Here are some of the most popular questions that we’ve been asked over the years by expats, overseas investors and international workers regarding their tax liabilities.
All taxpayers would like the sound of some of their UK income being “disregarded” for UK tax, particularly if you’re in a no tax or low tax environment.? If once you’ve become non-resident according to the Statutory Residence Test (SRT), and also have successfully achieved Split Year Treatment (SYT) and you’re a non-resident, then there is income from the UK that can be disregarded, and the type of income includes:
As with everything related to the taxation of non-residents, the detail is very important, so do ask us as info@expat-tax-advice.co.uk if you want to delve into the details of what’s exempt, and the exceptions to these general comments.
Under the Statutory Residence Test (SRT), an individual is either UK resident or non-UK resident for a full tax year, and at all times in that tax year.
The implication of this is that if you leave the UK during a tax year, you might be liable to taxes on your foreign income in the UK for the balance of the tax year.
Don’t be caught out – tax planning is essential.
However, if during a year the individual starts to live or work abroad, or comes from abroad to live or work in the UK, the tax year could be split into 2 parts …
So if you are planning on emigrating or immigrating, you really must get your Split Year Treatment sorted out before you leave or come to the UK; the timing of your date of emigration / immigration is vitally important to achieving the split year that you will need to protect your tax status.
It is essential that before you leave the UK, that you check your statutory Residence Test (SYT) and your Split Year Treatment (SYT). As aspect that many forget to deal with is that if you have worked for part of the year in the UK and paid taxes (PAYE for example), then you may be entitled to a tax refund because you are due a whole year’s worth of tax allowances, and your salary for example, will only have given you a part of your annual allowance up the date that you leave.
If you are already in the self-Assessment regime with the UK, then allow us to file your tax return so we can notify HMRC of your SRT date and whether SYT applies, and we can also apply for your tax refund.
A lot of the people who take up contracts of employment abroad take too literally the adverts which read “tax free salary”. Just because your salary is paid in foreign currency, by a foreign company and into an overseas bank account, this has little bearing on your UK income tax liability.
To decide if you are a UK Tax Resident, you need to carefully undertake the detailed assessment defined in the Statutory Residency Test (SRT) and then, and only then, will you know your tax position. We can help, call us – your wealth and peace of mind might depend on it.
Double Taxation Agreement
If you work in the UK but are subject to taxation in your home country on your world-wide income, then don’t worry, providing there is a double taxation treaty between the countries, this ensures that you only pay tax once – so call us and check you tax status.
The date that you physically move abroad is not necessarily the same date that the UK government recognises as the date that you become non-resident. To define the date that you become non-resident, you must go through the process known as the Statutory Residence Test (SRT) and then Split Year Trest (SYT) test to determine the date of non-residence and if the tax year can be split into two parts, the UK part and the overseas part otherwise you might have to pay UK taxes on your whole year’s income, even though you’re abroad.
You should ideally undertake this work in advance of the planned departure date, as often we are the specialist advisors, will be telling you dates by which we want you to emigrate.
Once you have set the date, and completed the tests, then if you are in the Self-Assessment regime, we will complete the tax return for you, or if you’re not in self-assessment, we’ll complete the P85 form for you to sign and we’ll submit that for you.
Depending on how long you’ll be away and presuming that you’re working for a foreign employer, then you will NOT be paying towards your UK State Pension entitlement. We will want to advise you, depending on your long-term plans on whether you should instead consider paying voluntary (Class 3) National Insurance so that you can sustain your right to a UK state pension.
While you’re working away from the UK, there is no requirement to pay towards your student loan. Let the Student Loan Company know if you’ll be away for over 3 months, and they’ll make the necessary arrangements with you. Similarly, let them know when you’re back, so you don’t end up being penalized for late/non-payment.
Yes, we can advise you specifically on this if you want to delve into the details.
The issue isn’t where you earn your money, it’s whether you’re a “UK Tax Resident” that matters – HMRC have tests they apply to see if you still pay UK taxes. There are various criteria for this, but time spent here is a major factor. For instance, if you’re in the UK for more than half the year, then you’ll probably be deemed a UK resident and have to pay your taxes here.
