Ofshore Banking / Tax Liability

Ofshore Banking / Tax Liability

Author
Discussion

K50 DEL

Original Poster:

9,237 posts

229 months

Thursday 30th August 2007
quotequote all
Hoping that someone here can help.

I've been offered a position based outside of the country for 6 months a year, with the option to extend this via usage of holidays.

What are the thresholds beyond which one doesn't need to pay UK income tax.

If it matters, I have a mortgage here, but precious little else.

Reason for asking is that I'm obviously keen to reduce my tax payments.


ETA: Could a mod please insert the missing F in the thread title as my keyoard appears to be on the fritz

Edited by K50 DEL on Thursday 30th August 15:03

Eric Mc

122,048 posts

266 months

Thursday 30th August 2007
quotequote all
6 months is not enough for you to be deemed to be non-resident for UK tax purposes. You are therefore still a UK Tax Resident and will be liable to UK tax on all your earnings and investment income, no matter where the earnings are "earned" or where the investments are based. However, if the other country involved has a "Double Taxation Agreement" with the UK, you will not pay tax twice on the same income.

K50 DEL

Original Poster:

9,237 posts

229 months

Thursday 30th August 2007
quotequote all
Eric Mc said:
6 months is not enough for you to be deemed to be non-resident for UK tax purposes. You are therefore still a UK Tax Resident and will be liable to UK tax on all your earnings and investment income, no matter where the earnings are "earned" or where the investments are based. However, if the other country involved has a "Double Taxation Agreement" with the UK, you will not pay tax twice on the same income.
Cheers Eric

The country being Angola, I'm not sure that they have an agreement on anything!!
What is the threshold in terms of the number of days that you need to be out of the UK before being able to stop paying UK income tax?

Eric Mc

122,048 posts

266 months

Thursday 30th August 2007
quotequote all
It's quite complicated trying to work out the required number of days to qualify for "tax residency" or "non-tax residency" in the UK. I would strongly advise having a look under "Tax Residency Status" or some similar heading on the HMRC website.

andy_s

19,401 posts

260 months

Thursday 30th August 2007
quotequote all
You need to be out of the UK 9 months out of 12 over an average of 4 years - but you cannot stay in UK longer than 6 months during the averaging period.

1. Get a good accountant. It'll be worth it.
2. Keep all tickets etc.
3. Watch what you do / how you use your cards etc if staying over one or two days too long.
4. Get a good accountant. It'll be worth it.

Eric Mc

122,048 posts

266 months

Thursday 30th August 2007
quotequote all
And there's also a "90 Day Rule" to take into account as well.

thewave

14,703 posts

210 months

Friday 31st August 2007
quotequote all
Leaflet IR20 is a good place to start http://www.hmrc.gov.uk/pdfs/ir20.pdf

Angola doesn't have a double taxation agreement with the UK, but any taxes suffered in that country may be relievable against your UK liability, but a letter from the Inland Revenue would be needed to confirm this. Any half decent accountant would obtain this in advance to hold on your file.

As a general rule of thumb, social security taxes in African countries are not releivable, but the taxes they withhold are.

In some cases, self employment income in countries like this do not attract a class 4 NIC liability, but this is rare, and even though all initial criteria indicates you should be paying class 4, there are some very odd rules (such as there are in Algeria) where even though the person is resident in the UK for tax purposes, he/she is not liable to class 4, it gets complicated though, and without looking into it further I would not know, as i've not come across any Angolan cases before.

Edited by thewave on Friday 31st August 10:07

Rob_J

13,268 posts

222 months

Friday 31st August 2007
quotequote all
Basic rules on establishing non-residency are as follows :

1) A complete tax year IE 6th April - 5th April working outside of the UK
2) Visits to the Uk not to exceed 6 months in any one tax year and not to exceed an average of 90 days per tax uear for the duration you claim non residence.
3) You can claim non-residency from the moment you start working overseas to the moment you return to the UK, BUT you must complete a tax year working overseas.

By way of example your worst case scenario would be to depart the UK on the 7th April 2008 & return on 4th April 2010. In which case you had not completed a tax year so no non-residency. By contrast departing on 5th April 2008 would mean that you could return on the 6th April 2009 & establish non-residency.