# Taxation



## jamin (Jan 6, 2010)

Yes another question - sorry! Can anyone advise as to what we need to do to ensure we are not UK taxed on our Dubai salaries? We will also be keeping our property in UK will this affect our taxation?


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## Gavtek (Aug 23, 2009)

To avoid paying UK income tax, you need to be out of the UK for 183 days in the first tax year and an average of 274 each year for 4 tax years.

If you're renting out your UK property then you will be liable to Schedule A Income Tax.


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## Elphaba (Jan 24, 2008)

jamin said:


> Yes another question - sorry! Can anyone advise as to what we need to do to ensure we are not UK taxed on our Dubai salaries? We will also be keeping our property in UK will this affect our taxation?


I haven't much time to answer you in full right now, but in brief, you start by completing and return HMRC form P86 to declare yourself non-resident.

Unless you remain outside of the UK for a full five tax years, you will be liable to UK income tax for all earning in the current tax year, including those from overseas, as you will now be in the Uk for more than 183 days.

Once you are non-resident you are only liable to tax arising in the UK if it exceeds your personal allowance. This is £6,475 per person in the current year. You should register for the Non Resident landlord Scheme to receive rental income gross.

If you contact me via the links below, I can email you some fuller information.

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## jamin (Jan 6, 2010)

Thanks to both of you for your help here. It's a lot to get you're head around and I appreciate your help in getting started.
I'll catch you on the links below for more. Cheers!


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## AndyM (Jan 6, 2010)

Hi 

The rules have changed and no longer will the fact your out of the UK for a number of days count as being none resident for tax, they are now taking all links to the UK into account when deciding if you are not resident, including property, family remaining etc. You need to complete form P85 which can be got from the HMRC website and you need to read document HMRC 6 also from the HMRC web site. My advice is also get some tax advice before you complete the form. Also ensure you start proceedings well in advance as most of the UK offices will not read the information for about 1 month. If you have a seperate contract for the work in Dubai ensure you include a copy with the form and a covering letter.

There are also documents on the non-resident landlord subject.

A


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## britishindian (Jan 31, 2010)

jamin said:


> Yes another question - sorry! Can anyone advise as to what we need to do to ensure we are not UK taxed on our Dubai salaries? We will also be keeping our property in UK will this affect our taxation?


I can tell you it is a pain to do as I have done some part of it and am awaiting to the the rest. The form you will need to fill and send is indeed the P85 which can be done while within the UK or form outside, with it you will need to include the P45 if you were working previously.

If you are likely to be a non-resident landlord you will need to complete the form outlining all details of the property in order to be exempt from Tax, you will also reference these details on the p85 you will be filling detailing all income you will receive while being non-resident.
Hope this helps!


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## AndyM (Jan 6, 2010)

Hi

If working under a formal contract of employment or as an employee of a company on secondment then section 8.5 in HMRC applies ortherwise you need to satisfy section 8.2. You will be classed as non-resident from the day after you leave to start work and not from the point you left i.e. if you go for a week's holiday before you begin work.

A


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## MrPhil (Feb 18, 2010)

Hi I have read a tonne of info on becoming non resident from the UK and as far as I understand it, you do not have to pay tax from the day after you leave the country to work. But I am hearing rumours from colleagues that you do have to pay UK tax for the first year. I guess I should believe HMRC, but can anyone clarify?


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## jamin (Jan 6, 2010)

I was sent this from Elphaba who is all knowing in these matters!!!

If someone leaves part way through a tax year they then remain liable for Uk income tax for the remainder of that year. This is particularly the case for anyone who intends to remain overseas for just a few years. Any stay in excess of 5 years living overseas you become more than temporarily non-resident for tax purposes and any partial years become exempt from Uk income tax. At this time there is also no liability to capital gains tax.
When leaving the UK, HMRC form P85 should be completed to be treated as non-resident for tax purposes.


