Living abroad, bringing money back to UK - tax implication
Discussion
I wonder if someone here could assist in answering a question that I do not seem to be able to get an answer on. I will be getting advice from my accountant and FA, but I am not going to do this until I have the final offer so I can get everything answered in one go. In the meantime I have managed to find most information I have been looking for, but not this bit.
Let me give some background first. I have been offered the opportunity of a role abroad (Dubai if relevant), and having read this link, believe that we would both qualify under the "third automatic overseas test" for tax purposes. So lets make an assumption here that is correct.
All that will remain in the UK from a residency perspective is a house we will rent out, and some stuff in storage (possibly including a couple of vehicles). I understand the tax implications of this, in that we will need to pay tax on the profit (rent received -fees, -interest paid etc) - although I am not sure of what amount this tax would be. Is there a generic calculator for this?
This is where the main questions come in......
On top of this we would want to overpay our mortgage (as we do today) with money that has been earned abroad, and put some into an off-set bank account. Is there any tax to pay for this? i.e. is there any tax with returning money to the UK to pay off mortgage or put into off-set account?
Similar question for if/when we return (or even for duration of stay). If we decided to return to the UK, and had some savings in Dubai, would we be able to just transfer these back to UK when we returned (or more likely to offset risk of exchange rate etc - transfer any savings back to UK rather than leave in Dubai during the duration of our stay) - or would there be tax implications of returning money to UK?
Sorry if these are stupid questions - but I just cannot find any information on it. Perhaps I cannot find the information as it is a non-issue, and there are no implications, I just want to understand as it will make a difference to my calculations to see if this offer is feasible. There is no point me having savings and not being able to get these savings back to the UK!
Thanks in advance for any replies.
Let me give some background first. I have been offered the opportunity of a role abroad (Dubai if relevant), and having read this link, believe that we would both qualify under the "third automatic overseas test" for tax purposes. So lets make an assumption here that is correct.
All that will remain in the UK from a residency perspective is a house we will rent out, and some stuff in storage (possibly including a couple of vehicles). I understand the tax implications of this, in that we will need to pay tax on the profit (rent received -fees, -interest paid etc) - although I am not sure of what amount this tax would be. Is there a generic calculator for this?
This is where the main questions come in......
On top of this we would want to overpay our mortgage (as we do today) with money that has been earned abroad, and put some into an off-set bank account. Is there any tax to pay for this? i.e. is there any tax with returning money to the UK to pay off mortgage or put into off-set account?
Similar question for if/when we return (or even for duration of stay). If we decided to return to the UK, and had some savings in Dubai, would we be able to just transfer these back to UK when we returned (or more likely to offset risk of exchange rate etc - transfer any savings back to UK rather than leave in Dubai during the duration of our stay) - or would there be tax implications of returning money to UK?
Sorry if these are stupid questions - but I just cannot find any information on it. Perhaps I cannot find the information as it is a non-issue, and there are no implications, I just want to understand as it will make a difference to my calculations to see if this offer is feasible. There is no point me having savings and not being able to get these savings back to the UK!
Thanks in advance for any replies.
CRB14 said:
Also make sure you tell them if you are going to rent out and seek permission to let. You'll then have to apply for non-resident landlord status. The rules may have changed since I did mine 6 years ago.
I brought my saving back without any issues at all.
Top tip if you go....don't spunk everything you earn. It's very easy to do.
Interesting re the non resident landlord status, I had completely missed that bit! I brought my saving back without any issues at all.
Top tip if you go....don't spunk everything you earn. It's very easy to do.
It is not going to be a golden goose trip, I will actually be losing around 25% from my UK disposable income, but the role is a long term career opportunity, and obviously an opportunity for a different lifestyle as well. Hence the need to understand all the financial aspects, and ensure we can continue to save as we do in UK already. I don't want to treat it as a 3 year holiday and come back with a 3 year hole in my savings plan.
LC23 said:
I am going to assume that you do meet the full time working abroad test and you will therefore be non UK tax resident for the duration of your time outside the UK. Please also check the relevant split year tests to ensure you can claim split year for the year you leave (and also looking forwards the year you return) the UK.
On the basis you are non UK tax resident the employment income earned for work carried out outside the UK is not taxable in the UK. Even if this is remitted to the UK there is no UK tax on the employment earnings. This is also true for investment income you earn outside the UK. As a non UK tax resident you are only liable to UK tax on UK source income.
Thanks for the very succinct response. On the basis you are non UK tax resident the employment income earned for work carried out outside the UK is not taxable in the UK. Even if this is remitted to the UK there is no UK tax on the employment earnings. This is also true for investment income you earn outside the UK. As a non UK tax resident you are only liable to UK tax on UK source income.
To confirm (I have had to google the word remit!) - this means that we can remit (send money in payment) into savings as well as paying off mortgage? Realistically we would transfer any surplus into off-set mortgage to offset the interest anyway, and use that as our savings when we came back.
