By Jonathan Curshen -
It is estimated that in recent years 600,000 or more U.K. citizens have been driven into exile because of high taxes. Once domiciled abroad, in Italy, Portugal, Singapore, or Bermuda, many Brits used to return home like migratory birds to spend six months annually "vacationing" in England. Stay one day more and under the law they would be liable to pay U.K. income taxes.
Realizing this, the tax collector, Her Majesty's Inland Revenue Service, adopted rules making long stays by former Brits more difficult. Today if a Brit maintains a home or apartment within the U.K., even a single day's visit results in full income taxes on all worldwide income. Without a U.K. home, the allowable non-taxable visit is 90 days per year, but only after an initial three-year continuous absence.
But consider the alternative using a second passport.
If former residents enter and leave the U.K. using a legitimate, non-British passport, entry and departure records produced no tax demands. The person comes and goes free from Inland Revenue's counting of days. That's because U.K. law allows unrestricted dual citizenship and does not dictate which passport you must use if you are lucky enough to have dual citizen status.
A similar "days-in, days-out" rule applies in the U.S.. A foreigner who establishes residence in the U.S. for over 122 days annually, and engages in what could be called "business activity," can be held liable for U.S. income taxes on all worldwide income. The IRS may decide he is a "U.S. person," as this legal status is called, for tax purposes. He may have to submit to an unpleasant grilling to get tax clearance before being permitted to leave. Any legal resident alien in the U.S. is also counted as a "U.S. person" for tax purposes by the IRS.
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