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## MrPhil (Feb 18, 2010)

jamin said:


> I was sent this from Elphaba who is all knowing in these matters!!!
> 
> If someone leaves part way through a tax year they then remain liable for Uk income tax for the remainder of that year. This is particularly the case for anyone who intends to remain overseas for just a few years. Any stay in excess of 5 years living overseas you become more than temporarily non-resident for tax purposes and any partial years become exempt from Uk income tax. At this time there is also no liability to capital gains tax.
> When leaving the UK, HMRC form P85 should be completed to be treated as non-resident for tax purposes.


Thanks Jamin. Part way through the year - do you know if that is resulting from the 183 days in UK clause? I am guessing so as if leaving at the end of April (which is likely) that would be a bit unfair having to pay almost a full year.


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## Manc Man (Feb 23, 2010)

Could someone help me? Im leaving the UK on the 25th March so before the start of the next tax year. I wont be a resident in the UK and probably only visit 1 week a year.

I shouldn't be liable in the UK for Income Tax on my Dubai salary?

Should i even bother with this P85 form?


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## Elphaba (Jan 24, 2008)

Manc Man said:


> Could someone help me? Im leaving the UK on the 25th March so before the start of the next tax year. I wont be a resident in the UK and probably only visit 1 week a year.
> 
> I shouldn't be liable in the UK for Income Tax on my Dubai salary?
> 
> Should i even bother with this P85 form?



Yes, you should bother. Form P85 informs HMRC that you wish to be treated as non-resident for tax purposes. They aren't psychic so if you don't complete and return it how woudl they know of your intentions? 

Provided you spend less than 90 days per tax year in the UK and your work is carried out elsewhere you will not be liable to UK income tax.

Note that your date of return will also be relevant to your tax status.

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## Andy Capp (Oct 5, 2008)

I guess i need to look forward to a BFO bill from the taxman when I return (if that ever happens) then....


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## Elphaba (Jan 24, 2008)

Andy Capp said:


> I guess i need to look forward to a BFO bill from the taxman when I return (if that ever happens) then....


You'll ever return to the UK?? 

If you ever so, you'll have been non-resident for over five full tax years so you will be free and clear.

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## MaidenScotland (Jun 6, 2009)

Elphaba said:


> You'll ever return to the UK??
> 
> If you ever so, you'll have been non-resident for over five full tax years so you will be free and clear.
> 
> -


Non-residents are often British-born individuals who persuade the authorities they have largely left the country and are therefore able legally to avoid many British taxes.
Accountants and tax experts have long assumed that as long as someone spent no more than 91 days a year in Britain, they could claim non-resident status and tax benefits.

However it now seems if you have ties in the U.K. such as sending your children to school there, still own a house etc the tax man can come after you regardless of the 91 day rule.
http://www.telegraph.co.uk/finance/...exiles-under-pressure-after-court-ruling.html


Maiden


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## wonderwoman (Nov 14, 2009)

*hi there*



jamin said:


> Yes another question - sorry! Can anyone advise as to what we need to do to ensure we are not UK taxed on our Dubai salaries? We will also be keeping our property in UK will this affect our taxation?


your company should help you with it or you would inform your local tax office in england that you are working abroad plus an offshore bank might be an good idea not sure if this will help you:


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## Andy Capp (Oct 5, 2008)

Elphaba said:


> You'll ever return to the UK??
> 
> If you ever so, you'll have been non-resident for over five full tax years so you will be free and clear.
> 
> -


Free and clear? More than I am here then!


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## Elphaba (Jan 24, 2008)

MaidenScotland said:


> Non-residents are often British-born individuals who persuade the authorities they have largely left the country and are therefore able legally to avoid many British taxes.
> Accountants and tax experts have long assumed that as long as someone spent no more than 91 days a year in Britain, they could claim non-resident status and tax benefits.
> 
> However it now seems if you have ties in the U.K. such as sending your children to school there, still own a house etc the tax man can come after you regardless of the 91 day rule.
> ...


Please do not be mislead by the Gaines-Cooper case. That is more to do with domicile than residency, which are totally different issues. 99% of expats will not be affected.

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## Elphaba (Jan 24, 2008)

jackcarlin said:


> your company should help you with it or you would inform your local tax office in england that you are working abroad plus an offshore bank might be an good idea not sure if this will help you:


Employers generally don't know about tax issues and banks are not a good place for independent advise. Better to speak to a finance professinal like me who deals with these issues daily.

