UK Inland Revenue & Working Abroad
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UK Inland Revenue & Working Abroad
I work for a small UK based airline that have aircraft based abroad and we may be able to go on 'detachment' to a base outside the UK. Whilst away we would still be employed under our original contracts and get paid in UK£ and get taxed at source in the UK. Whilst thinking of the pros and cons of this, one potential positive aspect is managing to claim the tax back from the Inland Revenue, providing sufficient time is spent out of the UK. Perhaps those of you with some experience of this may be able to help with the 'nitty gritty' aspects of what is needed to qualify.
My understanding of a 'non UK resident' is the following:
• Your absence and employment from the UK covers a complete tax year
• You spend less than 183 days in the UK during the tax year, and
• Your visits to the UK do not average 91 days or more a tax year over a maximum of 4 years.
Firstly, I take it that the first clause states that you are not allowed to spend any time working in the UK. Whilst technically being based abroad and flying into the UK and straight back would not qualify (I presume), how do the Inland Revenue treat coming back to the UK for your annual medical and your 6 monthly OPC/LPC? Does that constitute as actually working on British soil?
The second clause is fairly straightforward.
As for the third, I presume that the clock would start for counting the length of visits if I actually move away? Since I am a UK resident at the moment then counting the length of visits to the UK would not actually apply over the past 4 years (despite being away a fair bit). Or do you need 4 years of being a non-resident before you can claim tax-free status?
Any help or advice would be greatly appreciated!
Cheers
My understanding of a 'non UK resident' is the following:
• Your absence and employment from the UK covers a complete tax year
• You spend less than 183 days in the UK during the tax year, and
• Your visits to the UK do not average 91 days or more a tax year over a maximum of 4 years.
Firstly, I take it that the first clause states that you are not allowed to spend any time working in the UK. Whilst technically being based abroad and flying into the UK and straight back would not qualify (I presume), how do the Inland Revenue treat coming back to the UK for your annual medical and your 6 monthly OPC/LPC? Does that constitute as actually working on British soil?
The second clause is fairly straightforward.
As for the third, I presume that the clock would start for counting the length of visits if I actually move away? Since I am a UK resident at the moment then counting the length of visits to the UK would not actually apply over the past 4 years (despite being away a fair bit). Or do you need 4 years of being a non-resident before you can claim tax-free status?
Any help or advice would be greatly appreciated!
Cheers
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UK Tax
Mister Geezer
This thread may answer some of your questions:
http://www.pprune.org/forums/showthread.php?t=281653
Rgds
ADG
This thread may answer some of your questions:
http://www.pprune.org/forums/showthread.php?t=281653
Rgds
ADG
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There is only one piece of advice which, even if taken, is going to be of any serious potential benefit.
You should find a good accountant with experience in dealing with residence and domicile cases and put your particular proposals to him so that he can arrange a tax plan that would minimise your liabilities, taking into account your individual circumstances.
Any other course of action is apt to lead to irritation, frutration and pecuniary punishment.
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Contact the Inland Revenue, they are very helpful people. You might find, like myself, you will have to be out of the country for two years before you can get away with not paying UK tax and NI. As its not definite I will be working out of the country for two years, then I still have to pay UK tax and NI, up until then. The 185 day rule is a load of tosh. The swines will get you any way they can.
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Under no circumstances contact the Inland Revenue.
They are very helpful people only in determining what you shall pay them. That is, after all, their duty, their job and their rationale. Once you have alerted them to your plans they will have you within their timetable which will not necessarily be the one that would suit your most efficacious tax planning schedule.
Contact a good accountant experienced in matters of residence, domicile and who is experienced in the field of overseas contracts and the tax implications thereof. Place all your affairs in his hands from scratch and let him deal with the tax men for you.
It is a matter of great incomprehension as to why pilots seem so averse to seeking professional information obtained on a paying basis.
If a good accountant saves you ten thousand in tax liability and sends you a bill for two thousand, he has saved you eight thousand and is thus surely worth the mustard? The only grit in this is that you have to pay him the fee whereas you will never have had to pay the tax. It's cheap at half the price, every time. Pay for the professional. Eat, drink and be merry thereafter!
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Reference to recent court cases and judgements will show that there are no rules that the revenue cannot break, will not break or do not plan to break when the breakage of those rules will work to their advantage.
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I agree fully with CC,
having dealt with the IR (now HMRC) on several tax issues, including training costs, I can support the view that you interests are not best served by going directly to them.
You are under absolutely no obligation to contact them, as your tax affairs are to date in order (I assume), so in your own time speak to an appropriate, experienced tax advisor. Then take the actions that are best suited to YOU not the HMRC.
If you speak to the revenue direct you will speak to a relatively low ranking Officer with no appropriate experience. His advice will be skewed to achieve IR income, and thus a better end of year Personnel Report for himself.
having dealt with the IR (now HMRC) on several tax issues, including training costs, I can support the view that you interests are not best served by going directly to them.