There are special rules for the UK tax resident that is earning their income abroad and we will be pleased to guide you through this.
For those who are about to start working and living overseas, you need to go through the “Statutory Residence Test”, and you’ll see that in the 3rd automatic overseas test that days working in the UK is vitally important.
Everyone seems to be aware of, but overly focussed on the 91-day rule, but often forget to focus on the 31 work-day rule – one of the automatic tests says…
You’ll be non-UK resident for the tax year if you work full-time overseas over the tax year and:
If you’re required to work in the UK whilst being non-resident, contact us for our active support and advice.
You should review & take the residency tests each year because even quite minor differences can change the status… the hours you work abroad, your travel pattern, has your family moved and a myriad of other changes can have a significant impact.
Before you make any big decisions relating to you, your work, family etc., take our advice first.
According to HMRC, a working day is just 3 hours long!
Your employer might ask you to visit and do some work in the UK – there are very strict rules about this, and you must keep a careful eye on the number of days that you work more than 3 hours in the day in the UK… and take our advice on your tax liability and residency status.
A non-resident that has a legal obligation in the UK may require their accountants to act as their Process Agents – this is an agent for the service of process (or a process agent), and is the representative of a contractual party upon whom the court of arbitration proceedings may be served.
Common practice in England and Wales has evolved to make use of this provision to specify that service can be made on a process agent located in England and Wales, thereby removing the need on the serving party to serve proceedings outside of England and Wales.
Expat Tax Advice are happy to act as Process Agents and have extensive experience of undertaking this role.
To assess the UK and Australian tax position on distributions from a trust, we must ascertain whether the beneficiaries and trustees are UK or Australian tax resident under each country’s domestic laws and, in some cases, under the UK/Australia double tax agreement (DTA).
We must also consider the UK tax implications of a UK trust ceasing to be resident here for tax purposes. This may occur if some or all of the trustees cease to be UK tax residents.
Key points:
If you require further advice on this complicated subject, email us.
In some situations, days of presence in the UK do not count towards the totals of some of the day-counting parts of the statutory residence test. These arise when ‘exceptional circumstances’ prevent a person from leaving the UK.
The legislation indicates that such circumstances are the result of life-threatening illness or injury to the individual, their spouse, partner or minor children, or because of conflict or natural disasters, or, as several years ago, when a volcano in Iceland erupted, meaning that many planes were grounded.
However, all taxpayers who are hoping to claim exceptional days should be aware that the legislation limits the number of ‘exceptional days’ that can be claimed in a single tax year to a maximum of sixty.
Regardless of whether you’re an expat or non-resident, if you visit the UK, please ensure you keep meticulous records of your travels both to the UK and from it.
We’ve been working with a chap who’s been subjected to inquiry by the tax office, and they’ve now sent a record produced by the UK Home Office of his international travel to the UK, but their record fails to show that when he was in the UK, he then travelled into mainland Europe.
So the HMRC record shows he was in the UK when he wasn’t – he had left, visited France and then returned to the UK, before travelling home to the Middle East.
The record retention, travel documents etc, should be kept for at least seven years but also worth preparing your annual travel summary, and sharing with your accountant (us, hopefully!) as that also then provides a dated and timed contemporaneous record of travel.
If you’re needing to employ overseas staff, the only way now to bring in skilled labour from abroad is to act as a sponsor, and to engage those workers under PAYE contracts. Additional checks must also be made when engaging workers for the first time: identity checks must be completed on all individuals, and Right to Work share codes must be verified.
We’re delighted to work with Patricia Marleau who is a great immigration lawyer if you need to arrange your sponsor license, and of course our internal HR and Payroll team will always be available to help our clients.
It’s a question that our specialist Crypto Tax Advice team are asked quite often – if their purchases of crypto are offshore, are they then taxed in the UK.
HMRC’s guidance is very clear, and it depends on your Residency Status – if you personally are resident in the UK under the Statutory Residence Test (if in doubt, talk to the specialist team at @Expat Tax Advice) then you will suffer UK tax on your crypto assets.
