Gulf evacuations create tax poser; expat employees could be liable for a massive bill.

AuthorHayward, Cathy
PositionInland Revenue

British businesses face costs of 2.7 billion [pounds sterling] in tax and national insurance payments if expatriate staff stationed in the Gulf are forced to return home before 6 April as a result of the war in Iraq.

Around a quarter of the 176,000 British passport holders living in the Middle East moved to the region within the past two years, according to a report by the Institute for Global Mobility (IGM). They could face huge tax bills if they follow the government's advice and repatriate.

In the weeks leading up to the war, the Foreign and Commonwealth Office advised British nationals in Iraq, Kuwait, Bahrain and Jordan to leave immediately. Under the current tax legislation, expats are treated by the Inland Revenue as non-residents for tax purposes from the date of their departure from the UK, providing that they remain out of the country for a whole tax year. This means that anyone who originally left the UK after 6 April 2001 will not have fulfilled this criteria unless they remain overseas until 5 April this year.

If they are forced to repatriate before this date they will, in the eyes of the law, have remained resident in the UK throughout and therefore be subject to tax for the whole period. Employers will bear the brunt of the cost, because employees are not usually liable under expat contracts.

The IGM is calling on ministers to introduce a concession to help...

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