ILR Set(M) and Tax implication

I am a dual UK/US citizen (UK by birth/US by naturalization) married to a US citizen and working in the UK.  We have been in the UK for just under 2 years (23 months) and my wife is about to apply for the Set(M) ILR (Application for Indefinite leave to remain in the UK as the partner of a person present and settled in the UK); we've been told that's the only way to enable her to remain in the UK with me after the 2 years.

We intend to remain in the UK for another 8-18 months and then return to the US.

For tax purposes I am currently viewed as Resident in the UK but not Ordinarily Resident, I have and maintain a home, bank etc in the US, property is rented in the UK and I have investments and income in both countries (more in the US).  We file both US and UK tax returns and understand the double taxation treaty.  Are there any tax implication for us when my wife applies for the Set(M) ILR, especially as it may relate to staying in the UK beyond 3 years, or should we return to the US before the 3 years are up?

Firstly, immigration status does not necessarily correlate to ROR/RNOR status.  She may be taking ILR for convenience, which may have nothing to do with intention.  Intention can be based on a variety of factors but the burden of proof is on you.  So if you are happy that you can prove intention if called to do so, then don't particularly worry about her immigration status, all else being equal.

I assume you are asking because you are receiving overseas workday relief.  You mention that your 2nd anniversary is soon so your question may actual be a bit moot.  You only qualify for OSWDR up to the beginning of the tax year in which your 3rd anniversary falls.  So if your 3rd anniversary falls in March 2011 (or the 10/11 tax year), you lose your OSWDR as of 6 April 2010.  So you may be ROR from 6 April by default.

Also, an immigration answer not a tax one, your wife can just apply for FLR again rather than ILR.  ILR is not required.  Though, the immigration rules have tightened and if you ever think you may come back to the UK, your wife may want to consider getting not just ILR but citizenship.

Recent cases (specifically Tucza and Genovese) demonstrate that intention now has little to do with R/NOR status.  You actually need facts to support such a claim and the change in immigration status is likely to my mind to start making a Tax Tribunal think you have changed your intention.