The argument that we hear being used is that if the wallet is held offshore, doesn’t that change the situs test – the answer is who has the wallet key – if you have the wallet key, then no, you have control and if UK resident, then you’re subject to UK tax.
But what about an offshore agent having the wallet key, how does that affect situs – I haven’t seen a court case to determine this yet, but our thoughts are that if the agent is under your control, such that you can tell the agent to give you the key number, then you still have control.
If you would like any support with any issue mentioned here, then contact us.
Any vessel engaged in exploitation of mineral resources by means of a well whilst standing or stationed in any waters, is an offshore installation. If you work on an offshore installation anywhere in the world, you are not regarded as a “Seafarer” for the purposes of the deduction, and your earnings for duties performed on such a vessel or structure will not qualify for the deduction.
Yes! An “offshore installation” is specifically excluded from the seafarer tax exemption. The following list of offshore installations is given as a guide only:
As with most other jurisdictions, the UK tax system is based on the dual considerations of “residence” and “source”.
If you are “resident” in the UK then you are subject to tax in the UK, but if you are non-resident, then you will be taxed in the UK if you have a “source” of income that is generated in the UK which isn’t relieved by the terms of an applicable double tax treaty.
This means that you can still be subject to UK taxes even if you don’t usually live in the UK. Contact us and we can assist you if you are an internationally mobile sports or music performer.
If your company has a single director who is personally situated out of the UK, but the company is UK registered, the question arises as to where you would pay corporation tax.
If the country in which the owner/operator resides deems that the company is taxed there on the basis that it is being managed and controlled where the sole director shareholder is now living, the company will have reporting and tax obligation in both the UK and the resident country.
The client will need the resident country to confirm that the company is resident as per its domestic laws – we recommend consulting a local tax advisor to confirm this.
We then need to follow the residency section at article 4 often referred to as the ‘tie break test’. Para 3 is relevant here and the extract notes a company ‘shall be deemed to be a resident only of the State in which its place of effective management is situated.’
Effective management is discussed in the OECD Model Tax Convention commentary 2017 and explained that this should be considered on a ‘case by case basis’. It flags considering where board meetings are held, where senior day-to-day activities are carried out and accounting records are kept, etc.
It is possible that your foreign income will be taxed twice – both in the UK if deemed a UK tax resident, and the country in which the income originates. If this is the case, you can usually claim tax relief to get at least some, if not all, of this tax back.
How much tax relief you can claim depends on the double taxation treaty.
If you have already paid tax on your foreign income, you can usually claim Foreign Tax Credit Relief in your UK Self Assessment tax return. The amount of tax relief you will get will all depend on the ‘double-taxation agreement’ that the UK holds with the other country. Even if the UK doesn’t hold an agreement with the other country, you might still be able to get tax relief as long as the foreign tax corresponds to UK Income Tax or Capital Gains Tax.
You might not get the full amount of foreign tax you paid back. If a smaller amount is set by the double-taxation agreement, or the income would have been taxed at a lower rate in the UK, you will get less in tax relief.
Hello! The US, similar to the UK where we’re based, operates a process that you’re taxed on your worldwide income, so you would need to look at the double taxation treaty between the USA and Canada to ensure that, if the Canadian company is going to tax you, that this tax is offset against taxes you pay in the US.
“Expat Tax Advice… Wow! I thought the USA was the only country that did the worldwide tax thing based on citizenship.”
In summary, the US and the UK are the only countries that tax you wherever you are in the world if you’re a citizen; the others tax you on worldwide income based on residency.
Many, but not all, double taxation agreements contain an Article dealing with the earnings of teachers. Where there is such an Article, a UK teacher who goes abroad in order to teach in the other country will normally be exempt from the other country’s tax on the earnings from teaching.
Some agreements, however, provide that the remuneration of visiting teachers can only be exempted from tax in the country visited if it is ‘subject to tax’ in the UK (see, for example, Article 19 of the Barbados agreement).
