UHY Ross Brooke Chartered Accountants

Here, there and everywhere

David Jones tax director UHY Ross Brooke

A nomadic professional lifestyle may sound attractive (does to me!), particularly in this post-Covid era after the unwanted intrusions and restriction of the last 3 years.

By David Jones, Tax Director

It has seemingly never been easier, or indeed more popular, to just up sticks and leave the UK shores and continue a profitable (often digital) consultancy outside the UK tax net. In fact to extricate yourself from the UK tax net is not always easy, especially if you have UK real estate or family, regardless of your prowess in “day counting”. But it is equally essential to ask yourself who else’s tax net you might be jumping into.

A true tax nomad considers that because of a deftness of foot, and a willingness/ability to move easily across national borders, they never trigger a taxable nexus or tax residence in any jurisdiction, so no tax returns to be filed, and no tax to be paid, right? It might be feasible to do so, although extremely difficult, especially in any transition year. Just how well do you know the trigger points in each jurisdiction in which you leave a footprint? And say you become dual tax resident, will the much-vaunted Tax Treaty come to your rescue? It is very easy to get this wrong, and there have been recent high profile examples (eg Shakira) demonstrating some of the elephant traps for tax nomads. For instance, from a personal perspective:

  • Perhaps you already know that a day spent in the UK may not count as a UK day (when day counting) unless you are actually in the UK at midnight on that date?
  • And if you are working in the UK on a particular day for less than 3 hours then that is not a UK working day?
  • But did you also know that in either example, if you are also in Spain for just an hour on that same date, then that is also a “countable day” for Spanish tax residency tests?
  • From a Spanish perspective, numerous days outside Spain could still be counted as in Spain, their “sporadic absence” rule, as paraphrased by Leon Fernando del Canto in his recent excellent article in the tax professional press.

And if you conveniently don’t have documented proof of “days spent”, doesn’t that stymy/weaken an official challenge against your tax resident status? Think again – that really could be your undoing.

Can incorporation reduce international tax liability?

Finally, won’t the choice of “company or partnership (or something)” help provide a veil of protection for you personally? Possibly, but are you also aware:

  • That a company incorporated anywhere but the UK could actually be taxable in the UK if your personal visits to the UK are part of your nomadic plan and you make important management decisions while here in the UK?
  • If the company has a regular, fixed place of business in the UK and/or you habitually conclude contracts in the UK, then a proportion of the company profits will be taxable in the UK?
  • Or did you know that regardless of you owning an offshore company, if that company makes a gain on the disposal of a taxable asset then the UK tax authorities can assess you personally on the gain made by the offshore company, despite the proceeds never being received by you personally in the UK? And this applies to non-UK assets?

The concept of nomadic and the “free-spirit” contradicts these boring tax considerations, but the reality is that there are very very few jurisdictions where you can tread without leaving some sort of tax footprint.

Then, once the imprint is made, your carefree life could come to a shuddering halt – and then, does that jurisdiction consider “ah well, just a free-spirit” or do they resort to levelling accusations of avoiding or even evading (criminal, as has been levelled at Shakira) that jurisdiction’s tax regime?

The best strategy is to plan the lifestyle with due consideration of the tax issues that arise, and so keep ahead of the curve: anonymity, much cherished, is rarely achievable or a defence these days – more and more countries tax offices now have the fullest information exchange regimens. So be warned.

Please contact us to discuss your personal or corporate tax issues with our international tax specialists.

You may also wish to read about UK Tax residency issues and cross border working or transfer pricing.

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