UK 90 day rule

[beerdrinker]

You may have heard that HMCR is going to change the interpretation of the 90 day rule for those people who are UK domiciled but choose to live (and be resident) abroad

This link gives more information as well as an e mail address for those who might wish to pass comment:

http://www.hm-treasury.gov.uk/consul...e_domicile.cfm

[hunterboy]

Looks like a few people may get caught out with the changes.....what are they going to do about frequent fliers, etc that transit through the UK?

[cavortingcheetah]

It is all in fact a little more draconian than one might think.
The new proposals will affect both non resident and non domiciled individuals.
Until April 6th, 2008, days of arrival and departure in the UK will not have been counted as days in the UK in terms of calculating days of residence as laid down in HMRC. IR20. guidelines. After April 6th, 2008, such days will count towards the rolling average of 90 days in any one tax year as laid down in IR20..
This means that a pilot or flight crew member who has gone to live in, shall we say, Malaga, where he might suppose life to be easier, would be considered to have spent a day in the UK for each part of a day that he were physically present in England. Therefore, a turnaround at Stansted would be considered a day in the UK and a night stop would give rise to a visit of two days in the UK.
The result of this will be that non UK resident flight crew who fly in and out of England in the course of their duty, on a regular basis, may find themselves UK residents in terms of the 90 day guidelines whereas up until now they fell free of such a tribulation.
The ramifications of this are potentially enormous and although double tax treaties may protect some, many fight crew may well have to employ, at considerable expense, an accountant to file a tax return in the UK as well as in their place of actual residence. Inevitably whichever tax charge is the higher will apply and so, even the Malaga example, taking advantage of the attractive Spanish tax regime for new arrivals there may end up paying the UK HMRC the difference between his Spanish tax and the UK tax. Where your salary is paid will not matter to HMRC. In addition to this, if our Malaga example is held to be resident in the UK for income tax purposes, unless he is non domiciled, he will fall into the catchment area of UK inheritance tax. Even if he is non domiciled, under the new rules, he will be liable for CGT on his world wide capital gains.
Pilots and cabin crew will have to ensure that companies do not roster them for more than ninety UK trips a year, on different days, to or from the UK. It will not matter to HMRC if you do not pass through immigration control. There is no such requirement in the UK HMRC guidelines to do so before being considered a visitor to England.
The government has published a consultation paper in which it invites further comments on matters of non domicile and taxation. The changing of the counting of the days is not actually part of the consultation paper. The government has already stated that such a change will be initiated on April 6th, 2008. The effects of such a change will be enormously detrimental to the entire financial operation of the City of London.
The British government seeks to find justification for the change of the counting of the days by stating that most other countries apply a similar rationale to days of arrival and departure. This is disingenuous and rather dangerous for the economy. The UK 90 day residence rule is probably the most prohibitive restriction of its kind enforced by any country in the world.
A better balance would perhaps be achieved by extending the 90 day rule to the more generally adopted 180 day rule per annum, as is the case in most other countries.
But that of course would require an application of the concepts of fairness and balance, both of which would appear as but figments of the fundiment to those who haunt the darling passages of the brown building which passes in England for the treasury.

[Anotherflapoperator]

Frightening isn't it. We do have a double taxation agreement here on the Isle of Man, but my job entails flying to the UK on evety duty. I've lived here 10 years, always paid up my taxes in full and my children are all Manx, and to be frank, I ain't ever going back either!

Time I went and talked to the tax office I reckon. Is it just me, or does this smack of class-war Labour vindictiveness again?

Hopefully, a happy New Year to you all.

[RAFAT]

Personally I don't think a pilot or any other crew member being on UK soil for the sole purpose of an aircraft turnaround is going to be affected by this. The examples given in the document seem to indicate that the arrival and departure days are countable when they are wrapped around whole days.

Furthermore, if you don't get off the aircraft then how exactly will HMRC know you've been on UK soil? apart from checking rosters of course, but I doubt they'll be doing that.

[cavortingcheetah]

The application of the new rules will probably make no difference to visiting crew members from another state.
The new rules will, however, enable HMRC to pursue, for whatever purpose and to greater effect, those who have left England to take up residence elsewhere but whose work brings them back into the country on a regular basis.
The residence rules in the UK are, in the main, just that, rules. There is little at the moment that is statutory relating to residence or domicile. The rules are in a complete mess and it would significantly clear the air were there to be a proper test of residency which could then be put into the statute book for the distinct and definite clarification of points which, up until now have been at the discretion of the revenue and on occasion the interpretation of the courts.

[Nov71]

I thought inbound passengers & crew who remained 'airside' were legally 'in transit of UK airspace' until they cleared immigration control.

