Spain ex-pats face ‘non-dom changes’

New changes to the UK’s tax regime will affect expats in Spain…

HM Revenue & Customs (HMRC) has published its draft legislation covering changes to the taxation of non-domiciles and the counting system for determining tax residency. This counting issue could affect those expatriates living in Spain who spend much time in the UK.

An individual will be treated as tax resident in the UK for a tax year if they either spend 183 days or more in Britain for the tax year, or if they are spend an average of 91 days or more there per annum measured over a period of four tax years.

For any expatriate who spends close to these numbers of days in the UK and wishes to remain a non-UK tax resident, keeping track of the exact days you fly in and out of the UK is very important. Until now, HMRC did not count a day of arrival or departure as a day in the UK. This would mean, for example, that if you landed Britain on a Monday morning and flew out again on a Friday evening, you would only have spent three days there.

Under the new proposals, both the day of arrival and departure will count. In the above example, therefore, you would now be counted as spending five days in the UK.

The draft legislation says:

“Treat as a day spent by the individual in the United Kingdom any day on which the individual arrives or departs from (or both arrives in and departs from) the United Kingdom.

“But in determining that issue do not treat as a day spent by the individual in the United Kingdom any day on which the individual’s presence in the United Kingdom is solely that as a passenger in a part of an airport or port not accessible to members of the public”.

In simple terms, this means:

• Any day arriving or departing the UK will now be treated as a day in the UK, regardless of the time you arrive/depart.
• If you take a connecting flight through a UK airport and remain in the transit area/departure lounge, that day will not count.
• However, if you arrive at Heathrow and travel to Gatwick leaving that same day, it WILL count.
• If you (for example) arrive at Heathrow and have a meeting at Heathrow Hilton, leaving that same day, it WILL count.

The draft legislation will be put to parliament in the 2008 Finance Bill. Subject to the Bill becoming law it will take affect from 6th April this year. However, the legislation is at the consultation stage and so these rules may be amended before it is put to parliament. We will advise on the final new regulations once they are confirmed.

The legislation also includes proposed changes to the taxation of non-domiciles, which refers to foreign nationals working in the UK.

Under the proposed new rules, non-doms who have been in the UK for over seven years will need to pay an annual charge of £30,000 to be able to continue to access the beneficial remittance basis of taxation