British expats in Dubai are facing tax bills of up to £5 million if they return to London to escape the Iran conflict, according to accountants. The warning comes as wealthy individuals in Gulf states consider leaving due to tensions involving Donald Trump's policies.
Accountants are advising clients on how to avoid hefty HMRC bills, including taking a holiday in another country until the new tax year starts on April 6 before flying back to the UK. This could reduce the number of days spent in Britain and potentially avoid triggering UK residency rules.
Nikita Cooper, tax director at Price Bailey, said clients face unexpected capital gains tax liabilities of between £1 million and £5 million related to sales made within the last five years while non-resident. For example, someone who sold a company for £20 million could face a 24% tax charge if they become UK resident again.
The issue stems from the UK's five-year temporary non-residency rule, which prevents individuals from leaving the UK briefly to dispose of assets tax-free in low-tax jurisdictions like Dubai. If someone returns within five full tax years, capital gains realised abroad are brought back into the UK tax net.
Accountants note that HMRC may consider the Iran war as an 'exceptional circumstance' allowing up to 60 days in the UK without triggering residency, but this typically applies only to countries where the Foreign Office advises against all travel. Currently, the advice for the UAE is 'all but essential' travel, leaving a grey area.
Sandra Jeevan of UHY Hacker Young highlighted that a returning expat with £100,000 employment income, £200,000 investment income, and £1 million capital gains could face a tax bill exceeding £350,000. She stressed that clients are making 'extremely emotional decisions' but noted that solutions such as restructuring work or deferring decisions are available.