You are under absolutely no obligation to contact them, as your tax affairs are to date in order (I assume), so in your own time speak to an appropriate, experienced tax advisor. Then take the actions that are best suited to YOU not the HMRC.
If you speak to the revenue direct you will speak to a relatively low ranking Officer with no appropriate experience. His advice will be skewed to achieve IR income, and thus a better end of year Personnel Report for himself.
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I can understand why people are preaching a "good accountant" (btw, they are hard to find) but the accountant isn't liable if they get your tax wrong. YOU are liable. Yes, accountants can seem to save you thousands as you put it, but are they really saving you thousands or just telling you to pay the wrong amount and hope that you don't get audited. Because I assure you, if you get audited and you haven't paid correctly, the IR will expect that tax + penalities + interest off you and they won't stop until they have got it, stripping every asset you have. Where is your "highly paid" accountant now? Accepted that there are accountants that can save serious money, legally. These accountants are paid in the 100 of thousands and they save money for their clients who pay tax on millions. Are you one of those?
Edited to change in to on. Back to your cage CC.
Edited to change in to on. Back to your cage CC.
Last edited by Beefy_EMA; 30th Aug 2007 at 11:45.
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No one whose tax liability would be in the millions were he to pay all the tax that he might not avoid were he not to arrange his tax matters in a legal and judicious fashion would ever allow himself to accumulate a tax liability of millions by not arranging his taxation matters in the aforesaid legal and judicious fashion.
N4790P
Having spent over 25 of the last 40 years as Non Resident I totally concur with all of cavortingcheetah's posts.
Yes you are liable for any mistakes but and it’s a big but, with a reputable company preparing your returns the IR tends to be far more amenable and almost understanding.
One thing I would suggest and that is to keep a very accurate diary with all necessary evidence of days in/out of the UK.
Whilst IR rules are not overly complex, they are open to creativity. A good consultant should exploit this to your advantage without any undue risk.
I’ve been audited on a couple of occasions without too much hassle because I had ALL documents/evidence/proof to back up my returns.
Mrs ZFT is currently going through a 7 year NR audit over some rental property and because she didn’t listen (do women ever?) she is having an interesting time!!
Only thing I can’t resolve is how to be declared Non Domicile. This would fix so many problems!!
Yes you are liable for any mistakes but and it’s a big but, with a reputable company preparing your returns the IR tends to be far more amenable and almost understanding.
One thing I would suggest and that is to keep a very accurate diary with all necessary evidence of days in/out of the UK.
Whilst IR rules are not overly complex, they are open to creativity. A good consultant should exploit this to your advantage without any undue risk.
I’ve been audited on a couple of occasions without too much hassle because I had ALL documents/evidence/proof to back up my returns.
Mrs ZFT is currently going through a 7 year NR audit over some rental property and because she didn’t listen (do women ever?) she is having an interesting time!!
Only thing I can’t resolve is how to be declared Non Domicile. This would fix so many problems!!
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This is indeed ther place to be discussing this. There have been several threads on Tax here recently so do a search and read them all.
Anyone who thinks that burying their head in the sand and hoping to avoid paying their taxes is living in a dream world. You will be found and pay accordingly, eventually. If you get away with it over a long period then good luck to you. But if you are caught, which is very likely, you will be severely penalised for avoiding for so long.
Writing here as someone who has been in the situation described, I would urge you to contact the Inland Revenue website or HMRC as they are now (http://www.hmrc.gov.uk/) and get all the information you can glean from there. There is a lot of good advice and it is free. In my experience, if you are going to be working abraod then talking directly to a Tax Inspector in the office where your affairs are handled is the first thing you need to do, not the last.
If you avoid paying taxes under these circumstances and have to pay later, you will be given very little latitiude in the amount you have to pay. Arranging your tax liabilities, with the help of the Inspector, means you can arrange pay as you earn and will almost certainly never be asked to pay any more. Indeed, depending on your circumstances, you will almost certainly be able to claim some of the tax back at the end of each year.
Those who advocate silence on this issue are the ignorant ones. Knowledge is power and knowing your tax inspector might well be one of the best relationships you ever make. They are not employed to screw you, believe it or not, they are employed to help you get you tax affairs in order.
Trust me, I have been there!
Anyone who thinks that burying their head in the sand and hoping to avoid paying their taxes is living in a dream world. You will be found and pay accordingly, eventually. If you get away with it over a long period then good luck to you. But if you are caught, which is very likely, you will be severely penalised for avoiding for so long.
Writing here as someone who has been in the situation described, I would urge you to contact the Inland Revenue website or HMRC as they are now (http://www.hmrc.gov.uk/) and get all the information you can glean from there. There is a lot of good advice and it is free. In my experience, if you are going to be working abraod then talking directly to a Tax Inspector in the office where your affairs are handled is the first thing you need to do, not the last.
