For UK business owners considering a future sale, Portugal can be an attractive place to begin the next chapter. Lifestyle is often the starting point, but there may also be a significant tax question: could relocating before a sale eliminate UK capital gains tax (CGT) on the disposal?


Ceasing UK tax residence

A non-UK resident individual is generally outside the scope of UK CGT on worldwide gains, including gains on shares in a UK trading company. But leaving the UK physically, or taking a home in Portugal, does not itself switch off UK residence. The UK Statutory Residence Test must be considered carefully.

This can be challenging during a sale process. Negotiations, due diligence and Board meetings may all require UK time, which will need to be managed in order to cease UK residency.

Planning should therefore start with a realistic assessment of UK days, work, family arrangements and accommodation, including how this may be impacted by the sales process.

Becoming a Portuguese tax resident and the IFICI regime

The second hurdle is becoming a Portuguese tax resident. Broadly, you may become tax resident in Portugal if you spend more than 183 days in Portugal in a relevant 12-month period, or if you have a home in Portugal available in circumstances suggesting an intention to occupy it as your habitual residence.

To benefit from the IFICI regime, an individual must become a Portuguese tax resident, not have been a Portuguese resident in the previous five years, not have benefited from certain preferential regimes, and carry out a qualifying professional activity for an eligible Portuguese entity. If the conditions are met, foreign-source income, such as capital gains, may be fully exempt from Portuguese tax.

The UK five-year issue

Even if you can achieve non-residency, the UK temporary non-residence rules mean that certain gains realised while non-resident can be taxed in the UK on a future return. This typically means planning for more than five years of non-UK residence. The post-sale lifestyle plan, therefore, matters as much as the pre-sale tax plan.

Why structure and timing matter

Company structure can also be important. A personal holding company may help control when CGT arises, independent of the sale. But restructuring shortly before a transaction is rarely straightforward and can carry risks, particularly if it appears mainly tax-motivated.

Final thought

Relocating to Portugal before a UK business sale can be a genuine opportunity, but to be effective, you will need to create a detailed and realistic plan. The message is simple: take advice early. By the time a buyer is at the table, many useful planning options may no longer be available.

Liam Crawford, Associate Director at Forvis Mazars in the UK (liam.crawford@mazars.co.uk)

Mário Patrício, Senior Manager at Forvis Mazars in Portugal (mario.patricio@forvismazars.com)