British expats returning to the UK from Dubai and the Middle East could face unexpected Capital Gains Tax (CGT) liabilities, according to accountancy firm Price Bailey.
Many returning expats, as well as those planning to move to the Middle East but delaying their departure due to regional instability, may breach the UK’s five‑year temporary non‑residency rule, which is designed to prevent individuals from briefly leaving the UK to dispose of assets tax‑free in low‑tax jurisdictions such as the United Arab Emirates.
The rules mean that if an individual becomes a UK resident again within five full tax years, the capital gains realised while abroad are brought into the UK tax net and taxed in the year of return in some circumstances.
People who may have sold UK businesses or second non-UK homes while tax‑resident in Dubai could now face paying CGT at 24%, which could amount to tens or even hundreds of thousands of pounds, Price Bailey said.
Although HMRC can disregard up to 60 days spent in the UK due to exceptional circumstances this relief may not apply if individuals can travel to alternative destinations.
The same rules apply to individuals in the UK who were preparing to emigrate to Dubai and are in the advanced stages of selling businesses or second non-UK homes, but are now reluctant to leave due to safety concerns.
Nikita Cooper, director in the tax team at Price Bailey, said: “The immediate focus is usually on income, which is taxed as it’s earned, but the far bigger issue is CGT, which is often overlooked. Someone returning to the UK from Dubai for a short period may face some income tax, but that is manageable, unlike a large one‑off CGT bill.
“What catches people out is that if they return within five years, gains on assets held before departure and sold while in Dubai are effectively ‘revived’ and taxed in the year of return. It’s the retrospective nature of the rules that tends to surprise people.”