This has poss implications for foreign sailors (fisherman) in UK territorial waters

IMO The Govt would also have to record and tax foreign lorry drivers income for the time spent in the UK and illegal immigrants held in UK detention or for earnings whilst on the loose (to be applied & deducted from their repatriation incentive
How about time spent overflying UK airspace eg International Space Station

Meanwhile those who can afford creative tax accountants will avoid payment

[cavortingcheetah]

The problem with being airside of immigration in the UK insofar as HMRC is concerned is that there is nothing that covers that particular situation on the statute book. HMRC can interpret your 'being in' or 'visiting' England in basically any way they wish to. It would then, if it came down to it, be up to you to prove that your interpretation of HMRC's own rules was more correct than their own, in a court of law. This is sometimes a little tricky as Mr Gaines-Cooper found out, to his significant cost and, incidentally, to the cost of many others.
The jurisdiction of British law certainly extends airside of the immigration desk, just try telling the next hostess who smiles you off her flight that she's a somewhat less than attractive and talented tribute to the traditions of airborne female servitude!

[hunterboy]

I agree with CavortingCheetah in as much as the proposals at the moment are very wide reaching and will affect many unsuspecting people.
For instance,as far as being in transit passing through a port, where does it say you are not liable for UK income tax? What about transiting between LHR and LGW? It seems to be a sledghammer to crack the non-domiciles nut. However, the IR document does also refer to the non-residents that "escape" UK tax. But then again, if you are resident abroad, why should you be liable for UK tax?
I have no doubt that this is going to cause a lot of grief through the law of unintended consequences.

[cavortingcheetah]

Oh, I think that there is no doubt that were you to transit airports then the time spent doing so would count as a day in the UK.
May I point out that in Morgan vs Cilento (2004), a case involving Anthony Schaffer the playwright, Mrs Minutolo, who had an affair with Schaffer, sought to have him declared domiciled in the UK so that she could claim under the 1974 inheritance tax act. Ex patriate pilots, a sub division of that professional group renowned for their lack of marital fidelity and constancy, should perhaps look to their affairs with greater consideration for the consequences of the future.
Unintended consequences indeed, but the ramifications of the present proposals will be apt to be far more far reaching than those who have promulgated them might ever have imagined.

Edit: I should have pointed out that Mr Schaffer was dead at the time of the court case concerning his past domicile. His heirs and assigns had the pleasure of fighting over his spritual whereabouts when he was alive whilst no doubt not caring too much about his final destination in the after life.

[MaxReheat]

One would like to think that BALPA might attempt to take up the cudgels on this one. This smacks of Broon and his 'darling' cronies' typical stealth approach of hoping nobody will notice yet another vindictive tax grab until it's too late.

[hunterboy]

I understand that BALPA have expressed a view on this; something to do with fatigue. I'm not sure I follow the argument, and I'm not convinced that BALPA should really be concerning itself with the tax affairs of a minority of its members. BALPA time would be better spent sorting out decent pay rises for its members.

[cavortingcheetah]

It is certainly a tax grab and there are many, such as Richard Murphy of Tax Justice, who argue eloquently in favour of such egalitarian action.
It remains to be seen whether the measures which will be implemented next April will turn out to have been either wise or just.

From next April, non domiciles, living in the UK for more than seven years, will have the choice between paying a levy or 'fine' of £30,000 or declaring their world wide assets and bringing such assets into the UK tax net.
This levy will of course represent an actual amount of £50,000 because that amount of money is what will be needed, after either income tax or CGT payment, to generate the £30,000.
If one opts for the levy route, one will loose one's UK tax allowance, currently worth some £5,225 pa on any income which is remitted to the UK and thus subject to normal UK tax rates.
The levy, because it is termed a 'levy', is an amount which falls outside any UK tax treaty with another country. In particular this will effect the American community in England because they will not be able to take advantage of the US/UK tax treaty and the witholding relief, at 15%, which this treaty currently affords. Those Americans, resident in the UK, will end up paying double tax.
The consultation paper carries this levy idea further and proposes an increase of the levy from £30,000 to £50,000 for those who have been resident in the UK for longer than, perhaps, seven years. This is a pleasant little threat on the horizon for those who might wish a continuance of residence in a country which is not their natural home.
The alternative to this levy route is for a non domiciled resident to pay UK tax on their world wide assets, so long as they are resident in the UK, which in turn implies that they spend more than 90 days, rolling average, in the country in any one year. The government is holding back on publishing their final proposal and now does not intend to do so before February 28th, 2008. This will give anyone who wishes to avail themselves of the total tax route, some five weeks, before April 5th, 2008, in which to arrange their financial affairs so that they may take advantage of whatever tax planning structures are available to a normal UK resident. This is not a lot of time.
It is hardly surprising that many of those who work for companies with an overseas flavour that operate in the UK, finance houses, finance consultancies, the Baltic Exchange, oil companies and, well, the list is endless, are thinking of departing the shores of Albion.

