Alan Sugar under fire following claims to be UK non-resident

Sir Alan Sugar, entrepreneur and the star of The Apprentice, has found himself under media scrutiny over his tax affairs after apparently attempting to declare himself a UK non-resident for tax reasons.

The Sunday Times (10 September) carried a report on Sir Alan’s tax affairs following a dividend award of £390 million, one of the largest in UK corporate history, in the 2021-22 tax year. The report suggests he attempted to declare himself a UK-non-resident to allegedly avoid a hefty tax bill.

The claim was made after the billionaire spent “many months” in Australia hosting its version of Celebrity Apprentice. The newspaper reported that he was unsuccessful, paying HMRC £186 million in tax because as a sitting peer he is automatically deemed to be UK resident, as well as UK domicile. Sir Alan strenuously refutes the allegations made by the newspaper.

But what does it mean to be UK non-resident, and how does residency differ from domicile? Can being UK non-resident really limit the amount of tax an individual pays?

The rules are complex and attract considerable scrutiny from HMRC. Specialist advice should always be sought before claiming changes to your tax status.

Residence and domicile

Domicile and residency are often used interchangeably yet have very different tax implications.

Broadly, an individual will automatically be considered UK resident if they are in the UK for 183 days in any given tax year. At the other end of the scale, an individual may be regarded as UK non-resident if less than 16 days are spent in the UK in a tax year (so long as they were UK resident in any of the previous three tax years). If an individual has been outside the UK and non-resident for more than three tax years then their threshold is 46 days.

Between these thresholds is a slight grey area whereby other factors need to be taken into account, including whether an individual has a UK home, works full time in the UK and has any UK ties such as accommodation and children in the UK.

Domicile is a concept only defined in common law, with an individual regarded as UK domiciled if they were born in the UK or, if they were born overseas, they have established stronger connections to the UK such that is it now their long-term home. 

Whilst possible, it is difficult for a UK national to claim to be non-domiciled unless they have severed their ties to the UK. This has been the subject of numerous court cases, which have largely arisen once the individual has died and HMRC may be seeking to charge their worldwide estate to UK inheritance taxes.

Foreign nationals living and working in the UK can be UK resident and regard themselves as non-UK domiciles, due to their overseas country of origin, and choose not to subject overseas income to UK taxation. There are onerous conditions to be met, as well as hefty charges applying after longer periods of UK residence.

Tax and UK non-residence

Had Sir Alan not been a Lord meeting the requirements to be considered UK non-resident, he would have made significant tax savings on his UK dividend payment, potentially benefiting from the disregarded income regime which applies to non-UK resident with UK source investment income.

In addition, UK non-residents do not pay tax on dividends or income earned overseas, nor on the disposal of assets in and outside the UK – apart from the disposal of UK property which is now subject to the new ‘Non Resident Capital Gains’ scheme.

There is however a catch - the six-year rule. If a UK non-resident resumes UK residence within a six-year period any gains made within that period will then be subject to capital gains tax. Therefore, return visits to the UK must be appropriately managed.

The UK residence rules are complex and require careful advance planning. Specialist advice from an experienced tax advisor is essential.

For further information regarding this article, please get in contact with our Global Mobility team at James Cowper Kreston.