Before you started to think about offshore investments, you may never have considered the issue of tax and residence in any detail. But now that you are engaging in investing money in different countries, you may wish to get professional advice on the matter.
At first glance, this may seem odd. After all, you live where you live, don’t you? But tax authorities may have a strange definition of “residence” and failure to abide by their rules could cost you dearly.
It used to be the case that HMRC in the United Kingdom looked at the number of days you stayed in the UK per year. In some circumstances, they would even have looked at the total number of days you stayed their over a three year period. The “limit” for being considered a resident for tax purposes was around 90 days. Rather than being the preserve of superrich jet setters, this was dangerously easy to achieve for normal expats. A long Christmas stay and a summer tour to visit friends could soon add up.
However, since the Gaines-Cooper case which did, as it happens, involve a superrich person, the rules have changed. The taxman can now look at where your “centre of gravity” is.
This is a spectacular example of how HMRC can move the goalposts, without actually telling anyone where they have put them. The case itself may not offer much help. Few expats may have lives that match up with Mr Gaines-Cooper’s, so comparing the facts of the case and your own circumstances may not offer much help.
Instead, you may wish to seek professional advice on the issue. Clues to what may lead to HMRC deciding that your “centre of gravity” is in the United Kingdom include having a spouse who lives there, and educating your children in Britain. Keeping valuable property and antiques may also be clues. However, rather than relying on clues, ask your financial adviser for their opinion on the issue. It’s better to be safe than sorry about a large tax bill!