If you avoid paying taxes under these circumstances and have to pay later, you will be given very little latitiude in the amount you have to pay. Arranging your tax liabilities, with the help of the Inspector, means you can arrange pay as you earn and will almost certainly never be asked to pay any more. Indeed, depending on your circumstances, you will almost certainly be able to claim some of the tax back at the end of each year.
Those who advocate silence on this issue are the ignorant ones. Knowledge is power and knowing your tax inspector might well be one of the best relationships you ever make. They are not employed to screw you, believe it or not, they are employed to help you get you tax affairs in order.
Trust me, I have been there!
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There is no suggestion here as to tax evasion which is illegal. Neither is there advocation to neglect of tax affairs, which would be stupid. The posts are directed instead towards the topic of sensible tax planning and how best to achieve that end. A goal which is perfectly legal and remarkably sensible.
Whilst there may be good information on its website, the Inland Revenue is somewhat biased toward meeting various targets for the raising of income tax. Tax inspectors work for the government and their business is to make as much money as they can for that institution. The advice one receives from them may be free on distribution but might be rather costly in the collection. A good accountant on the other hand is worth his weight in gold. Quite apart from keeping you cost effective and legal, he will remain up to date with the ever shifting legislation, much of which is engineered by the revenue for its own uses.
Indeed, it is true that it would be highly advantageous, were one to live and work abroad, to be non domiciled in the UK. This is not as absolutely impossible as it might sound but it does need careful planning. You may rest assured that the revenue would not be particularly keen to offer you advice which would enable you to achieve this goal. Neither would they be any keener to offer you advice which might reduce the tax you might have to pay to the quite legal level which a decent accountant might be able to achieve for you.
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Best advice -straight bat down the line....
Interesting posts reminds me how topical an earlier posting of mine remains.
Hope that it will help a few of you and for clarity....
Approach of UK Taxman –Resident or Not?
Clearly it is becoming more evident within the wider community that the UK Revenue (HMRC) are actively seeking to tighten their approach and grip extending taxing arms as far as possible in many respects but also in relation to aircrew.
The whole matter has been rumbling on for a long time but looks as though it may now overflow and probably result in further shake ups.
Some may encounter problems which could include greater risk of a retrospective challenge regarding any claimed Non Residence status and UK tax position, particularly in respect of any periods during which a UK basing has been or will be held. Subject of course to overall individual facts of each case.
HMRC guidance within IR20 is long over due a complete re write and simply cannot be relied upon.
UK Tax Residence status is covered by very little UK legislation with additional guidance, practice, and concessions being drawn from case law.
Tax cases of Robson v Dixon 1972, Shepherd 2005 and more recently Gaines-Cooper 2006 refer.
When trying to stay a step ahead, various considerations (list below not exhaustive or necessarily in any particular order of importance) will impact upon the outcome and they include:-
1) your physical presence (i.e. visits to UK)
2) performance of UK substantial duties ( i.e. working flights) or not
3) UK accommodation maintained available for use or not
4) Basing UK or overseas throughout relevant period
5) Location of home and family
6) Host country tax position (returns filed/tax resident/tax paid)
7) Application of relevant Double Taxation Agreement (Tax credit/exemption)
8) Standing and use of overseas property (family home / holiday home) etc.
Some have already encountered individual enquiries from the UK taxman into self assessment tax returns previously submitted and this trend is only likely to escalate.
Of course this can prove to be both time consuming and costly to both sides.
Conflict of International law regarding taxing rights can be a complex subject.
Will you still be able to continue to live abroad effectively within your chosen host country and have this upheld by the UK tax authorities when on a UK basing?
Probably yes, providing that all other relevant criteria are adhered to and indeed upheld, then it should still be possible to take a view that a UK Non Residence status could continue for some with restricted UK liability arising to the extent of remuneration attaching to UK duties performed and other UK arising income.
The more important questions may be where do you want to live and if this is abroad will any combined foreign taxation turn out to be more onerous than any UK liability?
UK tax authorities will continue to have regard to your individual circumstances and lifestyle choice but you may find yourself, as others have indicated, filing tax returns to three or more jurisdictions -with all of the attendant admin and fees.
So do seek further professional advice within each relevant jurisdiction, being that of your home country, basing and employer’s location.
Turbulence ahead possibly so, but hopefully with careful planning - not for everyone.
David
Hope that it will help a few of you and for clarity....
Approach of UK Taxman –Resident or Not?
Clearly it is becoming more evident within the wider community that the UK Revenue (HMRC) are actively seeking to tighten their approach and grip extending taxing arms as far as possible in many respects but also in relation to aircrew.
The whole matter has been rumbling on for a long time but looks as though it may now overflow and probably result in further shake ups.
