# Query on UK income tax



## Glasceb (Jul 15, 2008)

Hi

Sorry if this has been asked before.

I'm coming out to Dubai in the next couple of months to live and work and intend opening an onshore account for every day expenses plus an offshore account for savings.

Question is; if I return to live permanently in the UK in say a couple of years, will I be liable for tax on any money that I transfer into the UK from the offshore account?

Any help would be appreciated. Thanks


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## Elphaba (Jan 24, 2008)

Yes it has been asked before and I have answered it each time! 

If you only plan to be UK non-resident for two years you will have UK taxliabilities for the remainder of this tax year (2008/09) and for the year in which you return (2010/11). You will also have to pay tax on monies that you take into the UK, subject to your personal allowances and Capital Gains Tax (CGT) allowances.

You do not become automatically non-resident for tax purposes just be going abroad. You need be so for 4 years for partial years to be exempt from UK tax. You need to be overseas for even longer to be exempt from CGT.

Before leaving the UK you should complete HMRC form P85 and sent it to your tax office to register to be non-resident for tax purposes.


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## Maz25 (Jul 6, 2008)

Elphaba said:


> Yes it has been asked before and I have answered it each time!
> 
> If you only plan to be UK non-resident for two years you will have UK taxliabilities for the remainder of this tax year (2008/09) and for the year in which you return (2010/11). You will also have to pay tax on monies that you take into the UK, subject to your personal allowances and Capital Gains Tax (CGT) allowances.
> 
> ...


Quite right. As soon as your money hits a UK bank account, you will be liable for taxes on all of it. You can, on the other hand, keep it under the matress and pay no taxes!

As Elphaba has right said, you need to fill out the P85 and based on the information you provide, the taxman will decide how much taxes you are owed. As you are leaving part way through the tax year, at the most, you will only get back taxes that you have paid on your annual allowance. The rest, the taxman will keep! You only get most of it back if you are leaving the UK permanently and do not intend to come back for at least 4 years or more. In that case, you will be asked to provide proof that you have indeed left and do not intend to come back!


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## AshbyA (Jun 11, 2008)

This has worried me a little bit. I might be getting the wrong end of the stick as the whole tax thing confuses me but - I spoke to someone on the phone and read the link below and both led me to believe that I would not pay any tax as long as I was out of the country for more than 1 tax year and do not come back that often. Is this not the case? 

ok have not made enough posts to put the website in but it is on the HMRC website under moving abroad


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## Elphaba (Jan 24, 2008)

If you are resident outside the UK for a full tax year and so not return to the UK for more than 89 days you will be exempt from UK income tax in that year. Partial years are a different matter and it then depends on how long you are overseas in total.

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## fjcruiser (Mar 19, 2008)

the form you need is P85


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## fjcruiser (Mar 19, 2008)

sorry i cannot post URL yet but you should type:
www dot hmrc dot gov dot uk fwd slash cnr fwd slash p85 dot pdf

good luck


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## Elphaba (Jan 24, 2008)

Here is the link - which has been posted before.

http://www.hmrc.gov.uk/cnr/p85.pdf


My comments regarding liabilities stand - this form won't change that!



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## JunFan (May 20, 2008)

Here's an extract of an answer to the same question I posed to my accountant, who has never let me down with financial advice before, so I believe him...
"When you arrive back in the UK and revert back to being resident again, the monies you have earned overseas is not taxed. The IR don’t work retrospectively, but of course any interest that you earn on those monies/savings etc once you’re back resident in the UK would need to be accountable on your tax return in the year concerned."


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## Elphaba (Jan 24, 2008)

JunFan said:


> Here's an extract of an answer to the same question I posed to my accountant, who has never let me down with financial advice before, so I believe him...
> "When you arrive back in the UK and revert back to being resident again, the monies you have earned overseas is not taxed. The IR don’t work retrospectively, but of course any interest that you earn on those monies/savings etc once you’re back resident in the UK would need to be accountable on your tax return in the year concerned."


Sorry, but this is not strictly correct. It depends on how long a person is outside the UK, as a return part way thorugh a tax year if you have not been non-resident for an extended period will lead to a full UK tax liability in that year.

And HMRC (no longer called IR!) does work retrospectively.

In my experience (professionally) not all accountants are familar with rules for non-residents as many do not deal with this area on a regular basis.

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## fjcruiser (Mar 19, 2008)

"And HMRC (no longer called IR!) does work retrospectively"

Correct.That is why you have to keep your tax returns for minimum of 6 years. If you have earned interest on an offshore tax account keep it there. as soon as you bring it back to the UK it becomes taxable again!