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## MrPhil (Feb 18, 2010)

Elphaba said:


> Employers generally don't know about tax issues and banks are not a good place for independent advise. Better to speak to a finance professinal like me who deals with these issues daily.
> 
> -


Does the P85 take long to process?


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## Elphaba (Jan 24, 2008)

MrPhil said:


> Does the P85 take long to process?


At times it can take months for HMRC to acknowledge it, but that makes no difference to your status or the date you become non-resident.

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## MrPhil (Feb 18, 2010)

Elphaba said:


> At times it can take months for HMRC to acknowledge it, but that makes no difference to your status or the date you become non-resident.
> 
> -


Thanks Elphaba.


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## AndyM (Jan 6, 2010)

Hi All

Lots of discussion regards days out of the country etc, please see below from my tax advisor, it pretty much sums up what has to be satisfied in order to become none resident.

_Assuming you are resident and ordinarily resident in the UK, you will cease to be UK resident from the day after you leave the UK where HMRC are satisfied that the tests below have been met: 

*Qualitative test*

This test seeks to establish that you have “left” the UK.


In relation to these conditions you will be deemed to have “left” the UK where, as well as working abroad, you live abroad, in the sense that you have significant overseas connections, such as an overseas home, workplace or employment and where your lifestyle indicates that an identifiable break with the UK has been made, for instance that holidays, weekends and leisure time are also spent outside the UK. To accept that you are no longer resident in the UK HMRC will seek for you to demonstrate that your “settled lifestyle pattern” has moved outside the UK. 

Factors likely to counter such a position include retaining UK property, your family remaining in the UK and your children remaining in full time education in the UK. 

HMRC will look at a basket of lifestyle factors to decide whether on balance they accept this condition has been met. 

*Day counting tests*


Where the qualitative test has been met HMRC will then look to the day counting test, this seeks to establish that:

• you will be abroad for at least a complete UK tax year (6 April to 5 April); 

• that whilst abroad, you work in full-time employment; and 

• that your return visits to the UK (business or social) do not amount to:

– 183 days or more in any one tax year (the 183-day test); or

– an average of 91 days or more a tax year during your absence abroad calculated over a maximum of four years (the 91-day average test).



In respect of the day counting tests, a UK day is counted as a UK day where you are present in the UK at midnight._
Where both the qualitative and day counting tests are met you will be treated as non-resident in the UK.

Thanks

A


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## jamin (Jan 6, 2010)

Thanks Andy M. That's been really useful to share your info from tax advisor. Lots to think over as we are keeping a property here and renting it out. Surely that alone will not jeopardise our non-uk residency application? Should we tread carefully on how we are declaring this? It's a non-profit income - in fact we will have to make up the monthly rental shortfall for mortgage payments as rent will not cover all. So no worries for tax implications there.


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## AndyM (Jan 6, 2010)

Hi Jasmin

The fact your renting will go in your favour as you are demonstrating you have limited your options for return by renting the property out. You will declare this on the P85 form but it then gives HMRC visibility that you will be receiving rental income. 

You should only pay tax on any amount that is deemed as profit, as you state that your income will not cover the mortgage then you should have no issue.

HMRC web site has the necessary details for no resident landlords.

Thanks

A


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## Last_one_out (Mar 17, 2010)

Hello everyone, 

First post, although I've been lurking on and off, plotting my UK escape!

This telegraph article from today is relevant to the discussion, and not good news I'm afraid.

[Just found out that I can't yet post links, but if you go the website of the UK's telegraph news paper- telegraph dot co dot uk, you should be able to find the article, the rest of the URL is below] It's not spam I promise!

/finance/personalfinance/offshorefinance/7404403/Expats-could-face-30-years-of-tax-bills.html

Cheers

Last One Out (...of the UK please turn off the lights)


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## HamishUK (Oct 20, 2009)

jamin said:


> Yes another question - sorry! Can anyone advise as to what we need to do to ensure we are not UK taxed on our Dubai salaries? We will also be keeping our property in UK will this affect our taxation?