Where a UK teacher visits one of the countries concerned, but remains resident and ordinarily resident in the UK, they should, on request, be provided with a letter on headed note paper, signed by an Officer of HMRC, certifying the amount of their earnings that was subject to UK tax.
As a British citizen Seafarer, you are filing your tax returns in the UK, you have a home and probably family here as well, so you might ask what’s the situation if you’re buying an investment property in the UK.
To be defined as a seafarer, you will spend the majority of your time out of the country, and of course, you wouldn’t be tax resident anywhere else as you’re on the high seas.
Whilst there is a 3% additional SDLT for all 2nd residential properties regardless if they’re bought in your own name or in a company. There is an additional 2% SDLT for non-residents buying in their own name or in a company in which they are shareholders… and that includes Seafarers.
A qualifying day is one in which you are absent from the UK at midnight. Under normal circumstances HMRC would regard being outside the twelve mile limit as being outside the UK, but by concession they may be prepared to accept that where a vessel leaves its UK berth before midnight and goes to a foreign port, then that is a day out.
If you let out a property below market rent (for example, to a friend or family member), you can only claim expenses up to the level of rent received. You cannot create a loss to offset against other taxable income.
If your rental income is in a foreign currency, you should convert it into your local currency using a consistent and reasonable method. This could be the average annual exchange rate or the rate at the time of each transaction.
Yes, travel expenses directly related to managing and maintaining your property are generally allowable, as long as they meet the “wholly, exclusively, and necessarily” rule.
Rental income is taxable and must be declared on your Self-Assessment tax return. You’ll pay Income Tax at your marginal rate on profits after allowable expenses. Mortgage interest relief is restricted under Section 24 if the property is owned personally.
You may still qualify for Private Residence Relief for the period it was your main home, plus an additional 9 months after moving out. If only part of the property is rented, different rules may apply.
Non-UK residents must pay UK Income Tax on rental income. The rate depends on total UK income. They may still qualify for a personal allowance depending on their country of residence or tax agreements.
Failing to declare rental income can lead to penalties and interest. HMRC’s Let Property Campaign allows voluntary disclosure, often with reduced penalties.
Yes, overseas landlords can claim similar deductions as UK landlords, including maintenance, repairs, insurance, letting agent fees, and mortgage interest (subject to restrictions).
Rental income should typically be split according to ownership shares and declared individually on each owner’s tax return.
Yes, property management fees are tax-deductible. However, hiring a manager does not remove your obligations under the Non-Resident Landlord Scheme.
Yes, they can generally access the same reliefs, including allowable expenses and mortgage interest relief (subject to rules and restrictions).
You must file a Self-Assessment tax return annually, declaring rental income and allowable expenses.
Overseas landlords must register with HMRC and pay UK tax on rental income. This is usually handled through Self-Assessment or the Non-Resident Landlord Scheme. Allowable expenses can still be deducted.
Yes, the UK has agreements with many countries to prevent double taxation. Typically, you can claim a credit in your home country for tax paid in the UK.
The UK tax year ends on 5 April. Self-Assessment deadlines are:
You must declare UK rental income according to your country’s tax rules and include any UK tax paid. Relief depends on local laws and any tax treaty in place.
Property forms part of your estate for Inheritance Tax (IHT). Reliefs such as the nil-rate band and residence nil-rate band may reduce the amount payable.
Under the scheme, tax is usually deducted at source by a letting agent or tenant unless HMRC approves gross payment. Approval depends on your tax compliance status.
You can claim capital allowances on qualifying items such as fixtures, fittings, and certain building features to reduce taxable profits.
You may need to pay Capital Gains Tax on any profit. The sale must be reported to HMRC, usually within 60 days of completion.
If you regularly buy and sell properties with the intention of making a profit, HMRC may treat this as a trading business rather than investment.
Yes, this can affect Capital Gains Tax. Time spent as your main residence (plus the final 9 months) may qualify for relief, reducing your tax liability.
They may be eligible if the property was their main residence at some point. Eligibility depends on residency status and the period of occupation.
Tax treaties usually allow the UK to tax rental income first. Your home country may then provide relief to prevent double taxation.