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## fjcruiser (Mar 19, 2008)

the IR works restropectively, hence the need to keep your tax returns for a minimum period of 6 years.
Also, to avoid being taxed on the interest you have earned offshore, you do not remit it to the UK as simple as that.You dont need to be non resident to have an offshore account.


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## JunFan (May 20, 2008)

Thanks for pointing out those things...mmm...my accountant has checked this out twice now...I'll have to check my latest tax return a bit more thoroughly LOL!


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## greatexpectations (Aug 5, 2008)

fjcruiser said:


> the IR works restropectively, hence the need to keep your tax returns for a minimum period of 6 years.
> Also, to avoid being taxed on the interest you have earned offshore, you do not remit it to the UK as simple as that.You dont need to be non resident to have an offshore account.



naive question - i apologise - but of your cash is in a Dubai bank, and you draw it in the UK to spend, are you clear of the tax's man clutches?

as in this case the money never hits a uk bank....


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## Elphaba (Jan 24, 2008)

greatexpectations said:


> naive question - i apologise - but of your cash is in a Dubai bank, and you draw it in the UK to spend, are you clear of the tax's man clutches?
> 
> as in this case the money never hits a uk bank....


That is not likely to ever be an issue. Not unless it is a deliberate plan to avoid tax, but spending money whilst on holiday/at home is not a worry at all.




_


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## wikkid (Mar 13, 2008)

*Tax on savings*

If you are UK resident and have money in an offshore account, HMRC have fought and won a case that the interest gained on that account IS taxable and must be declared annually. Many former ex-pats kept an offshore account open thinking that the interest did not have to be declared. This is part of a large scale investigation by HMRC which is ongoing and was expected to raise billions by applying any tax due for up to 6 years previous and applying penalties of up to 100% of the unpaid tax.

This is not an issue for anyone who is still non-resident, but shows the need for some tax-planning upon return.

As for withdrawing some money from an ofshore account while here on holiday/ short visit etc, there is no need for any worry, only if and when you become UK resident.

Wayne


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## greatexpectations (Aug 5, 2008)

thanks guys - this helps....

so assuming you resume UK residency after some lengthy period and have fulfilled the requirement of being permanent non-uk.....

when you move back, you keep the principle sum earned in an offshore account, but need to declare/pay tax on the interest

when you draw down on the principle investment, is this obvious to Hmrc, and do you get taxed at this point?


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## Maz25 (Jul 6, 2008)

greatexpectations said:


> thanks guys - this helps....
> 
> so assuming you resume UK residency after some lengthy period and have fulfilled the requirement of being permanent non-uk.....
> 
> ...



Once you move back in the UK, you will start paying taxes on everything in your account, as interest paid is calculated based on the balance in your account. Taxes will not be backdated but if you fail to declare that you are now resident and the HMRC were to find out, you will be prosecuted. As has already been said, the HMRC is cracking down hard on people trying to evade taxes and those caught are being prosecuted and made to pay back taxes owed which in this case would be backdated! 

Once you move back to the UK and start paying taxes again on your salary, then it would be obvious to all that you are back in the UK and have a liability for UK taxes. From that point, it will only be a matter of time before they find your little stash of cash and start taxing you. The minute you change your address at the bank, they will inform HMRC in any case!!!


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## crazymazy1980 (Aug 2, 2008)

Quite a useful thread this. 

I have a quick couple of questions in relation to this.

What happens if you want to regularly transfer money back to the UK? I still have a mortgage here in the UK which I am planning on transferring a part of my salary back across to top-up on any rental income I get.

How is this managed for tax purposes? Or can I just change my mortgage direct debit to come out of an off-shore account (say in Jersey). Can you pay a mortgage in the UK from an international account?


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## Maz25 (Jul 6, 2008)

crazymazy1980 said:


> Quite a useful thread this.
> 
> I have a quick couple of questions in relation to this.
> 
> ...


The HMRC website will provide you with all the info you need: HM Revenue & Customs: Non Residents

You can still transfer money into your account back home, without acquiring any tax liability if you fill in the relevant form. Even then, taxes will ony be paid on the interest rather than the balance and you can still claim back any taxes that you have paid at the end of the tax year (see above link for the form). Offshore accounts are great for savings, so unless you are planning to save a large amount of money, then there is no need to set up a new offshore account. Once you have set up an account in the UAE, then your bank can do the transfer for you on a monthly basis. I would advise that you check with your bank to see how much they will charge you to receive the transfer. When I used to bank with HSBC, I know that they charged £13.


