Flying longhaul and living abroad
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Flying longhaul and living abroad
Anyone here flying longhaul for BA or Virgin and living abroad such as in France, Spain or Ireland? Was wondering if it is possible to avoid tax by doing so and if so, what are the restrictions?
aka Capt PPRuNe
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Suggest you get a bit more advice from the 'experts' at the inland Revenue (or whatever it's called these days).
To help you on your way try reading the following as a starter:
http://search2.openobjects.com/kbrok...t=0&qt=aircrew
To help you on your way try reading the following as a starter:
http://search2.openobjects.com/kbrok...t=0&qt=aircrew
Join Date: Mar 2000
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Can't reply specifically about BA/VS but the duty time may factor into the equation at some point...maybe.
Example, from rather long ago.
Several pilots at TWA, being senior and dual nationals (UK/USA) decided they would rather live in the UK, and fly out of JFK (base) to LHR.
So far so good.
They would usually deadhead to JFK the day before, have crew rest, then operate.
This became rather a drag, so then the scenario was changed to deadhead to JFK, then operate three hours later, JFK-LHR.
This went on for awhile until....
A TWA 747 was noticed descending from the overcast at 400agl, with the landing gear still neatly folded in the wheel wells.
Opps!
The tower noticed of course, and the aircraft went around.
TWA management got wind of this straight away of course, and the Captain ahhh, retired, the F/E likewise, and the First Officer received a year off without pay.
Oh yes, the idea of avoiding US taxes didn't work either, as the IRS disallowed the idea, and the UK Inland Revenue wanted their slice as well.
An expensive scenario for all concerned.
Another group from TWA decided they would rather live in the Bahamas, and commute to JFK.
No US residency, no US taxes?
That didn't work either, as the IRS decided otherwise.
Some of the TWA guys were quite clever, to no avail...
Example, from rather long ago.
Several pilots at TWA, being senior and dual nationals (UK/USA) decided they would rather live in the UK, and fly out of JFK (base) to LHR.
So far so good.
They would usually deadhead to JFK the day before, have crew rest, then operate.
This became rather a drag, so then the scenario was changed to deadhead to JFK, then operate three hours later, JFK-LHR.
This went on for awhile until....
A TWA 747 was noticed descending from the overcast at 400agl, with the landing gear still neatly folded in the wheel wells.
Opps!
The tower noticed of course, and the aircraft went around.
TWA management got wind of this straight away of course, and the Captain ahhh, retired, the F/E likewise, and the First Officer received a year off without pay.
Oh yes, the idea of avoiding US taxes didn't work either, as the IRS disallowed the idea, and the UK Inland Revenue wanted their slice as well.
An expensive scenario for all concerned.
Another group from TWA decided they would rather live in the Bahamas, and commute to JFK.
No US residency, no US taxes?
That didn't work either, as the IRS decided otherwise.
Some of the TWA guys were quite clever, to no avail...
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Actually lemon there are loads of guys at BA who live in the places you mention, and plenty further afield.
I know that many pay little or no tax.
When you start with either BA/VS on longhaul then I'm sure you'll be inundated with advice from the "commuters"!
I know that many pay little or no tax.
When you start with either BA/VS on longhaul then I'm sure you'll be inundated with advice from the "commuters"!
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Wouldn't wish to comment on the actual question as that is one for the professionals, but would like to observe in relation to the US situation 411A raises that the US tax system is unusual in that they consider any income earned worldwide by a US citizen, or any income worldwide earned by a non-US citizen living in the US is liable to tax. Most countries operate a reciprocal arrangement so that as long as one or the other gets you then both are happy. Thus living in The Netherlands but renting my house out in the UK, I am liable for UK tax on my rental income, and NL tax on my salary.
Thus in our company any US expats get a different pay package to take account for the fact the the US authorities and the local authorities will both want a chunk.
Thus in our company any US expats get a different pay package to take account for the fact the the US authorities and the local authorities will both want a chunk.
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As I understand it, UK-based pilots living in other EU countries can make some tax savings at the moment, but the whole system is currently under review and may well change.
There are many VS pilots living in other European countries. None have suggested to me that they avoid tax altogether. Most work under the arrangements for international aircrew in their country of residence, and make sure that they don't exceed the maximum stay in UK so they are not liable for UK tax. That also requires them to effectively have no ties in UK, so owning a house here can, I understand, cause problems.
Some countries, eg France, have more advantageous tax arrangements for longhaul aircrew than others, which can mean that the overall tax bill is considrably lower than in the UK. However, the process of EU tax 'harmonisation' is ongoing, and I would expect such arrangements either to become EU-wide, or to disappear altogether. You'll not be surprised which outcome my money is on...
