Temporary non-residence rules — post departure trade profits (UK tax changes)

Overview

This document explains changes to the UK temporary non-residence rules to ensure they remain effective as anti-avoidance legislation and continue to counter tax-motivated non-residence.

The measure specifically concerns how dividends and other distributions from close companies received while an individual is temporarily non-resident are treated for UK Income Tax.

General description of the measure

The temporary non-residence rules (TNR) are designed to stop individuals from leaving the UK for a short period mainly to avoid Income Tax or Capital Gains Tax and then returning.

TNR rules tax certain income and gains, including distributions, when the individual comes back to the UK after a period of temporary non-residence.

Post departure trade profits

Previously, there was no UK tax charge under TNR where a dividend or distribution was treated as arising from “post departure trade profits”, meaning profits that accrued to the company after the individual became non-resident.

The link between a distribution and post departure trade profits was determined on a “just and reasonable” basis, which allowed part of a dividend to be excluded from the TNR charge if it was considered to relate to those post-departure profits.

Key legislative change

The measure removes the concept of “post departure trade profits” from the temporary non-residence rules in UK tax legislation.

As a result, all dividends and distributions received from a close company while an individual is temporarily non-resident will be chargeable to UK Income Tax if they fall within the scope of the TNR rules.

Anti-avoidance purpose

The change is intended to prevent individuals from using offshore company structures or timing profit generation so that distributions are linked to post-departure profits in order to reduce or avoid UK tax.

The measure introduces additional provisions targeting arrangements and structures designed to avoid tax during a period of temporary non-residence and on return to the UK.

Affected taxpayers

The rules apply to individuals who become non-resident for a temporary period and then resume UK residence, particularly those who are shareholders in close companies receiving distributions while abroad.

Only a relatively small group of individuals who receive dividends or other distributions while temporarily non-resident and then return to the UK within the relevant TNR period (typically five years) are expected to be affected by this specific change.

Reporting and foreign tax

Individuals within the scope of the TNR rules will continue to report dividends or distributions to HMRC in the usual way when they return to UK residence.

Under the new rules, affected individuals will need to provide information about any foreign tax paid on those distributions to ensure appropriate relief and to avoid double taxation.

Macroeconomic and wider impacts

The measure is not expected to have any significant macroeconomic impact on the wider UK economy.

Customer experience and interactions with HMRC are expected to remain broadly the same, aside from the additional detail required on foreign tax suffered on relevant distributions.

Policy objective

The overall objective is to keep the temporary non-residence rules robust so that short-term moves abroad cannot be used to shelter company profit distributions from UK Income Tax.

By taxing all close-company distributions received during temporary non-residence that come within the TNR rules, the government aims to maintain fairness and protect the UK tax base.

“The ‘temporary non-residence rules’ (TNR) are anti-avoidance rules designed to prevent individuals from undertaking tax-motivated non-residence in order to avoid Income Tax and Capital Gains Tax.”

“This measure removes the concept of ‘post departure trade profits’ from the TNR rules and ensures all distributions or dividends received from a close company whilst temporarily non-resident will be chargeable to UK income tax if caught by TNR rules.”

Author’s summary

These changes tighten UK temporary non-residence rules so that close‑company distributions received while briefly abroad are fully within Income Tax scope, closing planning based on “post departure trade profits”.

GOV.UK — 2025-11-26