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## crazymazy1980 (Aug 2, 2008)

Maz25 said:


> The HMRC website will provide you with all the info you need: See Link above
> 
> You can still transfer money into your account back home, without acquiring any tax liability if you fill in the relevant form. Even then, taxes will ony be paid on the interest rather than the balance and you can still claim back any taxes that you have paid at the end of the tax year (see above link for the form). Offshore accounts are great for savings, so unless you are planning to save a large amount of money, then there is no need to set up a new offshore account. Once you have set up an account in the UAE, then your bank can do the transfer for you on a monthly basis. I would advise that you check with your bank to see how much they will charge you to receive the transfer. When I used to bank with HSBC, I know that they charged £13.


Thanks Maz25,

That makes things fairly straightforward and means I can pretty much keep things here as they are. May just tranfer money in quarterly to save on charges if it's a flat fee - got to look after the pennies, it's wasted beer money


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## flossie (Jun 9, 2008)

You could also ask your pay office if they will deposit part of your pay into your offshore/overseas bank account. This is how we send money to Australia each month.

P.S. Aussie dollar down to a 6 month low!! Woohoo


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## sgilli3 (Mar 23, 2008)

flossie said:


> You could also ask your pay office if they will deposit part of your pay into your offshore/overseas bank account. This is how we send money to Australia each month.
> 
> P.S. Aussie dollar down to a 6 month low!! Woohoo


hahaha
Years ago I was always watching the value of our $, hoping for it to go up, now here I am, cheering when it drops !!!


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## crazymazy1980 (Aug 2, 2008)

flossie said:


> You could also ask your pay office if they will deposit part of your pay into your offshore/overseas bank account. This is how we send money to Australia each month.
> 
> P.S. Aussie dollar down to a 6 month low!! Woohoo


That sounds like a plan and it shouldn't be too hard for them - they're a bank themselves 

I've been loving the $ rate too, 2 to the £!!


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## greatexpectations (Aug 5, 2008)

thanks for the responses and advice all...


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## Ruggedblond (Oct 26, 2008)

Maz25 said:


> Quite right. As soon as your money hits a UK bank account, you will be liable for taxes on all of it. You can, on the other hand, keep it under the matress and pay no taxes!


I'm moving to Dubai in December and I understand due to UK tax rules I'll still be liable to pay UK tax on my earnings from December - April (remainder of tax year) even though I'll be in Dubai. I'm self employed so I imagine I'll need to fill in my tax return before I come to Dubai in order to fill in the form to advise I'm emigrating? 

I'd like to leave my UK bank account with some funds to cover the last direct debits etc. Also my bank don't charge for overseas purchases which has always been a godsend when I've been abroad in the past. When it comes to the new tax year in April and lets say I have £1,000 in my account, will the UK government deem I'm liable to tax on this money, how will they try to collect it and even worse will they judge I haven't emigrated?!


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## Elphaba (Jan 24, 2008)

Ruggedblond said:


> I'm moving to Dubai in December and I understand due to UK tax rules I'll still be liable to pay UK tax on my earnings from December - April (remainder of tax year) even though I'll be in Dubai. I'm self employed so I imagine I'll need to fill in my tax return before I come to Dubai in order to fill in the form to advise I'm emigrating?
> 
> I'd like to leave my UK bank account with some funds to cover the last direct debits etc. Also my bank don't charge for overseas purchases which has always been a godsend when I've been abroad in the past. When it comes to the new tax year in April and lets say I have £1,000 in my account, will the UK government deem I'm liable to tax on this money, how will they try to collect it and even worse will they judge I haven't emigrated?!



Whether you are liable to UK income tax from December 2008 to April 2009 depends on how long you will remain UK non-resident for tax purposes. If you are overseas for just couple of years you are liable, but if you are not temporarily non-resident (say 4+ years) you will have no tax to pay.

Even if you were liable to tax on your savings account, the interest of £1,000 would be negligible. In fact if you are non-resident you can claim gross interest (HMRC form R85).

Just ask if you have any other questions. I do this for a living. 

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## Ruggedblond (Oct 26, 2008)

Elphaba said:


> Whether you are liable to UK income tax from December 2008 to April 2009 depends on how long you will remain UK non-resident for tax purposes. If you are overseas for just couple of years you are liable, but if you are not temporarily non-resident (say 4+ years) you will have no tax to pay.
> 
> Even if you were liable to tax on your savings account, the interest of £1,000 would be negligible. In fact if you are non-resident you can claim gross interest (HMRC form R85).
> 
> ...