As or 411A's story, it's very interesting, but the distances people commute within Europe are very similar to those considered normal in the US, though there is a far smaller proportion of the aircrew population doing it. Transatlantic commuters do exist, but they are very rare!
There are many VS pilots living in other European countries. None have suggested to me that they avoid tax altogether. Most work under the arrangements for international aircrew in their country of residence, and make sure that they don't exceed the maximum stay in UK so they are not liable for UK tax. That also requires them to effectively have no ties in UK, so owning a house here can, I understand, cause problems.
Some countries, eg France, have more advantageous tax arrangements for longhaul aircrew than others, which can mean that the overall tax bill is considrably lower than in the UK. However, the process of EU tax 'harmonisation' is ongoing, and I would expect such arrangements either to become EU-wide, or to disappear altogether. You'll not be surprised which outcome my money is on...
As or 411A's story, it's very interesting, but the distances people commute within Europe are very similar to those considered normal in the US, though there is a far smaller proportion of the aircrew population doing it. Transatlantic commuters do exist, but they are very rare!
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Hope this helps.....
Individual Non-Resident Taxation
Generally speaking an individual is assessed to income tax in the United Kingdom if he is deemed to be UK resident for fiscal purposes. Unlike the United States citizenship is not a basis for levying income tax. Generally speaking a person is deemed UK resident for fiscal purposes:
* in any tax year in which he lives in the UK for more than 182 days or
* If his visits to the UK exceed 91 days per tax year for 4 consecutive tax years in which case he is tax resident in the 5th year or alternatively from the commencement of the tax year in which he first stated his intention to make such visits to the UK
* if he makes regular visits which are substantial, habitual and obligatory: Such visits may indicate residence provided they exclude an element of chance and occasion and provided they follow an almost mechanical regularity.
An existing resident of the UK can become non-resident for tax purposes by being out of the country for at least one period of 365 days, during which he did not spend more than 91 days in the country, with days of arrival and departure not being counted.
Non-residents are generally speaking only liable to UK income tax on income derived from:
* Property situate in the UK
* Any trade or profession carried on through a branch or agency in the UK
* Any employment the duties of which are performed in the UK
This rule has led to many UK nationals seeking to become non-resident by moving abroad. In the United States by contrast the mere fact of citizenship means that a US national living in a foreign country is still liable to pay income tax in America on his worldwide earnings with a credit being given for any taxes already paid or due in a foreign country.
UK non-residents do not pay tax on:
* Interest from certain UK Government securities
* Interest from UK-situate bank and building society deposits
However, it is no longer possible to avoid capital gains tax by arranging for a gain to crystallise during a short period of overseas absence: five years' of non-residence is required before a gain on an asset acquired during residence is exempt from UK capital gains tax. The new rules for taper relief have made this provision almost irrelevant, in fact.
Non-resident entertainers and sports personalities will have been disappointed by a High Court ruling issued by Mr Justice Lightman in March, 2004, regarding a tax bill presented to tennis star Andre Agassi for earnings from sports companies, Nike and Head.
Mr Agassi had appealed against a decision by the Special Tax Commissioners in favour of the UK's Inland Revenue. The tax authority had argued that the fact that he was playing in the UK whilst endorsing products for Nike and Head represented a "relevant activity", and that he should therefore pay UK tax on the payments that he received from the companies.
Handing down his ruling, Justice Lightman explained that:
"It is common ground that section 556 of the 1988 [Income and Corporation Taxes] Act subjects non-residents to tax, if the payment is made by an English company or a foreign one with a tax presence here. The question raised is whether they are intended to be excused from liability if, instead, they are paid by a foreign company with no tax presence here."
He went on to observe that: "In my judgment it would be absurd to attribute to the legislature the intention that liability could in any and all cases be avoided by channelling the payment through a foreign company with no tax presence here. If this were the case, the tax would effectively become voluntary," and concluded that: "As it seems to me, the plain and obvious intention of the legislature was to impose an obligation on the person making the payment irrespective of his tax presence here."
In 2004 the Treasury announced new rules under which professionals would have to report tax minimization schemes to the Revenue. After much agonizing over professional confidentiality, the Law Society stated that a solicitor disclosing the information required under the new regime was "likely to be disclosing the substance of privileged communications passing between him and his client for the purpose of obtaining legal advice".
Law Society sources suggested that lawyers were planning to provide the Revenue with details of tax schemes suggested by their clients, but not with any information on conversations relating to the schemes, or advice provided. However, this did not go far enough for the accounting industry's representative bodies, which called on the Chancellor to delay the start date for the new reporting requirements.
