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.
I've done everything that you mention in your post. Right down to the location.
British expats website is quite handy for stuff like this but when I went in 2008 you had to do a full tax year out of the uk to get your non-resident status for tax purposes. You'll need to read up on the hmrc website about how many days you can spend in the uk per year but from the top of my head it's around 90 days max.
Overpaying your mortgage should be fine although it's worth checking with them. 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.
Get yourself on britishexpats.com. You'll find loads of info in their middle eastern section. Dubai is very very different to over here. It's brilliant but their way of doing business and such takes a bit of getting used to.
Top tip if you go....don't spunk everything you earn. It's very easy to do.
British expats website is quite handy for stuff like this but when I went in 2008 you had to do a full tax year out of the uk to get your non-resident status for tax purposes. You'll need to read up on the hmrc website about how many days you can spend in the uk per year but from the top of my head it's around 90 days max.
Overpaying your mortgage should be fine although it's worth checking with them. 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.
Get yourself on britishexpats.com. You'll find loads of info in their middle eastern section. Dubai is very very different to over here. It's brilliant but their way of doing business and such takes a bit of getting used to.
Top tip if you go....don't spunk everything you earn. It's very easy to do.
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.
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.
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.
Fats25 said:
Thanks for the very succinct response.
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.
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.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.
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 tax year
There cannot be a period of 31 days or more in a row where no overseas work is done (annual leave etc. is excluded)
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).
Edited by LC23 on Tuesday 18th February 21:06
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?!
I will also add that if you come back and work in the UK, you will remain liable to UK tax on income for substantive work duties:
http://www.hmrc.gov.uk/manuals/eimanual/EIM40204.h...
http://www.hmrc.gov.uk/manuals/eimanual/EIM40204.h...
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:
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.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.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.............
Fats25 said:
It wasn't a dig! Your info has been very helpful. If was just one of the only bits (I think) I remembered!
It certainly is not easy for a layman to understand. I'm sure it could really be simplified.............
It used to be easier, but then a few people were taking the piss. It certainly is not easy for a layman to understand. I'm sure it could really be simplified.............
Make the most it though I'm sure global taxation for Brits will arrive at some point.
Fats25 said:
It wasn't a dig! Your info has been very helpful. If was just one of the only bits (I think) I remembered!
It certainly is not easy for a layman to understand. I'm sure it could really be simplified.............
I didn't take it as a dig. It certainly is not easy for a layman to understand. I'm sure it could really be simplified.............
It could be simplified as it could just be a straightforward day count to establish whether you spend enough days in the UK to be resident or not. In the early days there was the expectation the SRT would go down this route. It ended up the polar opposite. Again my view but it seems HMRC have tried to think of every possible angle of someone "playing the system" and attempted to counteract it. In reality, at least the expats I deal with, most people have very little option as to how much time they have to spend here. Most people are employed and have to work where their employer sends them.
GT03ROB said:
It used to be easier, but then a few people were taking the piss.
Make the most it though I'm sure global taxation for Brits will arrive at some point.
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.Make the most it though I'm sure global taxation for Brits will arrive at some point.
We may well end up with a US system of worldwide taxation for citizens.
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.
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