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Split year treatment and dual residence

Are the UK split year treatment rules automatically superseded if a person is dual resident?

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My client is a UK domicile, the majority shareholder and director of a UK close company. He moved to Latvia in March 2018, bought a house there with his Latvian wife in March 2019, and has a certificate of Latvian residence dated 5 March 2019. He spent 101 days in the UK in the 2018-9 tax year, and 51 days in the UK in 2019-20, mainly for work purposes. He has not returned to the UK since leaving on 6 March 2020 and his wife and children have remained in Latvia throughout, but he rented a London flat from 2018 until October 2020 as somewhere to stay when in the UK.

I am working on my client’s UK tax return for 2019-20 and trying to determine if split year treatment should apply, and if so from what UK departure date. Case 1 would apply: the 90-day rule for physical presence is ok, but the stumbling block is the 30 work days. He had 16 visits to the UK in the 2019-20 tax year – i.e. “commuting” for visits totalling 51 days. I have ascertained that there is a point in November 2019 when the number of UK workdays after that date is (just) lower than the time-apportioned 30 days allowed.

So, I am thinking that we can declare split year treatment from mid-November 2019, and claim back the UK tax at source on his salary from that point as well as taxing dividends under the favourable Latvian rules. However, if he has a Latvian residence permit dated 5 March 2019, does that nix the whole thing? i.e. he is resident from Latvia from that point – full stop. Article 4 of the DTT refers to his permanent home and vital interests… which are in Latvia.

I have no concerns about the UK temporary residence rules because he has no intention of returning to the UK beyond sporadic business visits, but I worry that he did spend a lot of work time in the UK in 2019-20, and continues to be taxed at source even to this day on his UK salary.

I would appreciate some assistance on this. It seems that I need to show my client as either leaving the UK permanently on 5 March 2019 or mid-November 2019, with little flexibility in between!

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Caroline
By accountantccole
23rd Feb 2021 17:14

What is happening on the Latvian side? If they deem him to be resident from March 19, you don't want him showing as resident on both sides and paying tax twice.
It sounds like the intention was a move in March 19 so you'd have poss split year in 2018/19 and then if UK resident in 2019/20, he'd be dual resident and then need to establish treaty residence to see what is taxed where.
Caveat - not read the Latvian DTT!

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