Hi I am in the same situation and got the following advice from my solicitor:


Thank you for your email. Further to my brief holding email last week, I am now able to come back with a more considered response with regard to your tax position. Firstly, yes the HMRC website is a little confusing when it comes to UK Residence issues and these rules can be relatively complex. I do deal with quite a few non-resident clients so this is an area of UK tax that I have some knowledge on - I have summarised below how the tax rules should work for you:

*Rules for becoming non-UK resident*

The general rule when individual goes abroad to take up full time employment is that they will become both "non-resident" (NR) and not "ordinarily resident" (NOR) with effect from the day after their departure from the UK, provided the following conditions are met:

- they are leaving to work abroad under a full-time contract of employment
- they have left the UK to take up that work abroad (and have not for example gone on a holiday before taking up the work)
- the employment is expected to (and actually does) last at least one complete tax year (i.e. 6th April to following 5th April)
- their return visits to the UK do not exceed 183 days in any tax year and 90 days on average (calculated using a rolling 4 year average period from departure)

If you meet all of these tests, then you will become non-resident from the day after leaving the UK to travel to Dubai. The fact that you will be leaving just before the end of one tax year means that your "complete tax year" period will mean that you must remain in that job until at least 6 April 2011 for you non-resident status to remain (if you left beforehand you will be treated as never having left the UK, meaning all Dubai earnings will be taxable - see below). This works much better than if you left the UK say just after the new tax year begins, as your complete tax year period would run to 6 April 2012 (double the qualifying period for the sake of being the other side of the tax year end).

*Non-resident tax issues*

As a non-resident your UK tax position will change from one of being taxable on his worldwide income and gains to only being taxable on his UK source income (and not be subject to CGT - but this CGT exemption only applies if you remain outside the UK for at least 5 tax years.

Therefore whilst you are working in Dubai, your earnings over there will not be subject to UK taxation - only your UK income will remain subject to tax. This will include your letting of your flat. However, as a British Citizen, you will always be able to claim the full UK Personal Allowance (worth £6,475) so only income over this amount will be subject to 20% tax.

*Non-Resident Landlord scheme*

If a non-resident lets out UK based property, the default position is that either the tenant or letting agent must withhold basic rate tax from any rental income and account for this quarterly to HMRC, passing on the net to the overseas landlord. This enables HMRC to get a flat cut of tax if they unable to track or trace the overseas landlord.

The alternative to this (which we recommend) is that you register under the Non-Resident Landlord (NRL) scheme. By registering, you are able to receive all of your rental income gross, but must report your property income annual on a Self Assessment return. This way, HMRC do not take any withholding tax as they collect the correct tax via SA. Please see this link to HMRC website for more info: HM Revenue & Customs: The Non-Resident Landlords (NRL) Scheme

It may well be that, depending on the rents received and expenses deductible, your profit is all or mostly sheltered by the £6,475 PA, so no tax is due (better than not registering under NRL and having to reclaim the 20% withholding tax back).

To register, you simply need to complete a form NRL1 (attached in PDF format) and send this back to me signed and dated etc. I will then forward this on to HMRC for you. Once processed, you will be able to receive all rents gross.

SA Tax Returns

As far as how you go about completing a tax return, this can be done as normal by us. We are able to send and approve Tax Returns via email, provided we were given the necessary information, we could process your tax return and send it for approval by email. Once approved by email, we can then electronically submit it to HMRC.

I hope this explains how things will work from a UK tax perspective for you as you take up work in Dubai. If you or you have any follow-up queries, please do let me know.


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## jamin (Jan 6, 2010)

Thanks for that guys. Really useful and insightful. Still loads of bloomin forms to fill in though and all those percentages making my head ache - but it'll be worth it. Haven't checked out the telegraph atricle but judging by the subject line, not sure I want to!! 
Anyway what your tax advisor is saying that it's better to send an annual self tax return. I wonder if this can be done through an estate agents handling your property?


