UK taxman loses vital ruling on non domiciled British expats

A recent UK High Court ruling in favour of British taxpayers against HMRC will protect British expats from investigations into their tax liabilities.

The High Court’s ruling will apply to all non-resident British expats who have demonstrated they no longer have any ties to the UK. Basically, the judgement recognises that, once a citizen leaves the UK, the taxman’s power to investigate their tax affairs is vastly reduced. According to counsel for the complainant, the welcome ruling is a game changer for HMRC’s power and a gift for non-resident and non-domiciled Britons living permanently outside the UK as they will be safe from the UK taxman’s investigations.

The case was brought on behalf of Tony Michael Jiminez, an expat since 2002 who was being investigated by HMRC concerning his residency status. He'd co-operated with their enquiries up until the agency attempted to force matters via a production notice delivered to his Dubai home. Jimenez, a former co-owner of Charlton Athletic Football Club, immediately challenged HMRC’s right to issue the notice on the grounds that he was a long-term expat with no ties to Britain.

The case ended up under judicial review in the London High Court of Justice, with the key dispute centred on the issue of exactly how much power the British taxman has as regards exercising its assumed rights outside the UK. Jimenez’s case rested on HMRC’s powers to issue notices under the Finance Act 2008’s Schedule 36, with his lawyers arguing the state powers do not ‘extend to subverting foreign states’ sovereignty’.

Under a long-established general rule, other states will not assist foreign countries in collecting taxes unless a reciprocal arrangement is in force. Council also argued that HMRC had no power to issue a production notice against a Dubai resident, as it has no extra-territorial effect. As a result, the judge ordered HMRC to pay Jimenez’s costs.

Following the ruling, Jimenez told reporters he was happy with the result, adding that for years, HMRC had behaved as if distance was no limit to their powers. Expats living overseas, he said, stayed in the taxman’s sights long after they’d emigrated to warmer climates, whether they were rich, poor, young, old or retired. The ruling confirms HMRC’s powers mean nothing outside the UK’s borders.