Working overseas - 90 day tax rule

[MGYoung]

Morning all,

I will be leaving the UK to work overseas on 14 June 2008.

My understanding is that I will not pay any UK tax if I am resident in the UK for for less than 90 days (i.e. 89 days) in any one tax year.

Taking 5 April 2008 as day No. 1 of this tax year then the day I leave the UK (14 June 2008) is day 71 of this tax year.

This leaves me 89 - 71 = 18 days in which I can be resident in the UK until then end of the 2008 / 2009 tax year. I plan to come home either 2 or 3 times between 14 June 2008 and the end of the 2008 / 2009 tax year.

My understanding is that the days in which I arrive and leave the UK count as part of the 89 allocation. Is this correct?

One thing I am unsure about is that my flight leaving from the UK departs around 2pm on 14 June 2008 but doesn't land until 12.30am on 15 June 2008 local time (UK time will be three hours before this so 9.30pm on 14 June 2008). By passport will therefore be stamped on arrival with the date of 15 June 2008. What evidence do I need to provide to HMRC to prove that I was not in the country for more than 89 days in the tax year.

I have filled out the HMRC form reference P85 and will complete and submit form reference CF83 (National Insurance contribution when working abroad) shortly after I leave. I need my P45 before I can submit form P85.

Can any of the accountants out there confirm if my understanding is correct?

Thanks and regards

Martin.

[Eric Mc]

It is a lot more complex than that.

From what I know, if you are resident in the UK for more than 182 days in any tax year, you are a UK tax resident.

The 90 days rule relates to those who are out of the country for more than 182 days and would normally be looked on as non-resident. However, if they spend more than 90 days back in the UK in any tax year, they will become tax resident again.

"Residence - non-residence" is quite a tricky area.

[thewave]

MGYoung said:

Morning all,

I will be leaving the UK to work overseas on 14 June 2008.

My understanding is that I will not pay any UK tax if I am resident in the UK for for less than 90 days (i.e. 89 days) in any one tax year.

Taking 5 April 2008 as day No. 1 of this tax year then the day I leave the UK (14 June 2008) is day 71 of this tax year.

This leaves me 89 - 71 = 18 days in which I can be resident in the UK until then end of the 2008 / 2009 tax year. I plan to come home either 2 or 3 times between 14 June 2008 and the end of the 2008 / 2009 tax year.

My understanding is that the days in which I arrive and leave the UK count as part of the 89 allocation. Is this correct?

One thing I am unsure about is that my flight leaving from the UK departs around 2pm on 14 June 2008 but doesn't land until 12.30am on 15 June 2008 local time (UK time will be three hours before this so 9.30pm on 14 June 2008). By passport will therefore be stamped on arrival with the date of 15 June 2008. What evidence do I need to provide to HMRC to prove that I was not in the country for more than 89 days in the tax year.

I have filled out the HMRC form reference P85 and will complete and submit form reference CF83 (National Insurance contribution when working abroad) shortly after I leave. I need my P45 before I can submit form P85.

Can any of the accountants out there confirm if my understanding is correct?

Thanks and regards

Martin.

Hi Martin,

As Eric rightly states, it's a lot more complicated than the revenue lead you to believe. Reading through IR20 (http://www.hmrc.gov.uk/pdfs/ir20.pdf) will give you a good understanding of the rules for remaining non resident, and it's recently been updated too.

As a note though, recent cases have been decided on the number of 'midnights' spent in the UK and have ignored the travel day rule still stated in the IR20 leaflet (moving the goalposts, retrospectively applying it, and still not updating their guidance )

As a side, where are you going to work?

[MGYoung]

I'm going to work in Dubai.

[Fer]

MGYoung said:

I'm going to work in Dubai.

Can you recommend any leads or job sites for Dubai?

[Horse_Apple]

MGYoung said:

I'm going to work in Dubai.

Depending on the company you are working for, they could do all of this for you.

A lot of people are re-locating out of the City for Dub at present and the companies taking them on have specialist departments for sorting out personal taxation.

[944gav]

If I am reading your original post correctly, I assume you think you will not be laible to UK tax on your UK earnings before you leave as you are here for less than 91 days? This would not be the case.

To stop being liable to UK tax, you have to be regarded as non UK resident. To do this, you need to leave the UK for at least one full tax year, returning less than 91 days each year. If you intend to return before 6 April 2010, you will remain UK resident and liable here on worldwide income. If you intend to stay out longer and satisfy the 91 day rule, you will be regarded as non UK resident from the day after you leave and the year is effectively split so you will not have to pay UK tax on non-UK earnings.

When you send your P85 with your P45 to HMRC, if you meet the conditions above, you will receive a repayment as your full years personal allowances will be set against your earnings. If these are less than £5,435 you will have all of your tax refunded.