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## SBP (Jan 4, 2010)

jamin said:


> Thanks for that guys. Really useful and insightful. Still loads of bloomin forms to fill in though and all those percentages making my head ache - but it'll be worth it. Haven't checked out the telegraph atricle but judging by the subject line, not sure I want to!!
> Anyway what your tax advisor is saying that it's better to send an annual self tax return. I wonder if this can be done through an estate agents handling your property?


You can do it yourself online, just fill in the relevant boxes


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## AndyM (Jan 6, 2010)

Hi 

The article deals with an ongoing case that has prompted a great deal of debate over residency for tax purposes.

The client made an assumption that the 91 day rule was enough for him not to pay UK tax, however the rules have changed and you have to satisfy 2 tests (See my previous post). 

In the case of many expats leaving the UK for overseas work they simply leave their UK job collect their P45 and sign a new contract in the host country. Technically you fall off the UK tax radar. You would usually then sign up to the host country tax system, in Dubai income tax is not levied so no problem. 

What you should do is complete the P85 after reading the guidance in the HMRC6 document. In addition supply evidence of the contract, which should specify its length and ensure you break a full tax year during the length of the contract. Send it to HMRC and let them decide your residency status. If you are issued an NT code then HMRC have agreed you are non-resident and provided you remain out of the country for less than 91 days (Keep it well below) then there will be no come back. You may have to fill in a tax return to confirm the ongoing status.

Simply leaving the country and not paying tax without consulting HMRC through the P85 system will lead to investigation, especially if you return back to the UK later to start employment.

On a side note you should also continue to pay Class 1 NI contributions for 52 weeks after leaving, this is separate from tax. After 52 weeks you should move to Class 3 contributions. If you don't then any claim on UK state pension may be at risk.

I have just received my NT status and achieved this by completing the P85 and sending it to HMRC, I also supplied a copy of the contract and a covering letter. It took about 8 weeks to come through but now I am legal with HMRC and it is they who have determined that I am non-resident.

Cheers

A


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## Elphaba (Jan 24, 2008)

Last_one_out said:


> Hello everyone,
> 
> First post, although I've been lurking on and off, plotting my UK escape!
> 
> ...




No need to the average person to be the least bit concerned about this. The isssue is more regarding domicile than residency and the rules for that are unchanged. Provided you stick to HMRC rules you will not have an issue.

The usual scare-mongering in the press. As I advise on these issues for a living, I know what I am talking about.

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## Pip (Apr 4, 2010)

This situation seems familiar  I'm just negotiating start dates, to relocate from the UK. Thanks for all this info. 

My understanding was that: 

I would be eligible to pay tax in the uk up to the date I leave (likely to be mid June). Then my earnings in the UAE I wouln't be liable to pay tax on so long as I didn't return until the next tax year.

However, reading the above, does this in reality mean I can't return until April 2012 rather than 2011 to avoid the tax? In reality I hope this happens, but it seems a long long time away.

Another complexity, my mortgage in the uk has already gone up quite dramatically over the past few months. A few of my friends have been renting their flats out in the uk without telling the mortgage company they aren't living there. However if I declare the flat for tax reasons, will I need to tell the mortgage company too? Of is this a risk it might be worth taking, esp if I rent my flat out to a friend?

I know the official advice will be I should 'fess everything however in practice should it be ok?

Thanks


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## Elphaba (Jan 24, 2008)

Pip said:


> This situation seems familiar  I'm just negotiating start dates, to relocate from the UK. Thanks for all this info.
> 
> My understanding was that:
> 
> ...


If you leave the UK in mid June, provided you spend no more than 90 days in the UK in total during the 2010/11 tax year (6th April 2010 to 5th April 2011) you can be classed as non-rsident for tax purpsoes for the whole year. This means that any income arising out of the UK will be exept from UK income tax. If your UK income before you depart is below the Personal Allowance threshold, you be able to reclaim some tax too.

If you are planning to let your flat you must notify your mortgage lender or you will a) be in breach of your mortgage conditions and b) building & contents insurance will be invalid. Rental income is subject to UK income tax (subject to exceeding the Personal Allowance) but can be offset against mortgage interest payments.

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