Can anyone become non domicile? If so would I need to do it before I come to Dubai, whilst I'm in Dubai or IF and when I return?


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## Elphaba (Jan 24, 2008)

Ruggedblond said:


> Can anyone become non domicile? If so would I need to do it before I come to Dubai, whilst I'm in Dubai or IF and when I return?


And why on earth would be you need to be non UK domiciled? Residency and domicile are completely different issues.

The concept of domicile is very strong in Britsh law and not something that can easily be changed. To even be considered for a change of domicile you would need to have lived outside the UK for well over 15 years, have no property, bank accounts or savings there and have another nationality. You have to break all links with the country. Even then there are no guarantees.

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## Ruggedblond (Oct 26, 2008)

Elphaba said:


> And why on earth would be you need to be non UK domiciled? Residency and domicile are completely different issues.
> 
> The concept of domicile is very strong in Britsh law and not something that can easily be changed. To even be considered for a change of domicile you would need to have lived outside the UK for well over 15 years, have no property, bank accounts or savings there and have another nationality. You have to break all links with the country. Even then there are no guarantees.
> 
> -


Only a thought! Thanks for pissing on my fire haha!!!!


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## EllieJ (Aug 28, 2008)

If you earn money in the partial years and its paid into a offshore bank account and you are only away say 18 months, do the HMRC get to find out how much money is off shore in your bank account ?


So I guess I asking if its paid off shore is this a way of avoiding tax on the partial years,


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## Elphaba (Jan 24, 2008)

EllieJ said:


> If you earn money in the partial years and its paid into a offshore bank account and you are only away say 18 months, do the HMRC get to find out how much money is off shore in your bank account ?
> 
> 
> So I guess I asking if its paid off shore is this a way of avoiding tax on the partial years,



If you are out of the Uk fo rless than 5 year are are considered temporary non-resident and could be liable for UK income tax on partial tax years. It depends on exact dates.

Information on offshore bank accounts is provided the the UK government. If you are liable to UK tax, you will pay tax on interest earned and on monies remitted to the UK.

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## ghandi2485 (Nov 18, 2008)

Sorry guys im a little confused by all this - so if i move to Dubai now, earn for 4 years during which time i send blocks of £1500 a month back to my UK account with a lump sum sent back at the end, what do I have to pay income tax in the UK on and how much?

and what about if im out there 2 years with the same idea of about £1500 a month sent back with a lump sum at end...?


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## Elphaba (Jan 24, 2008)

ghandi2485 said:


> Sorry guys im a little confused by all this - so if i move to Dubai now, earn for 4 years during which time i send blocks of £1500 a month back to my UK account with a lump sum sent back at the end, what do I have to pay income tax in the UK on and how much?
> 
> and what about if im out there 2 years with the same idea of about £1500 a month sent back with a lump sum at end...?


No. If you are temporary non-resident partial years can be liable to UK income tax. Provided you are in the UK for no more than 89 days in any tax year, 6th April to 5th April, you would not be liable to UK income tax on overseas earnings.

A tax liability on a lump remitted on final return to the UK would depend on total time non-resident and the amount, bearing in mind that you have an annual Capital Gains Tax allowance.

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## ghandi2485 (Nov 18, 2008)

Ok thanks Elphaba - so the 89 day rule is regardless of whether i am out there 5 years or 2 so long as im not in the uk for more than 89 days in any tax year, i dont have to pay tax on any money i bring across from Dubai at any time

There whether i stay 2 years or 5, i simply dont pay income tax on money i bring across to the UK (whether money is transferred monthly or lump sum at the end of each year) so long as I am not in the UK for more than 89 days on that financial year....?

And with Capital gains tax - I will have my properties still in the UK on rent in this period - I have the yearly allowance I assume but other than that there are no specific extra rules around CGT because I am abroad, or are there? (I assume I also need to pay UK income tax on the rent generated from the properties but only the difference between mortgages and rent values)


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## Arranexpat (Aug 17, 2008)

Just to clear up any misconceptions. You are considered non resident if you have returned your R85 and intend to remain out of the UK for 4 years or more for purposes of opening an offshore account, investement etc. Elphaba is correct, if you remain out of the UK for 89 nights per year your income is not taxable but if you return within a partial year within 4 years of leaving you can be taxed. If you open an offshore account check where it is what protection you have and how confidential it is, they do vary. I have a debit/credit card with my offshore account which I can pay for goods, bills etc. where ever I am direct from my offshore account, this means that should I return to the UK I will still have access to my offshore funds. Any transfer to a Uk bank of more that £4999 will automatically be reported to HMRC and could cause you problems even if you are still out of the country.


