A line in the sand for Jordan Henderson?

A line in the sand for Jordan Henderson – Introduction

It was only at the end of last summer I found myself doing an impromptu master class on a whiteboard in the offices of a football agency.

The topic was UK tax residence and the example I was using was Jordan Henderson (not my client nor, to my knowledge, one of the agents)

Of course, Henderson had gone to the Saudi Pro League on big money.

Reportedly, he was earning £700k per week…tax free.

But, as I told those unwittingly finding themselves in my tax masterclass found out, there’s a catch.

The Statutory residence Test (“SRT”)

One assumes that the starting point for cases like JH is that they would hope to be classed as non-UK resident under the overseas work test (test 3) of the Automatic Non-UK stage.

This is the first stage of the waterfall of steps in the SRT. Meeting this means you do not have to look at the other tests – including sufficient ties.

Broadly, this applies where one goes to work full time overseas for a non UK employer and spend no more than 90 days (pro-rated of considering a shorter period) in the UK.

However, the starting point is that one is either tax resident or non-resident for a full year.

I don’t know the details of JH but it is assumed that, for 2023/24 he would not be non-Uk resident if one looks at the year as a whole.

But split years come to the rescue.

As it says on the tin, if one meets certain conditions, a tax can be split in two – a period or UK residency and then a period of non-residency.

A line in the sand

Broadly, to be non-UK resident for the period after that line in the sand, it would be necessary for JH to:

  • leave the UK under a full time contract abroad;
  • keep visits to the UK to 90 days (or pro-rated equivalent) or less
  •  ensure that he is non-resident for the complete 2024/25 tax year

If so, he would be non resident from the time he leaves the UK to the time he comes back.

If he does this, he would likely have no exposure to UK tax on his earnings. Not a loophole. Just how the system is supposed to work.

Of course, it doesn’t just apply to footballers.

But this requires JH to remain outside of the UK (with no more than 90 days of visits to UK) until at least 6 April 2025.

However we are told that Mr Henderson is unsettled in the Middle East due to the heat and the small attendances at games.

He is therefore thinking of returning to the UK in Jan transfer window.

But at what cost?

It would almost certainly mean those earnings whilst out of the UK were back on the table for HMRC.

This is because he has not managed a complete tax year outside the UK.

It therefore would be very much worth (from a financial perspective) Henderson sticking it out in the Middle East.

However, as is often the case with using residence as a tax planning main driver – looks like that’s easier said than done.

If you have any queries on this article, then please get in touch.