Living abroad, bringing money back to UK - tax implication

[GT03ROB]

LC23 said:

That was the point though, in the grand scheme of things it was very few people. And those people are probably the ones that can still structure their tax affairs to deal with any new rules HMRC comes up with.

We may well end up with a US system of worldwide taxation for citizens.

Although to be honest for most true expats the rules have not really had an impact since they did away with the 365day rule. I've been doing it on & off for the last 23yrs & the basics remained the same.

[LC23]

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.

[Fats25]

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]

Tax equalisation is an oddity into the mid-east most don't do it.

Without knowing the details of each package it would be difficult to work out which is best, but a local package into the mid-east is rarely good. Do not underestimate the cost of living.

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

[Fats25]

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?

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]

Fats25 said:

I don't understand the numbers?

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!

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.

[Fats25]

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.

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]

I've not seen that sort of package offered to the Middle East. It will vary industry by industry but to offer local terms (so tax free salary with whatever uplift you can negotiate) and then add expat benefits on top of that is not likely to happen. You've been given two options:

Local terms
Tax equalised expat assignment

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've worked with many multinationals on their expat assignees affairs and I have never seen anyone offered a local hire + expat benefits package to Dubai.

[GT03ROB]

Fats25 said:

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.

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.

I'm not suggesting that I require to earn that! We may therefore be talking at crossed purposes, mixing whats needed against whats on offer. As you can see from my profile I work oil & gas and have been with major US engineering/construction companies. This may give a different perspective from other industries. my employer is currently trying to get me to Saudi for a project, the deal there is structured slightly different due to Saudi labour laws, but essentially gives a far higher package than quoted above (UK base + 80% (60hrs/wk) + all accomodation/food/local transport/utilities covered + no tax). These type of deals are not unusual for this industry. The big difference maybe that these are generally for shorter duration, around 2 years & generally are only available on single status except for senior positions.

As for what I spend the additional money on..... my garage.

Edited by GT03ROB on Wednesday 19th February 08:54

[Fats25]

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]

Fats25 said:

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.

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.

[Fats25]

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.

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]

Fats25 said:

I know that! That is the easy bit - and as above - I know the local is better for us today.

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.

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.

[Fats25]

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.

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.

[Jules360]

Fats25 said:

I don't believe I did ask! You decided to answer a question that didn't exist - and I gave you some additional info.

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.

Fine, just remember that whilst there is no income tax here, they get you in many ways. This place is great at extracting your money.

[Mezger]

Holy Thread Resurrection, we may, potentially, be doing the opposite, i.e. returning to Blighty after 4.5 years away.

I will (of course) seek proper tax advice, but directionally, does anyone know if your foreign earnings are liable for UK tax if you come back midway through the UK tax year?

For example, if we were to return in October this year, are we liable to pay any UK tax on money earned abroad (wages and investments) between April 6th 2017 and when we return in October 2017?

[GT03ROB]

Mezger said:

Holy Thread Resurrection, we may, potentially, be doing the opposite, i.e. returning to Blighty after 4.5 years away.

I will (of course) seek proper tax advice, but directionally, does anyone know if your foreign earnings are liable for UK tax if you come back midway through the UK tax year?

For example, if we were to return in October this year, are we liable to pay any UK tax on money earned abroad (wages and investments) between April 6th 2017 and when we return in October 2017?

Nope.

This assumes you were non-resident for tax year 2016/17 which seems you are. It's called split year treatment & will be covered on you tax return for 17/18. Just watch your days in the UK from start of tax year 17/18 until you actually return. Your 90 days/year allowance is accrued at a rate of about 7 days per month.

[Mezger]

GT03ROB said:

Nope.

This assumes you were non-resident for tax year 2016/17 which seems you are. It's called split year treatment & will be covered on you tax return for 17/18. Just watch your days in the UK from start of tax year 17/18 until you actually return. Your 90 days/year allowance is accrued at a rate of about 7 days per month.

Thanks for the quick response, I guess you're also working overseas or an early bird. ;-)

So, if I understand correctly, what you're saying is no foreign earnings are liable for tax for 16/17 tax year ie the one that finishes April 5th 2017. This is clear.

However my question is the impact if any for the 17/18 tax year - which is when I would potentially be returning e.g. October 2017 how does that work. Say for example I work abroad from April 6th to October 6th 2017 then I return to the UK and start work in UK November 2017. Do I have to also pay UK tax on the wages and investments between April 6th and October 6th 2017?

[GT03ROB]

Mezger said:

Thanks for the quick response, I guess you're also working overseas or an early bird. ;-)

So, if I understand correctly, what you're saying is no foreign earnings are liable for tax for 16/17 tax year ie the one that finishes April 5th 2017. This is clear.

However my question is the impact if any for the 17/18 tax year - which is when I would potentially be returning e.g. October 2017 how does that work. Say for example I work abroad from April 6th to October 6th 2017 then I return to the UK and start work in UK November 2017. Do I have to also pay UK tax on the wages and investments between April 6th and October 6th 2017?

Yes I'm in Kuwait!

You are non-resident for UK tax purposes until October 2017 assuming you have already established non-residency which based on what you say you have. All wages earned prior to re-establishing residency remains outside of the UK tax system. Your tax return for 17/18 will ask you if you are claiming spilt-year treatment.

[Eric Mc]

Luckilly for you, you will probably have re-established your UK residence by tax year 2017/18 and you will be able to resolve your tax liabilities (if any) using the Self Assessment system.

Unfortunately, Self Assessment is being abolished on 6 April 2018 and for tax year 2018/19 on your situation would have to be resolved using the new Making Tax Digital system which I am sure will be far less straightforward in circumstances like yours.