Forced home from the Gulf: the UK tax implications

Many British expatriates who came back from the Gulf because of the conflict assume the UK has a broad tax concession for emergency returns. It does not. The UK has a narrow exceptional circumstances rule inside the statutory residence test. That rule can help with day counting, but it does not give a general exemption from UK tax.

For many returnees, the real danger is not the 183-day test. It is the combination of a UK family, a UK home, recent UK residence and UK workdays. Those factors can make a person UK resident much sooner than expected. Once UK residence starts, foreign salary, investment income and capital gains are potentially within UK tax unless split-year treatment, treaty relief or the FIG regime protects all or part of the position.

The 60 additional days are for exceptional circumstances only

The legislation allows up to 60 UK days in a tax year to be ignored where exceptional circumstances beyond the individual’s control prevent them from leaving the UK and they intend to leave as soon as they can. War is an example of an exceptional circumstance. But the 60 days are not a free annual allowance and it is not automatic.

The consequence is simple. If, after ignoring the qualifying days, the person still fails the automatic overseas tests or still meets the sufficient ties test, they are UK resident for that tax year. At that point the UK can charge tax on worldwide income and gains under the normal residence rules, subject to any specific reliefs or claims that apply.

The 60-day cap applies separately for each tax year. That means a person who returned near the end of 2025/26 and stayed into 2026/27 must run the calculation twice. A good answer for one tax year does not guarantee a good answer for the next one.

UK ties often make the day limit much lower than people expect

A large number of Gulf returnees have strong UK ties. They may have a spouse or children in the UK, access to the family home, and more than 90 UK days in one or both of the previous two tax years. If they start working from the UK, even briefly, they may also create a work tie.

That matters because the sufficient ties test can make a person UK resident for the number of UK days well below 183. Someone who left the UK only one or two years ago is often still a Leaver for SRT purposes and can become resident on a relatively modest number of UK days once enough ties are present. In those cases, the 60 additional days due to exceptional circumstances may not solve the problem at all.

Treaty residence can help, but only in the right case

Where the UK has a double tax treaty with the country the person lived in, treaty residence may reduce or eliminate the UK charge on foreign income and gains. But treaty relief only helps if the person is resident under the domestic law of both countries and the treaty tie-breaker gives residence to the overseas jurisdiction.

The usual tie-breaker test sequence is permanent home, centre of vital interests, habitual abode and nationality. A person who still has a settled home, routine and personal life in the Gulf may be able to argue that treaty residence remains there for the period of disruption. But that argument becomes harder if their family is in the UK, their main home is now in the UK, or they have to spend a longer than expected period here after returning.

Habitual abode is often the practical pressure point. The longer the stay in the UK continues, the harder it may be to say that the individual’s normal pattern of living remained overseas. Treaty residence may, therefore, be a useful safety net but it should not be assumed. It depends on the facts, the wording of the particular treaty and the evidence available.

Even where the treaty allocates residence to the overseas state, that does not erase UK domestic residence or UK filing obligations. It means that the treaty may restrict what the UK can tax.

Split-year treatment can save part of the year, but it is not automatic

If a person becomes UK resident on return, split-year treatment may reduce the damage. If one of the statutory split-year cases applies, the year is divided into an overseas part and a UK part. Foreign income and gains arising in the overseas part are then usually kept outside UK tax for that year.

That can be extremely valuable. But split-year treatment is only available if the precise statutory conditions are met. It does not apply merely because the person moved back part way through the tax year or because the move was forced by events abroad. Emergency returnees may assume the tax year splits automatically. It does not.

The temporary non-residence rules may create a second tax hit on return

People who left the UK less than five years ago often face the most unpleasant surprise. If they return to UK residence too soon, the temporary non-residence rules can pull certain income and gains from the period abroad back into UK tax in the year of return.

The classic example is a capital gain realised while non-resident. But the rules are wider than that. They can also apply to specified income categories such as some close company distributions, certain policy gains, some offshore income gains and some pension withdrawals. This is an anti-avoidance regime aimed at temporary departures from the UK.

The temporary non-residence rules do not mean that every salary payment received after departure is taxed in the UK. The regime is category-specific. Even so, a person who sold a business, extracted profits, realised large investment gains or received one of the specified income items while abroad can face a very large UK charge if an emergency return happens within five years.

UK IHT position can also get worse under the new long-term residence rules

Since 6 April 2025, inheritance tax on non-UK assets depends on long-term UK residence rather than domicile. Broadly, a person becomes a Long Term Resident once they have been UK resident for at least 10 out of the previous 20 tax years, and after leaving the UK they can remain within scope for non-UK assets for between 3 and 10 tax years, depending on how long they were resident before departure.

That means an unexpected return may impact IHT planning in two different ways. First, someone who already has an IHT tail running after leaving the UK may extend or interrupt the period needed to fall outside the regime. Second, someone who left the UK shortly before becoming long-term UK resident may, by becoming UK resident again, move themselves back towards long-term residence and bring overseas assets back into view sooner than expected.

This point matters not only for assets held personally. It can also matter for of the inheritance tax position of an offshore trust if it was settled by the returnee, because the new residence-based IHT rules now drive a large part of the offshore trust inheritance tax exposure analysis.

The position is materially better after 10 consecutive tax years abroad

Someone who has already been non-UK resident for 10 consecutive tax years is in a much stronger position than someone who left only recently. If that person becomes UK resident again, they can potentially claim the FIG regime for up to their first four UK-resident tax years. That can keep qualifying foreign income and foreign gains outside UK tax if claims are made.

They also do not become Long Term Resident for IHT simply because they arrived back in the UK. In other words, an emergency return is still important, but it is normally far less punitive than an emergency return after only two or three years abroad.

Three further points people often miss

First, exceptional circumstances only change the residence day count. They do not turn UK workdays into non-workdays. If the individual keeps doing their substantive job from a house in the UK, salary attributable to UK duties may become taxable in the UK even if the person remains non-resident. The “merely incidental duties” exception is narrow and should not be relied on for normal remote working.

Second, some people who left the UK only a few months before the conflict may never have broken UK residence in the first place. If their departure year did not qualify for split-year treatment, or if they retained too much UK presence, they may still have been UK resident throughout. In that case foreign salary and foreign benefits may already be within UK tax because the person never became non-resident at all.

Third, evidence matters. Anyone relying on exceptional circumstances should keep travel advice, flight cancellations, proof of when they intended to leave, proof of when they could safely return, and a detailed UK day and UK workday log. In a close case, poor records can be the difference between staying non-resident and becoming resident.

Final observations

For many Gulf returnees, the tax risk is not a single rule but a stack of rules acting together: exceptional circumstances, ties, split-year, treaty residence, temporary non-residence and the new long-term residence regime for IHT. Looking at only one of those rules usually gives the wrong answer.

The practical discipline is to analyse the position in this order. First, run the SRT for each tax year. Second, check whether treaty residence can override the domestic result for foreign income and gains. Third, if UK residence arises, test split-year treatment. Fourth, review any disposals, distributions, policy gains or pension withdrawals made while abroad. Finally, re-check the IHT position under the long-term residence rules.

The harshest outcomes usually arise where the person left the UK only recently, still has strong UK ties and assumed that the 60-day rule solved the problem. In many real cases it does not.

This article is provided for general information only. It does not constitute tax, legal or other professional advice, and should not be relied on as a substitute for specific advice based on your particular circumstances.