New border control checks in Europe could trigger tax probes

Financial advice firm Blevins Franks has warned a new digital border system that kicked in this month could prompt investigations into travellers’ personal finances.

The EU Exit/Entry System (EES) took effect on 12 October and requires UK nationals to register their biometric details at Schengen borders when travelling for short periods.

Travellers will be tracked when entering and leaving countries in the Schengen area, and anyone who overstays the 90-day limit for EU non-resident status, misuses visa-free travel or uses fake identities will be flagged up.

The changing requirements are being rolled out over six months and aim to improve border security within the EU and reduce illegal migration. Eventually they will replace passport stamps.

However, David Morley, head of wealth structuring at Blevins Franks said the automation of border control checks could trigger tax probes for travellers managing their finances on the down low.

“Tax authorities will be able to determine if anyone has been living ‘under the radar’ and open an investigation to claim back taxes,” he said.

“Failing to comply with the tax and/or visa rules can lead to serious consequences, which for taxation range from tax investigations, backdated liabilities, interest immigration, denial of entry or, at the extreme, deportation.”

Those with lawful residency or tax residency are exempt from the new requirements. If clients spend more than six months a year in an EU country, or meet other residency criteria, they are legally obliged to declare worldwide income and gains.

“If a client does not have a current residence permit, and/or has not correctly declared themselves for tax, advisers should seek assistance immediately from someone properly authorised in their country of residence to regularise their status and avoid escalating consequences,” Morley said.

“If a client is considering a move to the EU, the idea of becoming tax resident can feel daunting – but it doesn’t have to be. With proper planning, tax residency can improve their financial position.”