Non-compliance can result in penalties, interest, and potentially legal action. It’s important to meet all reporting and payment obligations.
Yes. If you charge below market rent, your allowable expenses are limited to the rent received. Charging market rent means standard tax rules apply, but you should keep evidence to support this.
You must declare worldwide income, including overseas rental income, on your UK tax return. You can usually claim relief for foreign tax paid under double taxation agreements.
You may pay Income Tax on rental income and potentially Inheritance Tax. The property’s value at inheritance becomes the base cost for future Capital Gains Tax calculations.
The internationally mobile worker, and where your company taxes are paid. If you visualise that a company has a single director who is personally situated out of the UK, but the company is UK registered, the question arises as to where you would pay the company’s corporation tax.
The new register will require overseas entities that own UK land to declare their beneficial owners or managing officers. Overseas entities will not be able to buy, sell, transfer or lease land, or create a charge against the land in the UK unless they’ve registered with Companies House.
Overseas entities who already own land in the UK will be given 6 months to register their beneficial owners or managing officers. This 6 month period will not begin until the new register has been launched. Any new purchasers will need to register with Companies House from the day the register comes into effect.
Once the overseas entity has registered and provided all the necessary information, an overseas entity ID will be provided by Companies House. This ID will then need to be shared with the relevant land registry (depending on where the land is situated in the UK) whenever the overseas entity buys, sells, transfers, leases or charges land in the UK. The overseas entity will need to update its information every year.
Anyone from outside the UK thinking of investing here and taking advantage of where the UK has commoditized property, then this video may be exactly what you need. If you’re an Expat or other non-resident, and want to invest in property from abroad, this video explains the tax positions and structures.
An estimated 248 overseas investors in UK buy-to-let properties came forward to admit tax evasion in the last year. Many of these people will be UK expats living abroad rather than foreign investors.
These individuals can face severe consequences if they are found to have withheld any tax owed to HMRC and fail to come forward under the scheme. This could include tough financial penalties or even criminal prosecution.
The best way to ensure that landlords are paying the right amount of tax is for them to seek expert advice and inform HMRC of any uncertainties they might have. This would minimise the risk of a severe financial penalty, or even a jail sentence.
Recently, HMRC has become increasingly effective at identifying landlords that are not paying the correct amount of tax on their rental income.
The penalty for undeclared UK rental income is up to 100% of the amount of tax HMRC believes is owed. Where the source is offshore, the penalties can be even greater and as much as 200% of the unpaid tax. These penalties are in addition to the tax liability itself. Landlords are likely to face lower penalties if they voluntarily make a disclosure.
Failure to correctly make a capital gains tax declaration to the HMRC within 60 days after conveyancing (transferring ownership of) your property is likely to result in a penalty – even if there is no capital gains tax to pay.
If the completion date was between 6 April 2020 and 26 October 2021 you should have reported and paid within 30 days of completion of conveyance.
Please ensure that you seek our professional advice before finalising any declaration or capital gains tax calculation.
As every tax treaty is agreed between the two jurisdictions rather than through the EU or EEC, there will not be any impact on any tax treaties between the UK and any other country. However, watch for when there are trade deals are negotiated as there may be changes then – if in any doubt, contact us and we’ll advise if there’s been changes on treaties that you’re depending upon.
HMRC uses various global data sharing initiatives to obtain bank statements for foreign bank accounts used by overseas landlords. It also reviews data from tenancy deposit schemes to cross-reference landlords against those declaring rental income.
The penalty for undeclared UK rental income is up to 100% of the amount of tax HMRC believes is owed. Where the source is offshore, the penalties can be even greater and as much as 200% of the unpaid tax. These penalties are in addition to the tax liability itself. Landlords are likely to face lower penalties if they voluntarily make a disclosure.
Talking with the head of HMRC investigation team, and all the insurers, there is now a fair warning that HMRC will be stepping up their General Tax Enquiries.
If we can be of service, contact us.
If your question isn’t listed here, please contact us and we will be very happy to help!
1 Market Hill, Calne, Wiltshire, SN11 0BT
