Discussion
Any tax specialists on here? Need a bit of urgent advice...
My wife works for an American company, owned by a VC. She has an exit package that's worth up to 7 figures (paid in USD), depending on the sale value. Company likely to be sold in the next 2 years.
She's been back in the UK since November after 2.5 years working in the US, but the company have just asked her to head up another division based in the Bahamas. Not seen the full package yet, but it will come with a decent salary, bonus and an improvement in her exit package. Role is likely to be for at least a year, maybe longer.
We're both c.50 years old, looking for ways to make our retirement as comfortable as possible, and not having to pay 45% tax on what to us, will be a massive amount of money would obviously be very helpful.
Can anyone advise on UK tax rules for British Nationals living in tax free countries?
The sort of questions that are going through my head are...
If she lives and works in the Bahamas for a year, is she liable for any tax on any money she brings back to the UK at the end of the assignment?
If the VC were to sell the company during the time she's working in the Bahamas, and she gets her exit package paid there, is she liable for any UK tax on it?
How long after receiving her payout would she need to be out of the UK to not be liable for UK income tax?
Could we leave the money in a Bahamian bank and just draw it from there and not be liable for UK tax on it?
Not sure if this is a complication or not, but our intention is to retire to Spain sometime in the next 6-7 years (we already own a property there).
Not looking to do anything dodgy... all needs to be above board and legal.
Any advice much appreciated.
My wife works for an American company, owned by a VC. She has an exit package that's worth up to 7 figures (paid in USD), depending on the sale value. Company likely to be sold in the next 2 years.
She's been back in the UK since November after 2.5 years working in the US, but the company have just asked her to head up another division based in the Bahamas. Not seen the full package yet, but it will come with a decent salary, bonus and an improvement in her exit package. Role is likely to be for at least a year, maybe longer.
We're both c.50 years old, looking for ways to make our retirement as comfortable as possible, and not having to pay 45% tax on what to us, will be a massive amount of money would obviously be very helpful.
Can anyone advise on UK tax rules for British Nationals living in tax free countries?
The sort of questions that are going through my head are...
If she lives and works in the Bahamas for a year, is she liable for any tax on any money she brings back to the UK at the end of the assignment?
If the VC were to sell the company during the time she's working in the Bahamas, and she gets her exit package paid there, is she liable for any UK tax on it?
How long after receiving her payout would she need to be out of the UK to not be liable for UK income tax?
Could we leave the money in a Bahamian bank and just draw it from there and not be liable for UK tax on it?
Not sure if this is a complication or not, but our intention is to retire to Spain sometime in the next 6-7 years (we already own a property there).
Not looking to do anything dodgy... all needs to be above board and legal.
Any advice much appreciated.
For this sum it's worth taking proper professional advice... but simplistically she needs to :
1) establish non-residency in the UK for tax purposes
2) simplistically (again) this means working full time outside of the UK (with no more than 90 days spent in the UK or 28 days working in the UK) for a complete tax year.
3) Any income earned through her full time work outside the UK should then be outside of the UK tax system
4) She may also be able to claim split year treatment from when she took up the overseas full time work to when she completes it either side of completed tax years.
Very simplistic as I say but you should get professional guidance. I'm sure her company would be able to do that.
1) establish non-residency in the UK for tax purposes
2) simplistically (again) this means working full time outside of the UK (with no more than 90 days spent in the UK or 28 days working in the UK) for a complete tax year.
3) Any income earned through her full time work outside the UK should then be outside of the UK tax system
4) She may also be able to claim split year treatment from when she took up the overseas full time work to when she completes it either side of completed tax years.
Very simplistic as I say but you should get professional guidance. I'm sure her company would be able to do that.
Ok, I've done the tax free stuff all over & the key is establishing non-residency in the UK for tax purposes rather than residency elsewhere. If she is working full time in the Bahamas this should be straightforward, you'll hear people spouting about cutting all ties with the UK, selling your house, no UK bank accounts, etc., etc.. It's simply not the case if you are full time employed overseas. You can have you overseas wages paid into a UK account no problem if you wish, you can repatriate your non-resident earnings with no problems. Hope it works out sounds a great opportunity to secure a good retirement.
From what I've read, it's relatively easy to establish residency in the Bahamas for UK Nationals.Though obviously she'll be at least 2 months in to the current UK tax year when she heads out there... so it will overlap UK tax years.
Might be she works there for a year, the sale doesn't happen in that time, and then all we're talking about is the tax on c.$250k... which isn't insignificant, but nowhere near as beneficial as not losing 45% of say $1M.
However, as part of the package, it might be she could negotiate payment of part of her exit package (say $500k - the minimum payout) whilst she is living in the Bahamas.
Might be she works there for a year, the sale doesn't happen in that time, and then all we're talking about is the tax on c.$250k... which isn't insignificant, but nowhere near as beneficial as not losing 45% of say $1M.
However, as part of the package, it might be she could negotiate payment of part of her exit package (say $500k - the minimum payout) whilst she is living in the Bahamas.
