Individuals fleeing the Gulf states may face a tax bill from HMRC, according to Blick Rothenberg, a leading audit, tax, and business advisory firm.
Robert Salter, a director at the firm, stated, “Many UK nationals working in the UAE, Kuwait, and Saudi Arabia are looking to return home. However, being in the UK increases the likelihood of being classified as a UK tax resident under the Statutory Residence Test (SRT).”
“Being tax resident means they will be liable for UK taxes, which include a 24% tax on their worldwide income and gains for the duration of their UK tax residence. This could affect their Middle East salaries as well.”
He added, “If someone becomes a UK tax resident again, even if only for 1-2 years, and then returns to the Gulf, their estate may be subject to a 40% UK Inheritance Tax (IHT) if it exceeds £325,000 at the time of death.”
Robert explained, “Individuals who only moved to the Gulf region a few months ago and have not yet become ‘non-resident’ in the UK will find that benefits-in-kind, such as free housing or a company car, are subject to UK tax.”
He further noted, “Those who left the UK and spent less than five tax years abroad before returning and re-establishing UK tax residence may be caught by the ‘temporary non-residence’ rules. This means that capital gains accrued while initially non-resident in the UK—such as from selling a UK business or significant shareholding—might be taxed by the UK.”
Robert remarked, “The SRT considers various factors including the number of days spent in the UK in previous years, work patterns abroad, and ties like family or accommodation in the UK, combined with the exact number of days spent in the UK during each specific tax year. However, even if individuals remain classified as non-resident in the UK per the SRT, they and their employers may still be liable for UK taxes.”
He added, “While the rules allow for ‘incidental’ UK workdays without triggering UK tax, HMRC does not typically regard most UK workdays as incidental. Therefore, if someone fleeing the Middle East begins working from a UK home office while continuing their core role as a ‘global tele-worker,’ they would be liable for PAYE and other taxes on those UK workdays, even if they do not become a UK tax resident.”
Robert explained, “When individuals employed by a Middle Eastern entity return to the UK and start working ‘for the benefit’ of a related UK company (e.g., a UK subsidiary of their Middle Eastern employer), a PAYE obligation may arise. This applies if they begin working for the ‘economic benefit’ of the UK operation, even if their official employment contract remains with the Gulf entity.”
He continued, “However, there are rules that may limit an individual’s UK tax liability. Individuals who have lived outside the UK for at least ten tax years prior to their return may benefit from the UK’s Foreign Income and Gains (FIG) regime. For eligible individuals, this regime means that non-UK investment income and capital gains should be outside the scope of UK tax for the first four years upon their return to the UK.”
“Individuals who remain residents in the overseas jurisdiction may become ‘dual tax residents’ while in the UK. In such cases, if there is a Double Tax Convention between the UK and the relevant overseas country, the ‘dual resident’ rules within that Convention may provide an opportunity to avoid UK taxes on foreign income and gains, especially if it can be argued that the overseas jurisdiction holds the core taxing rights in that individual’s specific situation,” Robert concluded.
He also mentioned, “In certain scenarios, up to 60 days in a tax year may be disregarded if an individual cannot leave the UK due to exceptional circumstances beyond their control. The Foreign, Commonwealth and Development Office (FCDO) has advised against travel to the Gulf regions at this time and has arranged ‘rescue flights’ for British nationals living there. While formal confirmation is still pending, we hope that HMRC will accept that the conditions for exceptional circumstances are met.”
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