The recent geopolitical crisis in the Middle East is pushing many individuals previously resident in the UK who have transferred their residence to the United Arab Emirates to return to their countries of origin. In the case of the UK, especially in the new post-2025 regulatory framework, a technical analysis is necessary to prevent hasty decisions and inadequate planning from resulting in negative tax consequences.
The new FIG regime and the ten-year requirement
The Foreign Income and Gains (FIG) regime has been in operation since 6 April 2025, allowing new residents to benefit from an exemption regime for foreign income and capital gains.
To qualify, the individual must not have been resident for at least 10 full and consecutive tax years immediately preceding the year of return. Even just one year of UK residence in the decade results in the complete loss of the FIG regime.
For example, for those who left the UK in 2017/18, the decade of non-residency only ends on 6 April 2028. An early return in 2026 permanently compromises access to the FIG.
Statutory Residence Test: Involuntary Residence
Tax residency is governed by the Statutory Residence Test (SRT), introduced by the Finance Act 2013. The test is not easy to understand and combines different criteria and mechanisms based on time spent in the UK and family and business ties. For example, the Automatic UK test provides for automatic acquisition of UK residency if more than 183 days are present, a period that is reduced if additional links are present. According to the Sufficient Ties Test, family, residential, and business ties are taken into account, in the presence of which the number of days could be lowered to 16 days.
For those who work full-time abroad, according to the SRT, they could be considered non-resident if, while maintaining their job abroad, they reside for less than 91 days in the United Kingdom and do not carry out work for more than 30 days (a condition that is not easy to verify).
In emergency situations (airline disruptions, airport closures), exceeding the thresholds—even inadvertently—results in tax penalties for the entire period (which, we recall, expires on April 5).
Temporary non-residence and retroactive taxation
The provisions on temporary non-residence (ITA 2007, ss. 809D-809H) affect those who have been resident in the UK for at least four of the seven years preceding expatriation and return within five years.
In this case, capital gains realised on assets held before departure, even if transferred during the period of non-residence, could be subject to UK tax attraction in the year of return.
Transactions considered “permanently foreign” can therefore fall within the UK tax base if the return occurs before the minimum period of non-residence.
Mixed funds and use of foreign funds
Many expats hold mixed foreign accounts, combining income, capital gains, and capital. The mixed fund ordering rules (ITA 2007, s. 809Q) assume that each UK remittance comes from income, capital gains, and capital, in that order, resulting in taxation at the highest rates.
If the UK attracts tax, any investments in the UK, planned under the assumption of non-resident tax status, could generate unexpected tax consequences.
UK-UAE Convention 2016
UK-UAE tax relations are governed by the Double Taxation Convention of 12 April 2016. Article 4 provides tie-breaker criteria (permanent residence, centre of vital interests, habitual residence, nationality) to identify a single State of residence for treaty purposes. The criteria identified therein may in certain cases not be consistent with domestic provisions, creating potential tax conflicts.
Article 21 regulates the elimination of double taxation through tax credit mechanisms and can be a useful mechanism for alleviating double taxation. Although the treaty provisions prevail over domestic ones, the application of the latter can be challenged under the prevalence principle outlined above. However, operational aspects (such as the burden of proof on the taxpayer) make this mechanism particularly complex and nuanced.
Conclusions
The FIG, SRT, temporary non-residence, and the UK-UAE Convention constitute a highly interdependent regulatory framework. The combination of the elements identified above (date of return, counting of days spent in the United Kingdom, mapping of the transferred assets, use of foreign accounts, and any tax benefits) impacts the determination of the actual potential tax risk not only in the year of return and subsequent years, but also in relation to previous periods.
Decisions made quickly, without an integrated analysis of these factors, risk transforming a personal protection requirement into a lasting tax burden. While extraordinary events like the current one cannot be anticipated, careful planning and preventive review can reduce the risk and allow for a thoughtful assessment of different scenarios, potentially structuring the repayment in a tax-efficient manner.