At the moment it sounds like she is a UK tax resident (nationality, place of birth etc are not key determinators as to where your tax residency lies). The main test is where a person normally lives. There are tests to ascertain this based on where the permanent home is and how many days the person has spent in the country - with allowance made for brief visits such as holidays or family emergencies.
If she IS a UK tax resident, the tax law that relates to her bonuses or capital distributions from her employer will be UK tax law. Therefore, depending on the nature of these payouts, she will be liable to either UK PAYE and NI on the payouts or UK Capital Gains Tax or a combination of both.
If she can establish non UK tax residency, then these payments will be liable to whatever taxes pertain to the country where she actually resides for tax purposes.
As someone has said, she may need specialist tax advice on this as there are a lot of complex issues covered in your query.
If she IS a UK tax resident, the tax law that relates to her bonuses or capital distributions from her employer will be UK tax law. Therefore, depending on the nature of these payouts, she will be liable to either UK PAYE and NI on the payouts or UK Capital Gains Tax or a combination of both.
If she can establish non UK tax residency, then these payments will be liable to whatever taxes pertain to the country where she actually resides for tax purposes.
As someone has said, she may need specialist tax advice on this as there are a lot of complex issues covered in your query.
Chris Stott said:
From what I've read, it's relatively easy to establish residency in the Bahamas for UK Nationals.Though obviously she'll be at least 2 months in to the current UK tax year when she heads out there... so it will overlap UK tax years.
Might be she works there for a year, the sale doesn't happen in that time, and then all we're talking about is the tax on c.$250k... which isn't insignificant, but nowhere near as beneficial as not losing 45% of say $1M.
However, as part of the package, it might be she could negotiate payment of part of her exit package (say $500k - the minimum payout) whilst she is living in the Bahamas.
The key will be doing a tax year April-April.... so if she goes anytime soon she will need to stay until April 2020... hell there's worse places to have to be!!Might be she works there for a year, the sale doesn't happen in that time, and then all we're talking about is the tax on c.$250k... which isn't insignificant, but nowhere near as beneficial as not losing 45% of say $1M.
However, as part of the package, it might be she could negotiate payment of part of her exit package (say $500k - the minimum payout) whilst she is living in the Bahamas.
This is whatt the HMRC site says...
Work out your residence status
Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).
You’re automatically resident if either:
1. you spent 183 or more days in the UK in the tax year
2. your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year
You’re automatically non-resident if either:
1. you spent fewer than 16 days in the UK (or 46 days if you haven’t been classed as UK resident for the 3 previous tax years)
2. you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
Looks like she would qualify as non-resident under point 2 above (she won't be in the UK for 91 days in a 12 month period). But she would need to be out there for a minimum of 1 year.
Work out your residence status
Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).
You’re automatically resident if either:
1. you spent 183 or more days in the UK in the tax year
2. your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year
You’re automatically non-resident if either:
1. you spent fewer than 16 days in the UK (or 46 days if you haven’t been classed as UK resident for the 3 previous tax years)
2. you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
Looks like she would qualify as non-resident under point 2 above (she won't be in the UK for 91 days in a 12 month period). But she would need to be out there for a minimum of 1 year.
GT03ROB said:
The key will be doing a tax year April-April.... so if she goes anytime soon she will need to stay until April 2020... hell there's worse places to have to be!!
Yes, but there's the split year thing. And although there are worse places to be, we've just had 2.5 years living apart, and we'd like to minimise more time... though an extra 6-9 months to save 500K would obviously be worth it.Looks like she'll need to talk to her account when she gets back to the UK. This needs to be water tight!
Chris Stott said:
This is whatt the HMRC site says...
Work out your residence status
Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).
You’re automatically resident if either:
1. you spent 183 or more days in the UK in the tax year
2. your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year
You’re automatically non-resident if either:
1. you spent fewer than 16 days in the UK (or 46 days if you haven’t been classed as UK resident for the 3 previous tax years)
2. you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
Looks like she would qualify as non-resident under point 2 above (she won't be in the UK for 91 days in a 12 month period). But she would need to be out there for a minimum of 1 year.
Tax year is the key part, not just any 12 months mindWork out your residence status
Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).
You’re automatically resident if either:
1. you spent 183 or more days in the UK in the tax year
2. your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year
You’re automatically non-resident if either:
1. you spent fewer than 16 days in the UK (or 46 days if you haven’t been classed as UK resident for the 3 previous tax years)
2. you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
Looks like she would qualify as non-resident under point 2 above (she won't be in the UK for 91 days in a 12 month period). But she would need to be out there for a minimum of 1 year.
Although I'm a tax accountant I don't do much off shore stuff - so I am not of much help - but I would say please don't rely on HMRC website for advice, as daft as it may sound, they can be wrong, so can the people on the other end of the phone if you ring up. HMRC get out clause is always not to rely on the information they gave you unless its in writing of course its hard to get out of that.
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