Will Swiss job help me avoid UK tax?

I am a higher-rate taxpayer and have been given the opportunity to leave the UK and work in Switzerland. I have seen a lot in the press recently about people who have done this but have remained accidentally resident in the UK for tax purposes. I am married and own a property with my wife in the UK. I do not plan to visit the UK often after I leave, as my wife will come out and visit me every month. How will the new HM Revenue & Customs (HMRC) residency test affect me and how can I avoid remaining liable to pay tax in the UK?

Louise Somerset, tax director at RBC Wealth Management, says HMRC published consultation papers on a statutory residence test and the taxation of UK-non domiciles in June 2011. You do not mention in your question whether or not you are UK domiciled (ie, whether the UK is your permanent home), so this answer only can only cover the residence aspects of your situation – if you or your father were not born in the UK, it would be worth looking into your domicile separately, as this could create significant tax saving opportunities.

The residence consultation paper sets out a framework of specific tests for deciding whether or not you have ceased to be UK resident. However, these tests will only apply from April 6, 2012, and some of the details may change before then. So, if you are leaving the UK in the current tax year, you should initially look at the guidance in the booklet HMRC6. Unfortunately, HMRC is not obliged to accept that complying with HMRC6 is enough to make you non resident.

As you own property in the UK and your wife will continue to live here, it is very important to demonstrate that you are moving to Switzerland to take up full-time employment for a period of at least a full tax year. If possible, you should avoid returning at all to the UK for the rest of the current tax year after you take up your new role. You should also take steps to break your ties with the UK in other ways to demonstrate that you have really left the country. This might include redirecting mail, opening a Swiss bank account, and giving up UK club memberships.

Once the new residence tests come into effect from April 2012, it will be harder to lose UK residence than to become resident here in the first place. It will be necessary to make a clean break with the UK in order to lose your residence status – but, with a statutory residence test, you will at least know exactly what you need to do to achieve this.

If you leave the UK to work abroad full time, spend fewer than 90 days in the UK in a tax year, and work for fewer than 20 days in the UK, you will automatically be non-UK resident under the proposals, which means the residence of your family will not matter. In other cases, a number of tests will need to be considered – including days spent in the UK, availability of accommodation, and family ties.

Many people who leave the UK in the next few months will find that their residence status will be different under the new statutory residence test than has been the case under the current, less clearly defined, rules. It will therefore be important for you to look at the terms of the test when these are finalised, to check whether you need to make further changes to your lifestyle and movements to protect your tax position.