{"id":6575,"date":"2023-09-10T09:00:00","date_gmt":"2023-09-10T08:00:00","guid":{"rendered":"https:\/\/www.taxpolicy.org.uk\/?p=6575"},"modified":"2023-09-10T14:05:15","modified_gmt":"2023-09-10T13:05:15","slug":"sugar","status":"publish","type":"post","link":"https:\/\/heacham.neidles.com\/2023\/09\/10\/sugar\/","title":{"rendered":"Why Alan Sugar failed to become a tax exile, and why so many others succeed."},"content":{"rendered":"\n

The Sunday Times has a remarkable story<\/a> that Lord Sugar tried to avoid tax by leaving the UK for Australia. The idea was that he’d cease to be UK resident, and so would escape \u00a3186m of tax on some very large UK dividends. <\/em><\/strong><\/p>\n\n\n\n

Somehow neither Sugar, his team, or his advisers ever thought to do a simple Google search:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Which would have led them to this:<\/p>\n\n\n\n

\"Tax<\/figure>\n\n\n\n

So the answer as to why Lord Sugar failed to become a tax exile is easy. The CRGA means that, as a member of the House of Lords, he would have been UK tax resident whether he lived in Basingstoke, Sydney or on the Moon. <\/p>\n\n\n\n

It’s a fun story (not for Alan Sugar, and not for his advisers, who the Sunday Times says he’s now suing 1<\/a><\/sup>Most professional negligence claims settle well before reaching a court, but on on the face of it this looks like a slam-dunk. However, we don’t know all the circumstances, what questions were asked, and whether advice was preliminary or definitive. The advisers may also be able to point to limitations of liability in their standard terms – accountants often limit liability to \u00a31m (or thereabouts), even on very large transactions, and whether these limitations apply in a particular case is often a difficult question. Sugar would also have to show that, if he had been properly advised, he would have resigned his seat in the Lords, and then remained non-UK resident for five years – and demonstrating these kinds of counter-factual questions isn’t always easy<\/span>). But there’s a bigger question: why does the UK make it so easy to become a tax exile?<\/p>\n\n\n

Tax exiles<\/h2>\n\n\n

There is a longstanding debate in some circles on whether, and to what extent, people in general move in response to high taxes (often based around studies of US state taxes<\/a>). I confess this always seems a little unreal to me. Just to start: Sir Jim Ratcliffe<\/a> (Ineos),2<\/a><\/sup>The original version of this article included Toto Wolff<\/a>, the motorsport executive. I don’t think he really belongs in it – he left the UK<\/a> for tax<\/s> security reasons, but given he wasn’t born here, and didn’t make his money here, he shouldn’t be on the list.<\/span> Lewis Hamilton<\/a> (racing), Tina Green<\/a>, the Barclay brothers<\/a>, Richard Branson<\/a>, David and Simon Reuben<\/a> (property), John Hargreaves<\/a> (Matalan), Terry Smith<\/a> (fund manager), Steve Morgan<\/a> (housebuilder Redrow), David Rowland<\/a> (financier), Joe Lewis<\/a> (Tavistock Group), Anthony Buckingham<\/a> (Heritage Oil), David Ross<\/a> (Carphone Warehouse, Mark Dixon<\/a> (IWG)3<\/a><\/sup>Dixon’s Wikipedia article<\/a> says he voluntarily pays tax in the UK. I doubt it.<\/span>. There are many more. Some estimate that one in seven<\/a> British billionaires now live in tax havens; others one in three<\/a>. <\/p>\n\n\n\n

Looking at the Sunday Times “Rich List”<\/a>, I’m struck by how few of those listed still live in the UK. Most of these people left the UK for a very specific reason. They built up a successful business, and were about to make a large amount of money from that business (perhaps by selling it; perhaps through a large dividend). They left the UK, sold the business (or received the dividend) and made a large tax-free gain\/profit. They became a tax exile.<\/p>\n\n\n

How tax exile works<\/h2>\n\n\n

There isn’t a loophole or trick – its just that, like almost all4<\/a><\/sup>“almost all” meaning “everyone except the US”. There’s a reason<\/a> the US is an outlier here.<\/span> other countries, the UK only taxes people who live here – who are “UK tax resident”.5<\/a><\/sup>There used to be a huge loophole – you could leave the UK on 4 April 2020, become non-resident for the 2020\/21 tax year and receive your massive gain tax-free, then fly back into Heathrow on 5 April 2022. That no longer works. There’s a special rule<\/a> to tax “temporary non-residents”. If you leave the UK but become UK resident again within five years, any capital gains you made during the five years are immediately taxable.<\/span><\/p>\n\n\n\n