With regards to the Test for being a non UK tax resident, I have read that link I posted above and I believe we will meet it, but I will obviously discuss this further with my accountant. It is a little confusing at best to my non accountant brain!
My plan would be to go out for April 6th, and I will not have earned anything from March 31st so the 1st year should be simplified for me. My wife will not be so fortunate as she will travel later, and will have to be as per the split year - but again I believe she will qualify. It may means she has to travel even later than originally planned (due to a project she has at work which would mean her needing to work in UK, and it may encroach on the number of working days in UK allowed across tax year).
Also a good point re return dates - this is something we will have to bear in mind nearer the time of return.
LC23 said:
Correct, you can transfer the earnings relating to your Dubai work along with any offshore interest you earn to the UK (to either pay off the mortgage or put into savings) without creating a UK tax charge on that income. Bear in mind that offshore investments are not liable to UK tax, so given your tax free status in Dubai you may wish to consider siting investments outside the UK for tax purposes. Ultimately it is an investment decision for you.
If you are looking to meet the full time work abroad (FTWA) test for 2014/15 then please ensure you leave the UK prior to 6 April 2014 to keep things simple for yourself. To simplify the FTWA test:
You must work a minimum of 35 hours per week on average outside the UK over the period of working abroad
You cannot come back to the UK for more than 90 days (midnights) per tax year
You cannot work more than 30 days in the UK per tax year (a UK workday being one on which you work more than 3 hours in the UK).
Again - thanks for the response. If you are looking to meet the full time work abroad (FTWA) test for 2014/15 then please ensure you leave the UK prior to 6 April 2014 to keep things simple for yourself. To simplify the FTWA test:
You must work a minimum of 35 hours per week on average outside the UK over the period of working abroad
You cannot come back to the UK for more than 90 days (midnights) per tax year
You cannot work more than 30 days in the UK per tax year (a UK workday being one on which you work more than 3 hours in the UK).
On the FTWA the last two points are easy to meet - and very clear even on the split year calculations. The first point again will not be an issue as it is real working hours rather than contracted hours according to the link I posted. However the calculations require a bit of brain power!
LC23 said:
The calculations are ridiculous but they are just trying to establish that you do work the 35 hours plus overseas.
Please also note the second point I added regarding the break from overseas work.
Noted - it will be a fixed one employer contract, so again should not be an issue for the duration. Please also note the second point I added regarding the break from overseas work.
I cannot fathom why they care if you have a break in excess of 31 days?!
LC23 said:
GT03ROB said:
Very relevant if you change employer or contract of employment.
Very true. They allow you a certain number of days which do not count towards a break where you move from one contract to another. It is in the SRT document as I cannot remember the number off the top of my head.LC23 said:
Fats25 said:
15 from memory of reading the doc for first time earlier this evening!
Try reading the original drafts of the documents and legislation then having to unlearn some of it when they made last minute changes before enacting! One of the aims was to "simplify" the rules around tax residence in the UK. Having worked with the old rules for 14 years I can say from my point of view things have not been simplified by the SRT.
It certainly is not easy for a layman to understand. I'm sure it could really be simplified.............
There is a certain irony here for me.......
The company I am dealing with is a large US company and they have actually made me two offers.
1) Is an assignment (ex pat) package
2) Is a local package
For the first one the company implements a Tax Equalization scheme. I am sure you guys know the merits of this. The problem is coming from the UK to a Tax Free country I cannot make those numbers work at all, by the time my approx. 45% has been withheld (and not paid!). Expectation from the company is still that I would register as a Not UK resident tax payer. I am the wrong demographic to make it work. Coming from a low income tax country (like Singapore, Hong Kong) it obviously works well.
I am having to therefore go down the local route to even have a chance of making the numbers work, and as stated earlier will actually be taking a disposable income cut due to the higher cost of living.
So (in my case) it is not trying to play the system, it is trying to understand the system, to understand if I can afford to take an opportunity for a lifestyle change, and a career opportunity.
The company I am dealing with is a large US company and they have actually made me two offers.
1) Is an assignment (ex pat) package
2) Is a local package
For the first one the company implements a Tax Equalization scheme. I am sure you guys know the merits of this. The problem is coming from the UK to a Tax Free country I cannot make those numbers work at all, by the time my approx. 45% has been withheld (and not paid!). Expectation from the company is still that I would register as a Not UK resident tax payer. I am the wrong demographic to make it work. Coming from a low income tax country (like Singapore, Hong Kong) it obviously works well.
I am having to therefore go down the local route to even have a chance of making the numbers work, and as stated earlier will actually be taking a disposable income cut due to the higher cost of living.
So (in my case) it is not trying to play the system, it is trying to understand the system, to understand if I can afford to take an opportunity for a lifestyle change, and a career opportunity.
LC23 said:
Unless you get huge additional benefits by going on an assignment package rather than local hire, tax equalisation is highly unlikely to be the right way to go for you from a tax point of view. Most companies wouldn't even look to tax equalise to a no tax country. Do look at the numbers as a whole though. Those extra benefits add up quickly.
