Returning to the UK due to Middle East Instability: what are the UK tax risks?

Given the geopolitical instability and risk of military escalation across the Middle East, some internationally mobile individuals and families are considering whether they should return to the UK, either temporarily or on a longer-term basis.

While that decision may be driven by safety and practical concerns, it is important not to overlook the potential UK tax consequences. In some cases, even a relatively short period in the UK can affect an individual’s tax position, particularly where there is UK accommodation available, time spent working in the UK, or travel takes place close to the end of the tax year.

For those thinking about returning, the key issue is often whether their presence in the UK could make them UK tax resident.

Why UK tax residence matters

An individual’s UK tax exposure is determined by their residence status for the current tax year and, in some cases, previous tax years too.

UK residence is determined under the Statutory Residence Test (SRT). This looks at a combination of factors, including:

• the number of days spent in the UK;
• the individual’s ties or connections to the UK; and
• their residence position in earlier tax years.

This means that a short-term return to the UK can impact an individuals tax exposure. A visit that includes access to UK accommodation or time spent working in the UK could significantly affect the outcome of the SRT.

Given the timing, this is especially relevant now. With the UK tax year-end approaching, a return to the UK could have consequences in either or both of the 2025/26 and 2026/27 tax years.

What happens if someone becomes UK tax resident?

As a starting point, a UK tax resident individual is subject to UK tax on their worldwide income and gains.

That can have wide-ranging consequences, particularly for individuals with overseas investments, foreign employment income, business interests, or planned capital transactions.

There is also a further complication for individuals who have recently left the UK. Where a taxpayer returns to the UK within six tax years of becoming non-UK resident, certain income, gains and remittances may become taxable in the year of return under the temporary non-residence rules.

In other words, returning to the UK can sometimes have tax consequences that go beyond the year of return itself.

Can split year treatment apply?

Although an individual is UK resident or non-UK resident for a full tax year, but there are circumstances in which the tax year can be split into a UK-resident part and a non-resident part when calculating the tax payable.

This is known as split year treatment.

Where split year treatment applies, for tax purposes, the individual may be treated as non-UK resident for part of the tax year and UK resident for the remainder. However, the rules are detailed and the conditions are strict. Split year treatment applies automatically, when the conditions are met. Not all sources of income and gains qualify for split year treatment.

It should not be assumed that a return to the UK part way through the tax year will necessarily limit UK tax exposure.

Can days in the UK be ignored because of “exceptional circumstances”?

The SRT does allow certain days spent in the UK to be disregarded where an individual is in the UK due to exceptional circumstances.

Broadly, these are situations that are beyond the individual’s control and that prevent them from leaving the UK.

HMRC typically take a strict approach to what counts as exceptional circumstances and the maximum number of days that can be disregarded in a tax year is 60 days.

In practice, HMRC is likely to argue that returning to the UK is only exceptional where the event requiring the individual’s presence occurs in the UK itself. Where someone leaves another country because of war or instability, HMRC may contend that the individual still had a choice about where to go next and was not compelled to be in the UK specifically.

That means individuals should be cautious about assuming that days spent in the UK following departure from a conflict-affected region will automatically qualify as exceptional days.

Are there any opportunities for long-term non-UK residents?

For some individuals, a return to the UK may also create planning opportunities.

In particular, those who have been non-UK resident for at least ten tax years may be able to benefit from the UK’s new Foreign Income and Gains regime if they become UK tax resident again.

The detail will depend on the individual’s circumstances, but this is an area worth reviewing carefully before any move takes place. A return to the UK is not always purely a risk issue; in some cases there may be tax advantages available too.

What if someone works while they are in the UK?

Even where an individual does not become UK tax resident, UK tax may still arise if they carry out duties of employment while physically present in the UK.

This is particularly relevant where the individual is a director, or where their UK duties go beyond being merely incidental to their overseas role.

In those cases, the proportion of remuneration relating to UK workdays may become subject to UK tax.

For employers and business owners, there may also be wider business tax implications to consider. For example:

• could the business be treated as having a permanent establishment in the UK?
• are important management and commercial decisions now being taken from the UK?

In each of these circumstances, this could create an exposure to UK Corporation Tax or complicated cross-boarder issues.

These issues can arise surprisingly quickly where key personnel relocate, even temporarily.

What should people do before returning?

Where a move back to the UK is being considered, it is important to review the tax position in advance rather than once travel has already taken place.

The main points to consider are:

• UK day count before the end of the tax year;
• available UK accommodation or any other ties to the UK;
• expected UK workdays;
• previous UK residence history;
• whether temporary non-residence rules could apply; and
• whether the move could affect the tax position of an employer or business.

The tax impact will depend heavily on the specific facts, and seemingly small details can make a significant difference.

Final thoughts

For individuals leaving the Middle East because of instability or security concerns, returning to the UK may feel like the most practical option. But from a UK tax perspective, even a short stay can have consequences.

Residence status, split year treatment, exceptional days, temporary non-residence rules and UK work duties can all come into play. For business owners and senior employees, the implications may extend beyond the individual and affect the business as well.

If you are considering a return to the UK and want to understand the personal or business tax implications, our tax team can help. Please get in touch with our team.