The Silent Risk in Family Office Planning: Tax Residency Drift

Picture this: a trip to the family’s French château for spring, a few charity galas in New York, managing the children’s school in Switzerland, and a summer of board meetings in London. Nothing feels unusual until the audit letter arrives and turns your family office planning upside down.

This scenario is all too familiar for family offices entrusted with coordinating the lives and legacies of globally mobile families. Amid the whirlwind of logistics, philanthropy, and succession planning, a silent but critical threat often goes unnoticed: tax residency drift.

Tax residency drift occurs when the cumulative effect of travel and physical presence in a jurisdiction unintentionally meets the threshold for tax residency. It’s rarely deliberate. In fact, that’s what makes it dangerous.

The main drivers include:

• Routine use of multiple global homes.
• Cross-border travel for education, board duties, health care, or lifestyle.
• Misunderstood or outdated knowledge of residency thresholds.
• Post-COVID hybrid work patterns and blurred work/personal boundaries.
• Increased regulatory scrutiny of globally mobile individuals.

According to Knight Frank’s 2024 Wealth Report, 19% of UHNWIs plan to acquire a second passport or new residency within the year. It’s a reflection of growing mobility but also of heightened compliance risk family office planning must consider.

Family offices are designed to be the trusted core of ultra-wealthy families. From intergenerational wealth preservation to concierge-level services, their remit is broad and highly personal.

But when it comes to tax residency compliance, particularly day counting, the operational reality is often reactive. 

According to Campden Wealth’s 2023 European Family Office Report, 38% of European family offices cited regulatory compliance as a key operational concern, specifically regarding the challenge of keeping up with increasingly complex requirements such as cross-border taxation. Yet many still rely on manual tracking tools, such as Excel sheets or ad hoc travel logs, to manage compliance risk.

This ad hoc approach in family office planning has three major pitfalls:

1. Lack of Standardisation: No unified system for logging or auditing presence across jurisdictions.
2. Error-Prone Evidence Trails: Credit card statements or car rental receipts rarely suffice to confidently establish a physical presence.
3. Delayed Risk Detection: Without real-time oversight, a family office might only discover a residency breach after it’s too late.

While the UK’s overhaul of its non-dom regime has grabbed headlines, it’s far from a localised issue. Globally, tax authorities are sharpening their focus on residency. Consider these examples highlighting this new reality:

• Ireland: In two Irish cases, appellants were required to prove their physical absence from Ireland with evidence going back a decade. The inability to provide contemporaneous data made the process long, stressful, and potentially more costly.
• United States: The IRS uses the substantial presence test, with clear thresholds and an appetite for pursuing offshore activity.
• OECD-wide: The Automatic Exchange of Information (AEOI) framework now sees over 100 jurisdictions sharing financial account data, intensifying residency audits for HNWIs.

The common thread? Presence matters, and it must be provable.

Take a fictional, yet a plausible, example: A family based in Monaco believes they remain outside the UK tax net. But mum makes regular visits to a boarding school in Oxfordshire. Dad chairs a charity in London. Their UK presence exceeds expectations, but there’s no reliable log.

Most people have been advised to monitor day counts, but because there’s no clear process or standardised method for doing it, families can have varying ways of managing the task. Many still rely on spreadsheets. The problem is that day counts are often entered after travel, sometimes even months later. This retroactive trail of days has increased the risk of human error and miscalculations. 

When HMRC or another authority inquires, the family office must scramble to rebuild a record from emails, hotel invoices, and calendar invites. That patchwork is rarely convincing on its own.

It’s no longer sufficient to know roughly how many days a client spends in a jurisdiction. Tax authorities like HMRC increasingly rely on AI tools such as Connect, which can cross-reference flight records, social media, mobile data, and financial transactions to assess presence.

To keep pace, family offices must adopt systems that:

• Manage location data automatically.
• Align day counting with jurisdiction-specific thresholds.
• Generate digital evidence trails — photos, receipts, contextual notes.
• Provide real-time visibility to both the family office and their advisors.

A proactive approach is no longer a luxury but a risk management imperative.

When family offices treat day counting as part of their core infrastructure, the benefits multiply:

• Audit Preparedness: Responding to an inquiry with complete, corroborated data demonstrates institutional control and reduces the investigation’s scope.
• Reputational Protection: Clients  are less likely to blame the family office for oversights if systems are in place.
• Operational Efficiency: Automated systems reduce time spent compiling travel records, freeing up team resources for strategic matters.

Enhanced Advisory Collaboration: Accurate records support advisors in making timely decisions on immigration, asset movement, trust structuring, and more.

In one UK case, a taxpayer argued, not overstaying in the UK over their limit of 45-days, but that the extra five days fell under the ‘exceptional days’ rule. However, the case dragged on as HMRC questioned the evidence presented. This case went through the different legislative tiers, meaning the taxpayer was left in limbo for years, facing a tax liability of over £3 million.

Meanwhile, countries like the UAE and Italy continue to attract wealthy families by offering flat-tax or zero-tax regimes but authorities still scrutinise how much time individuals spend in other jurisdictions. Monaco residence doesn’t discount the possibility of being tax resident elsewhere.

For family office planning seeking to move from reactive to proactive, Daysium offers a purpose-built solution. It’s not just an app but a compliance infrastructure designed for globally mobile clients.

With automated day counting, jurisdiction-specific rulesets, and timestamped digital evidence, Daysium provides real-time visibility and defensible records across borders. Advisors can securely access reports when needed, and family office teams can plan with confidence.

Daysium already supports many tax jurisdiction rules across Europe, including the UK, Portugal and Monaco. We’re continuously adding new jurisdictions and will prioritise rules our clients require. View our full list of supported countries and their rules here.

“We’re here to support residency claims, streamline audits, and reduce reputational risk. It’s not about technology for its own sake. It’s about protecting your family clients with precision.”

-Tim Huelin, Founder CEO

What is tax residency drift, and why should family offices care?

Tax residency drift refers to the gradual accumulation of presence in a jurisdiction, often unintentionally, leading an individual to meet that country’s tax residency threshold. These can lead to costly non-compliance issues.

How can family offices count days across multiple tax jurisdictions?

The most effective way is through automated day count technology that aligns with country-specific rules. Manual methods like spreadsheets or calendar entries are prone to error and rarely include sufficient evidence. 

What records should family offices maintain to prove non-residency?

Beyond simple day counts, tax authorities increasingly expect contemporaneous evidence such as travel itineraries, geo-tagged photos, flight receipts, and accommodation details. 

Family offices are guardians of wealth, legacy, and often citizenship itself. But in an era of data-driven tax enforcement, the absence of robust day count compliance could undermine everything else you get right.

As travel, regulation, and family complexity grow, so must the systems protecting against tax drift.

Now is the moment to assess how your family office planning manages the vital day counting process:

• Do you have real-time visibility over clients’ travel?
• Can you confidently produce evidence from three years ago?
• Are your systems able to respond quickly to an audit letter?

If the answer isn’t a resounding yes, it’s time to act. Book a consultation today.