Attracted by the idea of being able to work from home somewhere sunny? Our recent survey showed us that half of people planning to buy a second home in Europe would use it for working remotely as well as holidays. Here’s a snapshot guide to keeping within the rules regarding tax residency and travel to and from the UK.
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The 90/180-day rule
British citizens travelling to a second home in most European countries are subject to the Schengen 90/180 day rule. This means you are free to stay up to 90 cumulative days in any rolling 180 day-period without a visa. The 90 days can be one long stay or a number of shorter visits. In summary, this means British owners can spend a maximum of 180 days (six months) spread across a year in a European country. When planning a spell at your overseas home, the trick is to count back 180 days from your intended date of return to the UK, and check that within that period you will not exceed 90 days abroad.
The Schengen Area encompasses 26 European countries who have all agreed an open border policy for travellers moving between member states. Time spent in any Schengen country counts towards your 90-day entitlement. Popular second home destinations such as Spain, France, Italy, Portugal, Greece are all members. As yet, Cyprus is not a member, although EU rules mean you still have to register with the authorities to stay there longer than 90 days.
Tax facts
When splitting your time between homes in two different countries (ie two different tax jurisdictions), for example the UK and Spain, make sure you stay on top of your tax status. You may think you are obliged to report and pay tax to the UK’s HMRC, but if your circumstances and lifestyle change, you could unwittingly make yourself accountable for taxation in the country of your second home.
Key to this is understanding the difference between ‘lawful residency’ and ‘tax residency’. In short, the former – and what most people associate with the term ‘residency’ – is your right to live (and often work, depending on your permit type) somewhere legally; where you have ‘tax residency’ determines the jurisdiction that has tax authority over your worldwide income and wealth. You could be lawfully residing in a foreign country while qualifying for tax residency in another.
As a rule, British nationals with a primary residence in the UK who use their second home abroad for extended holidays or short trips and while there work remotely for their UK employer or their own UK-based business typically have little to worry about. So long as you adhere to the 90/180 day rule, you remain a UK resident with UK tax residency status.
Factors that can alter your tax residency status include the location of what is deemed your primary residence, where you are economically active and how long you spend in/out of a country. Remember, you have two sets of rules to consider – those of the country where you are currently tax resident, ie the UK, and those of the country where your second home is located.
Get a quote from us today by completing our simple form or call us on 020 7898 0541. We’ll take a look at your requirements and arrange to speak to you at a suitable time to offer the best possible solution for all of your upcoming currency transfers.
As a rule, anyone who spends more than 183 days in a calendar year in a foreign country automatically becomes tax resident there. For some countries, spending more time there than any other country can be enough to qualify, even if this is less than 183 days in a year. Otherwise, being employed, running a business or being professionally active in a country will usually make you tax resident there. And the jurisdiction where you hold your most substantial assets or investments can claim tax authority over you.
Meanwhile, the UK uses its Statutory Residence Test (STR) to determine someone’s tax status. According to this, you are UK tax resident if you spend 183 days or more there in the current tax year, if your only or main home is in the UK, or you work full-time there.
All things considered, anyone with doubts about their tax status should consult a professional tax advisor. Getting things wrong could result in an unpleasant – and costly – surprise.
Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).
You are UK resident if you spend 183 days or more there in the current tax year, if your only or main home is in the UK, or you work full-time there.