Some may encounter problems which could include greater risk of a retrospective challenge regarding any claimed Non Residence status and UK tax position, particularly in respect of any periods during which a UK basing has been or will be held. Subject of course to overall individual facts of each case.
HMRC guidance within IR20 is long over due a complete re write and simply cannot be relied upon.
UK Tax Residence status is covered by very little UK legislation with additional guidance, practice, and concessions being drawn from case law.
Tax cases of Robson v Dixon 1972, Shepherd 2005 and more recently Gaines-Cooper 2006 refer.
When trying to stay a step ahead, various considerations (list below not exhaustive or necessarily in any particular order of importance) will impact upon the outcome and they include:-
1) your physical presence (i.e. visits to UK)
2) performance of UK substantial duties ( i.e. working flights) or not
3) UK accommodation maintained available for use or not
4) Basing UK or overseas throughout relevant period
5) Location of home and family
6) Host country tax position (returns filed/tax resident/tax paid)
7) Application of relevant Double Taxation Agreement (Tax credit/exemption)
8) Standing and use of overseas property (family home / holiday home) etc.
Some have already encountered individual enquiries from the UK taxman into self assessment tax returns previously submitted and this trend is only likely to escalate.
Of course this can prove to be both time consuming and costly to both sides.
Conflict of International law regarding taxing rights can be a complex subject.
Will you still be able to continue to live abroad effectively within your chosen host country and have this upheld by the UK tax authorities when on a UK basing?
Probably yes, providing that all other relevant criteria are adhered to and indeed upheld, then it should still be possible to take a view that a UK Non Residence status could continue for some with restricted UK liability arising to the extent of remuneration attaching to UK duties performed and other UK arising income.
The more important questions may be where do you want to live and if this is abroad will any combined foreign taxation turn out to be more onerous than any UK liability?
UK tax authorities will continue to have regard to your individual circumstances and lifestyle choice but you may find yourself, as others have indicated, filing tax returns to three or more jurisdictions -with all of the attendant admin and fees.
So do seek further professional advice within each relevant jurisdiction, being that of your home country, basing and employer’s location.
Turbulence ahead possibly so, but hopefully with careful planning - not for everyone.
David
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Do not foget that, unless memory plays false tricks upon the aged cranium, residency is a matter which has to be agreed with the revenue. You cannot simply decide that you are non resident and thus it becomes so! You need to have sorted this little matter out, with special regard to the strange UK tax year dates with the revenue before filing the appropriate tax return.
The same applies to domicile, which is a matter which should be of importance and concern to any foreign pilot, living in England, especially were he then to undertake overseas contract work.
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The best thing that I ever learnt at uni in relation to tax law was the term "substance over form". A lot of people tend to get het up on specific rules (usually the no. of days one) and think that if they comply with them then they are away laughing. Unfortunately tax law (and pretty much any law for that matter) doesn't work in such a way. The IR will take a view of all of the available facts apply their own technical rulings and possibly then consider case law. This is the reason why you need specialist advice and you need to give your advisor the entire picture. It is even better if you can speak to someone BEFORE you embark on a course of action so that a plan can be put in place. They may even request a written ruling from the IR in advance.
David has given you a very thorough analysis of the types of things that the IR look for. Every case will be different and you can bet that the auditor may decide to apply different weightings to each of the tests in order to arrive at an overall opinion.
David has given you a very thorough analysis of the types of things that the IR look for. Every case will be different and you can bet that the auditor may decide to apply different weightings to each of the tests in order to arrive at an overall opinion.
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This issue has been bothering me for some time. I have tried to find an accountant who understands the sometime complex nature of our business, but haven’t managed to find one.
I’m about to join NetJets and plan to live out of the country after a while with the company. Can anyone recommend an accountant who understands the factors involved with:
A UK contract
For a Portuguese firm
Living in a third country but spending 178 days a year elsewhere.
MOG
I’m about to join NetJets and plan to live out of the country after a while with the company. Can anyone recommend an accountant who understands the factors involved with:
A UK contract
For a Portuguese firm
Living in a third country but spending 178 days a year elsewhere.
MOG
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I am going to be in the same boat as you in a couple of years.
So I did a bit of research and a lot of pilots working for a UK company but living overseas, seem to use this firm. The info was found on other threads in pprune. I believe the tax rules will be changing very soon, but this firm may be a good place to start.
http://www.thefrygroup.co.uk/
So I did a bit of research and a lot of pilots working for a UK company but living overseas, seem to use this firm. The info was found on other threads in pprune. I believe the tax rules will be changing very soon, but this firm may be a good place to start.
http://www.thefrygroup.co.uk/
Anyone know about "Non-domiciled" tax status ? If living in the UK but not born there taxed only on foreign income bought into the country. Sounds like if living there but flying for a foreign airline income could be virtually tax free if not a citizen.