However, Treasury officials made it clear in October that Chancellor Gordon Brown would not be delaying the implementation of the measures over the lawyers' concerns.
The EU Savings Tax Directive
If you are an individual (natural person) who is resident in an EU Member State, and earn bank interest or other savings income on deposits or investments held in your own name in another EU Member State, third country or territory included in the Table below, then it is likely that you will be affected by the STD.
The Directive does not apply to persons (including EU Nationals) who are resident outside the 25 Member States of the EU or the Crown Dependencies of the UK (Jersey, Guernsey and the Isle of Man). Any new countries joining the EU will be obliged to accept the information-sharing variant of the Directive, and their residents will be caught by the STD as and when those countries accede to the EU.
There are four main categories of savings income under the scheme:
* Interest paid out on debt-claims or credited to accounts;
* Interest rolled-up and paid out when a debt-claim is repaid or sold;
* Distributions made by certain unit trusts and other collective investment funds which have invested more than 15% of their investments in debt-claims;
* Accumulated income paid out when units in certain collective investment funds that have invested more than 40% of their investments in debt-claims are redeemed or sold.
In simpler language, savings income is therefore essentially interest earned on bank deposits, interest from, and proceeds on the sale or redemption of, certain bonds and income from certain types of investment funds (principally open-ended money market retail funds).
Most other types of income (for example, dividends on ordinary or preference shares of companies, salary and pension payments) fall outside the definition and are therefore outside the scope of the STD.
You will be paid the interest on your savings gross, ie without deduction of tax, but the bank or other financial institution which you patronise (known as a 'paying agent') will require to provide details of your tax residence.
You may be asked for your Tax Identification Number (TIN). This is your tax registration number in your country of residence. The STD requires banks and other paying agents to obtain customers’ TINs where possible. Whatever information the banks have, they will pass on to the tax authorities in your country of residence, along with information about the income you have received (as defined above).
Double Tax Treaties
In April, 2003, representatives from the United States and Britain signed a new tax treaty between the two nations.
It is the first update of the bilateral tax arangement for thirty years, and the most significant act of the treaty is to abolish the 5% withholding tax levied on the dividends of UK companies' American subsidiaries. It is thought this will save many British firms millions of dollars a year.
US Treasury Secretary John Snow who signed the agreement on behalf of the United States acknowledged that British firms play a significant role in the US economy, and are responsible for around 1 million jobs in the United States.
Additionally, the Anglo-US treaty simplifies the regulations relating to the taxation of pensions in both countries. A 15% withholding tax on British pension funds' dividend payouts has also been scrapped.
Commenting following the signing of the treaty, Snow explained that the new tax regime will allow "individuals the freedom to move between our two countries for employment and advancement opportunities without fear that such moves will mean adverse tax consequences for their pension benefits."
Generally speaking an individual is assessed to income tax in the United Kingdom if he is deemed to be UK resident for fiscal purposes. Unlike the United States citizenship is not a basis for levying income tax. Generally speaking a person is deemed UK resident for fiscal purposes:
* in any tax year in which he lives in the UK for more than 182 days or
* If his visits to the UK exceed 91 days per tax year for 4 consecutive tax years in which case he is tax resident in the 5th year or alternatively from the commencement of the tax year in which he first stated his intention to make such visits to the UK
* if he makes regular visits which are substantial, habitual and obligatory: Such visits may indicate residence provided they exclude an element of chance and occasion and provided they follow an almost mechanical regularity.
An existing resident of the UK can become non-resident for tax purposes by being out of the country for at least one period of 365 days, during which he did not spend more than 91 days in the country, with days of arrival and departure not being counted.
Non-residents are generally speaking only liable to UK income tax on income derived from:
* Property situate in the UK
* Any trade or profession carried on through a branch or agency in the UK
* Any employment the duties of which are performed in the UK
This rule has led to many UK nationals seeking to become non-resident by moving abroad. In the United States by contrast the mere fact of citizenship means that a US national living in a foreign country is still liable to pay income tax in America on his worldwide earnings with a credit being given for any taxes already paid or due in a foreign country.
UK non-residents do not pay tax on:
* Interest from certain UK Government securities
* Interest from UK-situate bank and building society deposits
However, it is no longer possible to avoid capital gains tax by arranging for a gain to crystallise during a short period of overseas absence: five years' of non-residence is required before a gain on an asset acquired during residence is exempt from UK capital gains tax. The new rules for taper relief have made this provision almost irrelevant, in fact.