Bear in mind that if you state on the P85 you intend remaining outside the UK for at least one complete tax year and you return in a year for example, you will be liable to UK tax on the income from Dubai when you return.

[MGYoung]

Fer said:

MGYoung said:

I'm going to work in Dubai.

Can you recommend any leads or job sites for Dubai?

Depends on your line of work? www.justconstruction.net is a good site. Other than that the usual monster and hot jobs sites are worth a look.

Best of luck.

Martin.

[MGYoung]

Eric Mc said:

"Residence - non-residence" is quite a tricky area.

Jees, you're not wrong!. I've downloaded the IR20 booklet. Why on earth does it have to be this complicated!!

The one thing that I'm still not clear on is that if I am resident in the UK at the start of the 2008 / 2009 tax year but become non-resident from 14 June 2008 and remain non-resident for the whole of the 2009 / 2010 tax year will I pay UK income tax on my overseas earnings for the remainder of the 2008 / 2009 tax year assuming that I average less than 90 days in the UK over this period?

Thanks for all the advice.

Martin.

Edited by MGYoung on Wednesday 28th May 12:20

[944gav]

MGYoung said:

The one thing that I'm still not clear on is that if I am resident in the UK at the start of the 2008 / 2009 tax year but become non-resident from 14 June 2008 and remain non-resident for the whole of the 2009 / 2010 tax year will I pay UK income tax on my overseas earnings for the remainder of the 2008 / 2009 tax year assuming that I average less than 90 days in the UK over this period?

No. The year is split so that you are treated as Resident up to 14 June and liable to UK tax for the period 6/4/08 - 14/06/08 and then become non resident from 15/06/08 and are only then liable to UK tax on income arising here e.g bank interest and property income.

[thewave]

944gav said:

MGYoung said:

The one thing that I'm still not clear on is that if I am resident in the UK at the start of the 2008 / 2009 tax year but become non-resident from 14 June 2008 and remain non-resident for the whole of the 2009 / 2010 tax year will I pay UK income tax on my overseas earnings for the remainder of the 2008 / 2009 tax year assuming that I average less than 90 days in the UK over this period?

No. The year is split so that you are treated as Resident up to 14 June and liable to UK tax for the period 6/4/08 - 14/06/08 and then become non resident from 15/06/08 and are only then liable to UK tax on income arising here e.g bank interest and property income.

Bank interest is not taxable if you are non resident and not ordinarily resident. As your intention is to work and reside overseas and not spend more than 90 days in the UK, you will be non resident and not ordinarily resident. P85 is essential for claiming this status. Assuming the contract abroad is a rolling one, and not a single 12 month contract.

[MGYoung]

Thanks for all the advice. My contract overseas is a permanent position. I don't know exactly how long I will spend in dubai but the project I will be joining is scheduled to run until november 2010 so it is likely that I will non-resident until then.

I've lined up a meeting with an accountant on Monday to go through the finer details.

Thanks again.

Martin.

[944gav]

thewave said:

Bank interest is not taxable if you are non resident and not ordinarily resident.

What you posted is a bit misleading. Bank interest arising in the UK is taxable when you are non resident/not ordinarily resident.

As your personal allowances can be used against any UK arising income, if your total income including interest is below £5,435 for the current year you would not pay tax on it.

If, however, your interest income from a UK account was say £10,000 for the year, you would have to pay UK tax on the amount of interest above £5,435.

[Biggles111]

Some good advice throughout above. I have been non-resident on and off for a considerable period and am happy to put you in touch with someone if for example you need an accountant who knows this area fully - it is complex and not worth risking doing yourself in my view.

Key points to watch are:
- Days in/out - this changed at the last budget. The pre-budget proposal was that days travelling in and days on which you are travelling out would both be treated as time in. This was changed so that only one of the days (I can't remember which) is treated as a day in - makes more sense and is easy to calculate
- Keep proof of travel for several years afterwards. Passport stamps help, but even better keep all you boarding cards. If anyone does ever ask for proof you'll have it.
- The 90 day figure is a rolling average over an up to 4 year period. Therefore if say due to family issues you were to spend 110 days over in year two you can still be ok, so long as you were on 70 days or less in the first year.
- Sounds obvious but try to save a stack of cash - I have seen too many expats who work overseas, blow it all on booze/hookers etc and are penniless when they come back home!
- If you get stock options or similiar through your employment try to delay getting them granted until you are overseas, and exercise them whilst still out - can save you up to 40%.

[Howitzer]

In 2004 I left the UK to work in Dubai also, in Jebel Ali.

I left the on October the 4th and all my earnings between the start of the tax year and then were taxed. When I had left I received a full tax refund for all my earnings in 2004 up to that date after going to my local tax office.

Dave!