Clients are sometimes surprised to hear from their private client lawyers that one of the most powerful documents in international private client law, alongside a trust deed, a will or a lasting power of attorney, is a well-kept diary, and a recent Spanish tax case has thrown a spotlight on this. A Spanish court has reportedly ordered the tax authorities to refund the singer Shakira around €55 million after finding they had failed to prove she spent the required 183 days in Spain in 2011 (which would have meant she would have been treated as tax resident in Spain). The court concluded she was there for only 163 days, just 20 days short.

For most people, this is celebrity gossip, but for private client lawyers, tax advisers and their clients, it is a reminder that tax residence can turn on something surprisingly mundane: knowing exactly where you were, and being able to prove it.

Although Shakira’s case related to Spanish tax, the principles have direct relevance from a UK perspective. As with Spain, if a person spends more than 183 days in the UK during a tax year, they are conclusively UK tax resident for that year, (although the UK’s Statutory Residence Test can involve many other tests as well). Following the abolition of the non-dom regime and the introduction of the UK’s new long-term residence rules for inheritance tax, residence has become more important than ever for internationally mobile individuals and families.

In the past, many estate planning conversations focused on the question of a client’s domicile. Increasingly, and in particular following the changes in the Autumn 2024 Budget, the focus is on tax residence, how long someone has been resident, and whether they have built up a sufficient connection to the UK to bring their worldwide estate within the UK inheritance tax net.

That makes record-keeping even more important than it used to be.

The lessons from the Shakira case are refreshingly simple:

• Count your days of presence in the country. For the UK, presence in the UK at midnight is generally the relevant test.
• Keep good records. These can be backed up by the electronic footprint that can evidence travel arrangements, but for internationally mobile clients, a comprehensive diary to pull together this evidence can be critical.
• Do not assume that “mostly abroad” is the same as non-resident.
• Take advice before making significant moves, not after.

Advisers can sometimes perplex clients by asking questions such as:
“Can you tell me where you were on 17 March?”
The answer is often less certain than might be expected.

In an era where residence can affect not only income tax and capital gains tax, but also inheritance tax exposure, a detailed travel diary may prove every bit as valuable as a carefully drafted estate plan.

The headline figure in Shakira’s case may be €55 million, but the crux of the dispute appears to have come down to just 20 days.

For internationally mobile families, that is a useful reminder that residence is not always determined by where you feel at home. More often, it is determined by where the facts say you were. And the facts tend to be found in the diary, backed up by the receipts….

If you have connections to multiple countries and you are considering the impact of the UK’s new residence and inheritance tax rules, careful planning, and careful record-keeping, has never been more important. For more information please get in touch with Edwin Coe’s Private Client team.

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