There’s guidance from HMRC that keeping records for seven years is the general rule for personal and company records in the UK and that it’s reasonable to dispose of them after that period.
However, a new ruling shows that expats or those who spend time working overseas should hold onto records for a considerably longer period of time – and that it’s best to keep records of their employment and periods spent in different countries for the entirety of their career.
The ruling also demonstrates that a communication from the Revenue, even in writing, does not necessarily mean that the advice or decision won’t be overturned at a later date. HMRC have always given domicile opinions for a particular point in time based on the specific set of circumstances presented to them however they have not previously pushed home this point as vigorously in the Courts.
It is also clear that communications from the Revenue can be formal decisions or pragmatic decisions (to avoid uneconomic investigations, for example) and that the latter can subsequently be overturned. Even if a formal decision has been reached, it can be challenged at a later date by either parties.
A recent Tribunal, Gulliver v HMRC (2017), illustrates how the Revenue is becoming more challenging on its domicile rulings.
TaxAdviser magazine presents a good overview of the case.
Essentially, in 2003 a communication from HMRC implied that Mr Gulliver, a UK national, had acquired domicile in Hong Kong and was no longer considered a UK domicile for tax purposes.
Mr Gulliver is now living back in the UK and has been for a number of years and HMRC has opened an enquiry into his 2014 tax return, with over 100 questions, dating back to events of 1981 and querying whether he should have been considered as Hong Kong domiciled in 2003.
Our guidance going forwards is that clients should retain historical records of their employment, travel and living situations throughout their careers if they plan to claim or do claim non-resident or non-domiciled status for any number of years. This is underpinned by the expected change to domicile law that will mean that if you have been resident in the UK for 15 out of the previous 20 years you are deemed to be UK domiciled for all taxes. However, this deemed domicile status can be lost if you move away from the UK for sufficient time.
We will also reinforce that HMRC will make a decision on each tax year in isolation, so their decision about domicile status for a previous year cannot be assumed to carry forwards to subsequent years. This is why you should seek a formal domicile opinion in writing from a qualified adviser such as Sestini & Co on a regular basis which you can use as substantiation for the position taken on your return.
If you’d like to discuss how to tax and property matters relating to UK or expat situations, call us on 01761 241 861 or email us today. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.