Oh, absolutely good riddance of course, of course and of course!

Except that most of those who will be affected by these new tax changes do not send their children to state schools, do not burden the NHS and do inject considerable amounts of cash into the UK economy in the form of the taxes which they do pay and the money they spend in the country. Most of those foreigners targeted by these latest proposals would not dream of being a burden on the British state and thereby inflict upon their loved ones the appalling ravages of the UK state schooling system or its mortuary of a public health domaine.
Indeed, the German confederation of industry, which represents some two hundred and fifty German companies which operate in the UK, has very recently sent a letter to the Treasury. In this letter it was pointed out that Britain is in fact considered so expensive and so ghastly a place to live, by European standards, that an incentive such as a tax exemption was necessary to lure those with the requisite expertise which British industry requires to these rainy and gloomy shores in the first place.

Those are some of the facts.

Whether the government's proposals are fair is a question which may be of interest and exercise to the more socialistically inclined green eyed peculiarities in our midst. Whether the proposals are wise and whether, when put into force, they will be good for the economy is another question altogether. There are those who do wonder whether it was really a good idea to so seriously upset a stable and profitable status quo which has worked well for some two hundred and fifty years.

As for BALPA, it would probably be a very good idea if pilots in general avoided attracting too much UK revenue attention towards themselves at the moment. Pilot persecution or even prosecution would represent a very good general test case for HMRC on which to hone its newly acquired counting of the days. Pilots, unlike lorry drivers or coal miners, are not renowned for collective action in the face of oppression.

[hapzim]

keeping this near the top to allow all commuters to pick up on the facts.

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[kuningan]

Not as bad as first suggested

As widely leaked, the actual proposals in the Budget today were not as draconian as initially proposed. Current situation is 'days of arrival and departure' do not count in adding up to the 90 day average over 4 years. So a Monday-Wednesday visit until April 5 2008 counts as one day.

As originally proposed in October 2007 they would have - a Monday - Wednesday visit would count as three days.

What is now proposed is 'midnights' count as a day's presence in the UK - so Monday - Wednesday is two days.

AND there is a transit exemption if you are 'in transit between two places outside the UK' - even if you are there at midnight it does not count UNLESS you do something not related to the transit - eg have a business meeting. Don't know how that will count for night stops.......

Source: HMRC Budget 2008 note 102

[hunterboy]

At last, common sense prevails....let's hope these rules are set in concrete for a few years.
The other good news is that the new rules will be enshrined in legislation and not the HMRC IR20 document that appears not to stand up to legal scrutiny.

[bluefalcon]

BA longhaul affected??

Hi guys,

Would anyone flying for BA longhaul, (3-4 trips a month) and living outside of the UK be affected by this rule.?

thanks

[Walker Texas Ranger]

Just throw a version of the Boston Tea Party and then start another Revolutionary War! Thats how my forefathers got out of the UK taxes 200 + years ago. I believe we called it "taxation without representation"

[beerdrinker]

Bluefalcon,

Yes, as I read it in the same way as the old rule of day of arrival and day of departure not counting applied. So if you commute in on monday and leave the same day, that day will not count, but if you arrive back on wednesday and nightstop before commuting home on thursday that midnight will count.

However I would get Balpa (I assume you are a member) to get exact clarification from HMRC. The note HMRC published on the day of the budget (quoted above) is :

http://www.hmrc.gov.uk/budget2008/master-notes.pdf



Page 239 :



Current law and proposed revisions

4. Under the current rules, when deciding if an individual is resident in the UK

for tax purposes all days spent in the UK are normally counted, except for

days on which the individual arrives in, or departs from, the UK. At the

Pre-Budget Report it was proposed that days of arrival and days of

departure should count as a day of presence in the UK, subject to an

exemption for transit passengers.

5. The changes announced today mean that on and after 6 April 2008, any

day where the individual is present in the UK at midnight will be counted

as a day of presence in the UK for residence test purposes.

6. There will be an additional exemption for passengers who are in transit

between two places outside the UK. The exemption is wider than that

proposed at the Pre-Budget Report as it caters for people who have to

change airports or terminals when transiting through the UK. It will also

allow people to switch between modes of transport, so they could fly in but

leave by ferry or train for example. Days spent in transit, which could

involve being in the UK at midnight, will not be counted as days of

presence in the UK for residence test purposes so long as during transit

the individual does not engage in activities that are to a substantial extent

unrelated to their passage through the UK. So, for example, if they take

time out to attend a business meeting then the transit exemption will not

have effect.