Newsflash – Determination of residency

Determination of Residency

A number of people have commented to us recently, specifically in respect of UK and Australian residency, that the number of days spent outside of a country can be the determining factor as to whether a person is a resident for tax purposes.

Many countries operate systems where if you spent a certain number of days in the country you are a resident to taxation purposes even if you are a tax resident elsewhere. The problem is that the number of days spent in a particular country has never been the absolute best of residency regardless of how many people are under that impression.

Last year the Court of Appeal in the UK upheld the tax authority’s decision that a British businessman who had resided in the Seychellessince 1976 was also a resident for the UK for taxation purposes, even though he spent less than 90 days per year in theUK.

The Court of Appeal stated the taxpayer had not shown a distinct break from social and family ties from his home country. The business man had a house in the UK where his wife and son lived, his son was at school in the UK and he had a UK mobile phone. It was also commented that he had a will drawn up under English law and attended Ascot racecourse when in theUK.

The courts decision was the taxpayers “centre of gravity of his life and interests were in theUK”.

The decision could affect any expatriate who has lived abroad for many years, but retained some link with their country of citizenship, or of previous residency. In this case the taxpayer was assessed 30 million pounds covering the years from 1993 to 2004 inclusive.

A taxpayer would usually think that have taken up a new residency 34 years prior that they would be safe and that the new residency had been established and accepted. With the renewed emphasis of many countries on international tax matters, anyone living abroad that has that connection with another country could be at risk. Expatriates need to consider lifestyle changes to comply with stricter tests of residency. Taking children out of school or selling your home for tax compliance is not attractive.

Any expatriates, either from other countries living in Australia or Australians now living overseas, who have any queries in relation to their circumstances should contact us to have circumstances reviewed.