HMRC urged to clarify tax rules on expats fleeing Middle East conflict

HMRC has been encouraged to urgently clarify tax rules for expats returning to the UK to escape conflict in the Middle East, amid concerns that emergency returns could trigger tax exposure in the UK.

UHY Hacker Young said the issue was already worrying families who were making emergency arrangements to come back to the UK, and called on HMRC to clarify they would not face unexpected tax bills.

Expats returning abruptly could face exposure to UK tax if their time in the UK resulted in them becoming UK-resident under the Statutory Residence Test, noted UHY Hacker Young partner and London office head of private client and trust, Sandra Jeevan.

This could bring their global income and gains into the UK tax net at short notice, she added.

According to government figures, there are around 300,000 Brits living in Gulf countries, and more than 100,000 have requested repatriation flights.

As individuals must remain outside of the UK for a complete tax year to ensure foreign income stays outside of the UK tax system, an unexpected or early return could result in income and gains being taxable in the UK.

“We are hearing from many families who never intended to return to the UK this year but now have had no choice,” Jeevan stated.

“They could face exposure to UK tax simply because their emergency return alters their UK residence position.

“While HMRC has updated its guidance to acknowledge that the outbreak of war can qualify as an ‘exceptional circumstance’ for residency purposes, the rules remain highly restrictive and are strictly limited in scope.

“HMRC maintains a very narrow view of what qualifies. Choosing to stay in the UK to be with family after the initial crisis has passed typically does not count as ‘exceptional’.”

Returning expats could also face UK capital gains tax (CGT) if they resumed their UK residency before completing the minimum non-residence period required to fall outside of the temporary non-residence rules, Jeevan explained.

This would typically impact gains released on business interests, shareholdings, or other non-UK assets during their time abroad, especially individuals who had structured disposals on the assumption they would remain non-resident for the full required period.

“People relocating due to conflict simply haven’t had the chance to structure their affairs properly,” Jeevan continued.

“Many are already dealing with flights, housing, and schooling. Understanding potential tax exposure early can prevent further financial strain.

“Given the extraordinary circumstances, HMRC should adopt a pragmatic and sympathetic approach.

“In the meantime, anyone unsure about their UK residence position or exposure under the new regime should seek advice immediately.”

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