UK Parliament, CC BY 3.0 <https://creativecommons.org/licenses/by/3.0>, via Wikimedia Commons

A news story that almost made me spill my cornflakes at the weekend was that Alan Sugar had allegedly attempted to declare himself a non-UK resident for tax purposes.

If he’d succeeded, Lord Sugar would have paid no UK tax on a huge £390 million dividend he received from his company in the 2021-2022 tax year.

And, after being deemed UK resident, it’s reported the billionaire peer has paid the resulting £186 million tax bill to HMRC.

Tax residency investigation

A joint investigation by The Sunday Times and the Bureau of Investigative Journalism (TBIJ) revealed Sugar had argued he was, in effect, not based in Britain at the time. The star of the BBC reality show The Apprentice had spent months in Australia hosting its version of Celebrity Apprentice.

In an article published in The Sunday Times, it was reported Sugar wanted the authorities to “disregard” the income earned from Amshold Group, the UK holding company for his property assets and other business ventures.

But what he hadn’t realised was that, as a member of the House of Lords, he was automatically resident in the UK.

£186 million tax bill

After learning he wasn’t non-resident, Sugar is said to have paid the taxman the entire £186 million bill. There’s no suggestion he broke the law in attempting to avoid or reduce the bill.

In another twist, The Sunday Times claims Sugar “blames his tax advisers” for the oversight and is “taking action” against them to recover his loss.

The article includes a statement from Sugar’s spokesman, Andrew Bloch, who said: “Lord Sugar is a UK tax resident, and he always has been. All his income has been taxed on the basis of his UK residency, and is fully paid up.”

Sugar has been vocal in the past in defence of his own taxpaying record and has criticised those who avoid the levies.

The Amstrad founder is one of Britain’s most famous business leaders. The latest Sunday Times Rich List calculated his wealth at £1.1 billion, making him the 165th richest person in Britain.

UK residency

The law states that a person is usually non-resident in a tax year if either:

  • They spent fewer than 16 days in the UK (or 46 days if they haven’t been a UK resident for the three previous tax years)
  • They worked abroad full-time and spent fewer than 91 days in the UK, of which no more than 30 were spent working

However, MPs and peers are deemed “resident, ordinarily resident and domiciled in the UK for the purposes of income tax, inheritance tax and capital gains tax”.

Our thoughts on Lord Sugar’s tax residency

This is an intriguing story.

It’s a reminder of the blurring of tax avoidance and tax evasion in recent years. So, an individual – especially someone in the public eye – risks damaging their reputation if it looks like they’re trying to avoid tax.

It’s not unusual for UK taxpayers to become resident elsewhere. But it’s long been a bone of contention with HMRC when someone leaves the UK and, as a result, saves a significant amount of tax.

Non-residency was historically a very grey area, which is why HMRC introduced the Statutory Residence Test (SRT).

The legislation is designed to give taxpayers some certainty around their UK residence status.

If someone is non-resident under the terms of the SRT and no anti-avoidance rules apply to their circumstances, then under current rules a dividend from a UK company can be disregarded for income tax purposes and therefore no UK tax is payable.

However, where there are anti-avoidance rules in place, it’s important to be aware and ensure you don’t fall foul of them.

High-profile people – especially those in Parliament – should be mindful of the reputational risk of the details of any planning being released into the public domain.

If Lord Sugar did try to establish residency elsewhere, HMRC will obviously have its own view on how successful his attempt was.

Yes, a person’s tax affairs are private and it’s a matter between Lord Sugar and HMRC, but being in the public eye increases the sensitivity of any arrangement and it becomes a moral issue as much as a legal one.

Tax residency advice

For expert advice on the complex residency rules, contact our team of UK tax specialists on 07813 434195 or email: stephanie.churchill@churchilltaxation.co.uk

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation