Lord Sugar falls foul of little-known residence rule
Lord Alan Sugar has found himself in the spotlight after he alleged his accountant gave him incorrect advice in respect of his tax residence. What went wrong?

Tax residence has been on a statutory footing since 2013, so it's usually easy to determine someone’s residence as long as they have kept accurate records of their visits to the UK, working patterns, and so on. It's possible to remove or restrict one’s exposure to UK taxes by becoming non-resident, and this is a popular choice for people that look to retire overseas. This is generally uncontroversial, and cases where the plans fail tend to centre on the individual subsequently spending too much time in the UK. However, in Lord Sugar’s case there is no suggestion this happened.
Lord Sugar had relocated to Australia. Some time after this, he received a large dividend from a UK company. In general, UK income is still subject to UK income tax for non-residents, but the “disregarded income” rules mean that it’s possible to elect for the tax to be restricted to that deducted at source, i.e. £nil, in exchange for a loss of personal allowances and any double tax relief. On paper, this would appear to work. The problem is that MPs and peers are automatically deemed "resident, ordinarily resident and domiciled in the UK for the purposes of income tax, inheritance tax and capital gains tax”. The dividend was taxable in full, and Lord Sugar promptly paid the estimated £186 million.
Related Topics
-
HMRC has withdrawn Form 652. How should you notify VAT errors going forward?
-
Can paying interest to your company save tax?
You recently borrowed a substantial sum of money from your company rather than take extra salary or dividends. Your bookkeeper says it might be more tax efficient if your company charged you interest. This sounds counter-intuitive but is it correct?
-
Reverse charge and end user rules: opportunity?
If you sell construction services to other builders, you need to consider the domestic reverse charge rules. You must apply these where your customer is an end user. How might this create a cash-flow advantage?