Non-resident entertainers and sports personalities will have been disappointed by a High Court ruling issued by Mr Justice Lightman in March, 2004, regarding a tax bill presented to tennis star Andre Agassi for earnings from sports companies, Nike and Head.
Mr Agassi had appealed against a decision by the Special Tax Commissioners in favour of the UK's Inland Revenue. The tax authority had argued that the fact that he was playing in the UK whilst endorsing products for Nike and Head represented a "relevant activity", and that he should therefore pay UK tax on the payments that he received from the companies.
Handing down his ruling, Justice Lightman explained that:
"It is common ground that section 556 of the 1988 [Income and Corporation Taxes] Act subjects non-residents to tax, if the payment is made by an English company or a foreign one with a tax presence here. The question raised is whether they are intended to be excused from liability if, instead, they are paid by a foreign company with no tax presence here."
He went on to observe that: "In my judgment it would be absurd to attribute to the legislature the intention that liability could in any and all cases be avoided by channelling the payment through a foreign company with no tax presence here. If this were the case, the tax would effectively become voluntary," and concluded that: "As it seems to me, the plain and obvious intention of the legislature was to impose an obligation on the person making the payment irrespective of his tax presence here."
In 2004 the Treasury announced new rules under which professionals would have to report tax minimization schemes to the Revenue. After much agonizing over professional confidentiality, the Law Society stated that a solicitor disclosing the information required under the new regime was "likely to be disclosing the substance of privileged communications passing between him and his client for the purpose of obtaining legal advice".
Law Society sources suggested that lawyers were planning to provide the Revenue with details of tax schemes suggested by their clients, but not with any information on conversations relating to the schemes, or advice provided. However, this did not go far enough for the accounting industry's representative bodies, which called on the Chancellor to delay the start date for the new reporting requirements.
However, Treasury officials made it clear in October that Chancellor Gordon Brown would not be delaying the implementation of the measures over the lawyers' concerns.
The EU Savings Tax Directive
If you are an individual (natural person) who is resident in an EU Member State, and earn bank interest or other savings income on deposits or investments held in your own name in another EU Member State, third country or territory included in the Table below, then it is likely that you will be affected by the STD.
The Directive does not apply to persons (including EU Nationals) who are resident outside the 25 Member States of the EU or the Crown Dependencies of the UK (Jersey, Guernsey and the Isle of Man). Any new countries joining the EU will be obliged to accept the information-sharing variant of the Directive, and their residents will be caught by the STD as and when those countries accede to the EU.
There are four main categories of savings income under the scheme:
* Interest paid out on debt-claims or credited to accounts;
* Interest rolled-up and paid out when a debt-claim is repaid or sold;
* Distributions made by certain unit trusts and other collective investment funds which have invested more than 15% of their investments in debt-claims;
* Accumulated income paid out when units in certain collective investment funds that have invested more than 40% of their investments in debt-claims are redeemed or sold.
In simpler language, savings income is therefore essentially interest earned on bank deposits, interest from, and proceeds on the sale or redemption of, certain bonds and income from certain types of investment funds (principally open-ended money market retail funds).
Most other types of income (for example, dividends on ordinary or preference shares of companies, salary and pension payments) fall outside the definition and are therefore outside the scope of the STD.
You will be paid the interest on your savings gross, ie without deduction of tax, but the bank or other financial institution which you patronise (known as a 'paying agent') will require to provide details of your tax residence.
You may be asked for your Tax Identification Number (TIN). This is your tax registration number in your country of residence. The STD requires banks and other paying agents to obtain customers’ TINs where possible. Whatever information the banks have, they will pass on to the tax authorities in your country of residence, along with information about the income you have received (as defined above).
Double Tax Treaties
In April, 2003, representatives from the United States and Britain signed a new tax treaty between the two nations.
It is the first update of the bilateral tax arangement for thirty years, and the most significant act of the treaty is to abolish the 5% withholding tax levied on the dividends of UK companies' American subsidiaries. It is thought this will save many British firms millions of dollars a year.
US Treasury Secretary John Snow who signed the agreement on behalf of the United States acknowledged that British firms play a significant role in the US economy, and are responsible for around 1 million jobs in the United States.
Additionally, the Anglo-US treaty simplifies the regulations relating to the taxation of pensions in both countries. A 15% withholding tax on British pension funds' dividend payouts has also been scrapped.
Commenting following the signing of the treaty, Snow explained that the new tax regime will allow "individuals the freedom to move between our two countries for employment and advancement opportunities without fear that such moves will mean adverse tax consequences for their pension benefits."
