Prince Harry and Meghan Markle's decision to return to the UK after six years in the US could leave them missing out on potentially valuable tax benefits, according to tax experts cited by Fortune.
The Duke and Duchess of Sussex are moving from their Montecito mansion to a private residence outside London after spending the past six years in the US. However, their return before completing 10 years of non-UK residence means Harry could miss out on tax advantages linked to long-term non-residency.
"Whilst their return is welcome news, staying away a bit longer would have given them a much better tax result," Dhana Sabanathan, a partner in the tax, trusts and succession team at law firm Michelmores, told Fortune.
Under UK tax rules, completing 10 consecutive tax years as a non-UK resident could have given Harry access to four years of Foreign Income and Gains (FIG) relief after returning to the country, according to Sabanathan.
The relief could potentially have allowed qualifying foreign income and investment gains to be brought into the UK without UK tax during the relevant period.
By returning after six years instead, Harry could lose access to those benefits, meaning qualifying foreign income and investment gains may be subject to UK taxation after his return.
The couple could also miss out on certain inheritance-tax advantages linked to long-term non-residence.
Inheritance tax in the UK can reach 40%, meaning the tax treatment of substantial overseas assets could have significant financial implications. Fortune estimated Harry and Meghan's combined fortune at around $60 million.
Had Harry remained non-UK tax resident for 10 years, his non-UK assets could potentially have remained outside the scope of inheritance tax for a period after his return, Sabanathan explained.
The couple's timing is not entirely disadvantageous.
Their six full years outside the UK mean they have moved beyond the country's temporary non-resident rules for capital gains, according to the experts.
The rules are designed to prevent people from leaving the UK temporarily, realising gains while abroad and returning shortly afterwards to avoid tax. Individuals who return within five years can potentially have certain gains made while abroad taxed in the UK.
Because Harry has spent more than five years outside the country, that rule should not apply to qualifying disposals made during his non-resident period, Sabanathan said.
Nimesh Shah, CEO of London tax and advisory firm Blick Rothenberg, described the timing of their return as "immaculate" because of this distinction.
Sabanathan also said that non-UK disposals and income generated while the couple was non-resident, potentially including earnings from their Netflix and Spotify deals and Meghan's As Ever brand, should not be subject to UK tax on their return, subject to the applicable rules.
