Hard to get out post Brexit
Louise Bailey is the hair extension industry expert offering ‘the best hair extensions in London’. Her salon ‘Hair and Beauty’ is just off Oxford Circus in London in Market Place and her clients visit her from around the globe.
She is a ‘Master Craftsman of the Hair Council’ and for the past five years has been one of the four judges at the renowned Hairdressers Journal UK hair competition at Salon International.
Not only is she at the top of her industry, she is also creative – as can be seen from the design of her salon – and entrepreneurial. She plans to run online training courses for hairdressers – but does not want all the profits going on tax – so she is planning to move abroad.
Even before Brexit the UK Gov, did not made it easy to avoid paying UK taxes by going abroad, but post Brexit moving abroad has now become even harder. In 2013, starting from 6th April, the government revised the rules on non-UK residence to make it harder to slip the tax net. UK residents such as Louise who was born and brought up in the UK and who pays tax on her world-wide income, would like to become a non-UK resident, and pay UK tax only on her UK source income.
According to the post 2013 rules Louise will be automatically UK resident in any tax year, if she spends more than 183 days in the UK or her only home is in the UK, and she has spent more than 91days in it and more than 30 days there in the relevant tax year.
She will be automatically treated as non-UK resident if she spends less than 16 days in the UK or works full time abroad; 35 hours a week and less than 91 days in the UK with fewer than 30 days spent working
That is not going to happen, since she wants to keep the UK salon and her best customers in the UK.
She will therefore fall within the complex ‘Statutory Residence Tests’ set out in the Finance Act 2013 for which the Government has detailed notes on its official website under RDR3 and was updated on 22nd January 2020.
This Guidance note sets out in mind numbing detail what you need to do to become non-UK resident, which is a complex combination of time spent in the UK, relevant work in the UK and how many ‘connections’ you have in the UK such as family and a place to live.
I won’t go through these rules here – because they really are mind numbing.
All that I would like to say, is that anyone who thinks that the rules – do not really matter – since no-one will find out how many hours you work in the UK or the time you spend here –please think again.
HMRC has spent millions of pounds on artificial intelligence and data collection. Not only is the information on every person in the UK staggering, the penalties for failing to pay tax when due is a minimum of 100% of the tax due up to a maximum of 200% for non-co-operation.
Of course, before Brexit, the only hurdle Louise needed to jump through was to make sure she did not fall foul of even the smallest detail of the Government 2013 rules – but now Louise has also to make sure she will be accepted by the country of her choice.
Post Brexit Louise now needs to apply for a visa before she leaves the UK and each country has its own residency requirements.
In Europe, Spain and Portugal remain two of the most popular locations, Portugal for its favourable tax reliefs for the first ten years.
Britons, like Louise who want to live in Portugal will need to apply for both the D-7 visa (which allows applicants to work remotely) and a golden visa to obtain residency in the country which was available with an investment into a home.
But the residency rules are changing all the time. The golden visa has now ended in high density areas such as Lisbon, Porto and the Algarve, for home buyers so UK buyers who want to buy in these areas are now having to invest in renovation projects or contribute E500,000 to investment funds.
And the problems do not end there, the other two major issues are borrowing to buy and health care.
Of course, any decision of this nature is multi-faceted; Louise will not only need tax advice in both countries, but also immigration and emigration advice, property investment advice, succession advice, relocation advice, health care advice and mortgage advice – to name but a view which is why I set up Caroline’s Club so that through our Club you can find who to recommend to your clients and vice versa.
So if you look with dismay at Brexit under Boris, and are disappointed that our post Brexit Britain is not using its freedom to introduce competitive tax rates and less regulation – unless you are really determined, you may find you are stuck with it!!!
Please let me have your comments and don’t forget to register for Caroline’s Club – it’s FREE to register and you can then learn more about our exclusive award winning club of leading private client professionals who are keen to win business and build trust with clients simply register here