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Fiscal specialists are cautioning UK citizens who evacuated Dubai due to the conflict in the Middle East that they might yet incur greater tax obligations, notwithstanding an endeavor by the United Arab Emirates to calm anxieties.
The Financial Times indicated recently that officials in the UAE, a jurisdiction imposing no individual levies, had confidentially indicated their willingness to permit individuals who have departed the nation to reside longer overseas without forfeiting their fiscal domicile. Nonetheless, numerous fiscal advisors stated that the nations where UAE expatriates had opted to resettle would probably not be as flexible.
Repatriating UK nationals will additionally probably not meet the criteria for HM Revenue & Customs’ provisional fiscal regulations, the consultants appended.
“Regrettably, fiscal ‘flexibility’ in a low‑ or zero‑tax territory does not alter the method by which other sovereign entities establish their entitlements to taxation,” commented Fernando Del Canto, a Spanish attorney and legal advocate residing in London.
“Nations are independent and they wish to prevent the depletion of their revenue foundation; they desire to keep their fiscal [prerogatives] from migrating to the emirates.”
He conjectured that the Spanish and UK fiscal agencies would dispute claims from individuals who had departed the UAE should they remain in their respective nations for a duration sufficient to establish fiscal residency.
Charlie Sosna, who leads private wealth and taxation at the legal practice Mishcon de Reya, stated that although the UAE’s confidential guarantees provided “a degree of reassurance in theory”, they did not “eradicate the fundamental fiscal exposure”.
Repatriating UK citizens might encounter unforeseen obligations concerning both earnings levies and capital appreciation duties, should they establish UK fiscal residency.
Nikita Cooper, a director within the fiscal division at Price Bailey, an accounting company, remarked: “Individuals might have divested UK enterprises or secondary non-UK properties while fiscally domiciled in Dubai and may now be liable for UK capital appreciation duties at 24 percent. For numerous individuals, this could total tens or even hundreds of thousands of pounds.”
Consultants indicate that numerous impacted UK citizens are attempting to avoid activating fiscal residency in the UK by residing in alternative nations. Nevertheless, Del Canto noted, contingent on the duration of the conflict, individuals might encounter an identical fiscal domicile issue in these interim dwellings.
Every nation possesses its distinct fiscal residency regulations, where an individual’s domicile is initially determined by these internal statutes. Remaining over 183 days within a calendar year in a given state commonly leads to establishing fiscal residency in the majority of countries.
Numerous nations have also concluded dual taxation agreements — accords between two states designed to avert redundant levies on earnings or assets.
However, specialists warned that these accords do not stop individuals from attaining fiscal domicile in multiple nations; they merely designate which nation possesses the prerogative to impose taxes in such a scenario.
“Regarding the accord between the UK and UAE, its formulation is restrictive . . .A fiscal contributor might maintain domicile in both the UAE and the UK and could nonetheless be obliged to remit UK taxes on their global earnings,” stated Nimesh Shah, chief executive officer of fiscal consultancy Blick Rothenberg.
Within the UK, people establish fiscal residency contingent on the total days they pass within the nation and the extent of their connections to the UK, pursuant to regulations termed the Statutory Residence Test (SRT).
Shah indicated that a fiscal credential from the UAE asserting an individual’s classification as tax resident there, even if they were presently situated beyond the nation’s borders, would likely offer “extremely restricted utility for them, from a UK standpoint”.
Consultants additionally cautioned UK citizens repatriating from the UAE against depending on an “extraordinary situations” provision of the SRT. This grants individuals who become marooned in the UK due to unforeseen factors an additional 60-day period within the UK prior to establishing fiscal residency.
“HMRC rarely applied this during the pandemic,” remarked Del Canto. “I do not anticipate them being particularly flexible.”
Upon direct inquiry by the Financial Times regarding the applicability of the extraordinary situation regulation to those arriving from Dubai, HMRC merely stated that persons marooned in the UK originating from nations for which the Westminster administration has advised against any travel may depend on the extraordinary conditions being deemed applicable.
The Foreign, Commonwealth & Development Office (FCDO) presently counsels against any journeys to Iran, Israel, Iraq, and specific areas of Lebanon. Commencing this week, its guidance restricts travel to the UAE to only “vital” purposes.
As per the FCDO, 70,000 UK citizens had repatriated to the UK since the commencement of hostilities, up to March 13.
Martin Muhleder, a fiscal associate at immigration consultants Vialto Partners, cautioned that he “would not anticipate the extraordinary conditions to be relevant” for any individual arriving in the UK from nations absent from the FCDO’s no-travel itinerary, unless substantial additional elements rendered their situations “uncommon”.
HMRC stated: “The current regulations already consider extraordinary situations, including individuals impacted by conflict, conforming to the fundamental tenet that residents of the UK ought to contribute taxes within the UK.”