The Sunday Times had an interesting piece about Lord Sugar’s alleged failed attempt at tax planning. But it seems to say almost as much about the journalists’ grasp of the intricacies of tax as it does about that of Lord Sugar.
The article alleges that Lord Sugar ‘tried to declare himself a non-UK resident’ for 2021/22 but later refers to his ‘attempt to domicile himself elsewhere’.
Come on, chaps: which is it? Residence and domicile are entirely different concepts, as ‘any fule kno’ – or, at least ‘any fule’ who keeps abreast of our briefings. They have completely different effects on tax liability; and in terms of adherence they are chalk and cheese. Lord Sugar’s alleged six-month sojourn in Australia subjecting our antipodean cousins to The Apprentice might possibly in other circumstances have changed his UK residence status. But it is inconceivable that it would have changed his domicile status. And in any event, since the alleged income in question in Lord Sugar’s case was a chunky dividend from a UK company, Lord Sugar’s domicile status was neither here nor there: non-doms are as liable to pay tax on UK company dividends as the rest of us.
On the other hand, residence can make a big difference: generally non-residents are not liable to UK tax on dividends, whether from a UK company or a non-UK one. But there’s a major caveat applying to dividends paid by ‘close’ companies: if you are only ‘temporarily’ non-resident (meaning, broadly, non-resident for a period spanning fewer than five complete tax years) you will usually be taxed on your return to the UK on the aggregate amount of dividends paid to you during your period of non-residence. So even if Lord Sugar had contrived to be non-resident for the tax year 2021/22 in isolation, it would have made little or no difference to the UK tax liability on the alleged £390 million dividend he voted himself in the year.
So, the special circumstance identified by the newspaper as applying to Lord Sugar (that as a member of the House of Lords he is deemed at all times to be both resident and domiciled in the UK, regardless of where he spends his time and his long-term intentions) turns out, perhaps, to have had little real relevance to his liability.
Clients seeking to mitigate taxes on £390 million dividends are invited to apply to us for comprehensive advice.
[Image credit: Craiyon]