personal taxation while I work in the UAE?
Stephanie Mooney, senior associate in the private client team at law firm Kingsley Napley, says your UK exposure to income tax and capital gains tax (CGT) is determined by your residency status. Once you are non-UK resident, you will only be subject to UK income tax on any UK-sourced income and CGT on gains arising from residential property in the UK. Your UAE income will not fall within the scope of UK income tax.
Your residency status is dictated by the statutory residence test (SRT). This is complicated but in summary you should be mindful of the number of days you spend in the UK as well as the number of ties you retain with the UK. The greater the number of ties, the fewer days you can spend in the UK before being considered UK-resident.
If you have family and accommodation ties, you will be UK-resident in a tax year if you spend more than 90 days in the UK. Your UK home, even when rented out, may still be considered a tie, depending on how many days in the year it is vacant and available for your use.
If you do not wish to shed your UK property ties, it may be wise to consider keeping the number of days you spend in the UK to a minimum (for example, meeting with friends and family outside the UK, if possible).
If you move to UAE and start working there full-time part way through the UK tax year, you may be able to claim split-year treatment on your UK tax return, rather than being treated as resident for the whole tax year. You should take advice on this with a tax expert.
Your UK inheritance tax (IHT) treatment, which will be determined by your domicile status, is also something to think about. If you are currently UK domiciled, it is unlikely that a few years in the UAE will change your general domicile status. As a UK-domiciled individual, your worldwide assets will be within the scope of UK IHT on your death.
You should also watch out for tax traps including the “formerly domiciled resident” rules. Assuming you were born in the UK, with a UK domicile of origin, you will be deemed domiciled for UK tax purposes the moment you take up residency again in the UK (with a small grace period for IHT).
There are also the “temporary non-residence” rules to watch out for. If you return to the UK within five years and are caught by these rules any gains realised during your time in the UAE will be treated as gains realised while you are UK-resident.
This article was first published by the Financial Times on 31/08/22.
FURTHER INFORMATION
If you would like any further information or advice about the topic discussed in this blog, please contact Stephanie Mooney or our Private Client team.
ABOUT THE AUTHOR
Stephanie Mooney is a Senior Associate in the Private Client team . She advises on succession planning, the preparation of Wills, inheritance tax, trust creation and administration, mental capacity and the administration of estates.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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