The companies view is that the Tax Equalization is exactly that. An equalizer. They keep stating if they moved me to Scandinavia (never going to happen!) then I would benefit. It is blatantly a US driven scheme, that works for a US person. Anyway - it does not work for me.I have done the numbers, and to be honest the local package works out much better for us (2 adults, 0 children). The only bit of the assignment package that really adds up and I will miss out on is the 2x trips home per year (1 each), and schooling. There are a couple of bits for maintenance on property that is rented out, and storage costs, but these are negligible.
I can cover the trips home if I need them, and as above have no kids. The relocation (getting out there) package is the same. They just don't bring you back - but again I am not too fussed with that - and there are ways and means.......
The local package means more cash in my pocket, and more housing allowance strangely. The packages are like chalk and cheese there is no alignment I can see!
GT03ROB said:
I'll give you an of examples of the type of expat package I would normally be looking at into the mid-east.
Into Abu Dhabi or Dubai city : uk base + 10% uplift + 20% (48hr work week) all found (housing/local transport/food/utilities) tax free
I don't understand the numbers?Into Abu Dhabi or Dubai city : uk base + 10% uplift + 20% (48hr work week) all found (housing/local transport/food/utilities) tax free
Are you saying:-
UK Base - (do you mean Gross or Net?)
+ 30% in total
to equal UK standard of living (housing/local transport/food/utilities)?
48 hour week would be a godsend - I do more than that now!
GT03ROB said:
Gross.
So basically on £50k uk base, this becomes £65k in your bank. Company then provides accommodation, local transport, utilities, and either food allowance or cost of living differential.
Firstly you obviously have a lot more experience of this than I have, and I don't want to offend, but that number seems a very high markup. So basically on £50k uk base, this becomes £65k in your bank. Company then provides accommodation, local transport, utilities, and either food allowance or cost of living differential.
It is suggesting that you require to earn 75% (Gross Salary + 45%Tax not paid + 30%) more money than you earn in the UK, and that money is not to service your accommodation, transport, utilities and food/COLA. What are you spending this additional 75% in your pocket?! I know beer is expensive over there, but what else?!
I have worked out that I will need an additional 60% for living expenses compared to UK for food, accommodation, vehicles, utilities, UK expenses to be serviced etc - and have factored this into my calculations. I should assume it will be same sort of mark-up for "entertainment" on top of this.
Assuming 75% markup - and yet that not including living costs seems particularly extravagant.
LC23 said:
Both have their pros and cons but unless they are desparate to get you over there or industry norm dictates, you are not going to be given the best of both worlds.
I wasn't suggesting they will change their structure for me. It will be either Tax Equalized assignment, or Local.The way it has been left is that I have told them I do not think we can make the Assignment package work as it is too restrictive, and the additional benefits available to me, even added to the tax equalized package, do not add up to the Local package on offer. They need to pursue Local package. I need a bit of movement on this, and I have told them what they need to do to this offer to make me accept it, and the ball is in their court now.
Wait and see game now.
I have one more iron in the fire with regards my wife's work - as I would like this opportunity to happen - but I will hold that one to myself for now.
Out of interest what is your profession? I appreciate your knowledge and input here.
Jules360 said:
Is this not getting over complicated? For the expat package, take the gross base and deduct the tax. Then add in the benefits (rent, utilities, car, club memberships, whatever else), Then compare this to the local salary plus any benefits (if any). Which number is biggest ?
Just bear in mind that if you rent a villa, utilities can be expensive - GBP 1k is not unusual per month. On the upside, cars are cheaper than in the UK and petrol is almost free.
I know that! That is the easy bit - and as above - I know the local is better for us today.Just bear in mind that if you rent a villa, utilities can be expensive - GBP 1k is not unusual per month. On the upside, cars are cheaper than in the UK and petrol is almost free.
The hard bit is to predict the future. Package will stay the same on local, but would change considerably if kids were to come along on assignment.
Also what the actual costs of living will be compared to UK. I have had a pretty good stab at it from info I have found from people I know, and reading what I have picked up on forums, so I think I know where I stand - and the utilities costs are not a million miles off of £1k per month budgeted.
As above I cannot predict the future, so I need to go with the Today package, and that is local. I will deal with the future when it comes. However to future proof as best I can I have asked for an increase on the offer. That is why I am now waiting.
Jules360 said:
In that case, why ask? And since you currently have no kids and have said it's likely to be a 3 year assignment, then school fees do not come into it.
Only trying to help, Jeeeeezzz. Work it out for yourself fella.
I don't believe I did ask! You decided to answer a question that didn't exist - and I gave you some additional info.Only trying to help, Jeeeeezzz. Work it out for yourself fella.
The questions I asked were answered very well, and gave me some great information, and others gave me some great additional info. 3 years is very quick - hence it is a consideration - also understanding the situation helps to complete the negotiations.
Gassing Station | Finance | Top of Page | What's New | My Stuff