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## Ruggedblond (Oct 26, 2008)

Elphaba said:


> If you are overseas for just couple of years you are liable, but if you are not temporarily non-resident (say 4+ years) you will have no tax to pay.
> 
> 
> -


I take it this post answers Ghandi's question which was the same as mine. As I understand, if you're only out of the UK for two or three years then YOU ARE liable to UK tax on those years earnings irrelevant of whether you spent no more than 89 days in UK. 

I wonder what would happen ...only for example of course if you said you were going travelling instead of going to another country with work? If the money was off shore and you came back after two years how would the Revenue know any differently?


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## Arranexpat (Aug 17, 2008)

If you spend less than 89 nights in the UK in any one tax year you are not liable for income tax. If you come back to the UK and start working you are liable for any incom earned in that tax year. You will be taxed on what you or your company report, they will also look at what has entered you account and when.

If you aren't in the UK they don't care where you are. The country you are in on the other hand will. If you are in the EU for instance you may be liable for income tax in that country.


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## ghandi2485 (Nov 18, 2008)

OK - seems clear to me:

1. Fill out the form and intend to be out the country for 4 years

2. For every financial year you are out of the country where you dont spend more than 89 days in the UK, you aren't applicable for UK income tax in that year

3. If back within 4 years, and if spending part of a year in the UK where the total time adds up to be mroe than 89 days, you pay income tax on that year (or part of it)

4. Get an offshore account with onshore access - Question - which banks, and do you set that up before you come to Dubai (with a UAE bank or a UK bank with offshore accounting?) or with a Dubai bank in Dubai when you arrive?

Hope ive got that right

Also - what is the average for UAE expected salaries and monthly allowances for housing? My firm is going to offer (hopefully) a one off payment of 54k AED, 34k AED per month and an untold housing allowance yet.

thanks

Kash


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## Ruggedblond (Oct 26, 2008)

Arranexpat said:


> If you spend less than 89 nights in the UK in any one tax year you are not liable for income tax.
> 
> If you aren't in the UK they don't care where you are.


Doesn't this contradict Elphaba's reply (4 posts up) to my question? 'If you are overseas for just a couple of years you are liable'


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## Ruggedblond (Oct 26, 2008)

Ruggedblond said:


> Doesn't this contradict Elphaba's reply (4 posts up) to my question? 'If you are overseas for just a couple of years you are liable'


So which is it?


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## Arranexpat (Aug 17, 2008)

As I said, if you are in the UK for less than 89 nights in any one tax year and returned your R85 you have expat taxible status as long as you intend to remain expat for 4 years or more. It's very clear. If you return within part of the year exceeding 89 nights then you will be liable for tax in that year. If you are sent to Dubai fo 2 months by your company you are still taxable. If you are sent to Dubai on an 18 month secondment which states clearly that you will be returning to the UK in 18 months, you are still taxable. If you are sent to Dubai indefinitely from March 31st 2008 and are still there April 1st 2009 and haven't been back to the UK for more than 89 nights you are not taxable. If you have any doubts speak to your offshore accountant.


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## Elphaba (Jan 24, 2008)

Ruggedblond said:


> Doesn't this contradict Elphaba's reply (4 posts up) to my question? 'If you are overseas for just a couple of years you are liable'


Please don't quote me out of context!  Everyone's situation is slighty different and the same response does not apply to all. The actual dates out of the UK, rather than the number of months can make a big difference to tax liability, especially if someone is overseas for just a few years.

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## Elphaba (Jan 24, 2008)

Arranexpat said:


> As I said, if you are in the UK for less than 89 nights in any one tax year and returned your R85 you have expat taxible status as long as you intend to remain expat for 4 years or more. It's very clear. If you return within part of the year exceeding 89 nights then you will be liable for tax in that year. If you are sent to Dubai fo 2 months by your company you are still taxable. If you are sent to Dubai on an 18 month secondment which states clearly that you will be returning to the UK in 18 months, you are still taxable. If you are sent to Dubai indefinitely from March 31st 2008 and are still there April 1st 2009 and haven't been back to the UK for more than 89 nights you are not taxable. If you have any doubts speak to your offshore accountant.


This is not correct. An 18 month period out of the UK could well mean that a person does not pay UK income tax, provided they are out of the Uk for a complete tax year. It is perfectly feasible to take a 'year out' and thus not pay tax for the 12 month period 6th April to 5th April, but to be liable before and after.

Arranexpat - I don't know your background, but please take care in trying to advise people, as you comments are not all correct. I am qualified to advise on these matters.

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