Shakira has been in the news recently due to the tax case that the Spanish authorities are bringing against her. They argue that, due to the amount of time she spent in Spain, Shakira was habitually resident there and should have been paying Spanish tax. The fact that she held wealth through BVI companies is seemingly regarded as an aggregating factor.
Regardless of the specific circumstances of her case, Shakira's plight at the hands of Spanish prosecutors highlights the risk faced by peripatetic individuals who spend extended periods of time in countries other than the one they consider their “tax home”.
This risk applies equally to people who spend time in the UK. In the UK, tax residence is determined by the Statutory Residence Test, or "SRT". Under the SRT, tax residence is mainly determined by the number of days a person spends in the country and the number of UK "ties" he or she has. Spending too many days in the UK can result in tax residence, which carries with it an obligation to report and pay tax on worldwide income and gains. If the same income and gains are simultaneously taxed in another country, it can be possible to claim relief under the relevant double tax treaty. However, this relief must be claimed and the obligation to file tax returns remains.
If this applies to you, then obtaining timely advice is key. You can either limit your days in the UK, or take steps to mitigate the tax implications of UK residence. If you are not domiciled (or "deemed domiciled") in the UK you can claim the remittance basis of taxation, which allows you to defer paying tax on income and gains arising and retained outside of the UK. Any kind of offshore trust or company structure should be carefully reviewed to ensure that it is efficient and not subject to adverse taxation under anti-avoidance legislation.
At the very least, knowing that you are tax resident will allow you to file the correct tax returns on time and thereby avoid penalties, interest and - in the worst case scenario - possible conviction.
We regularly give clients advice on the SRT and help them plan their time in the UK. We have also developed a tax residence app called ResiCheck to help our clients understand the SRT, test their residence in a prior year, plan future residence and keep track of their days in the UK.
The judge held that, between 2012 and 2014, the singer was a tax resident in Spain and, therefore, had to pay her taxes in the country, which she did not do.