Frequently Asked Questions about Expat Tax. 

Frequently Asked Questions about Expat Tax. 

Here are some of the most popular questions that we've been asked over the years by expats, overseas investors and international workers regarding their tax liabilities. 

Non-Residents | Working Overseas | Property | Covid  

Non-Resident Tax Questions  

 
Like the sound of some UK income being “disregarded” for UK tax? If you’re a non-resident, then there is income from the UK that can be disregarded, and the type of income includes… 
 
interest and alternative finance receipts from banks and building societies 
dividends from UK companies 
income from unit trusts 
income from National Savings and Investments 
profits from public revenue dividends 
profits or gains from transactions in deposits 
certain social security benefits, such as State pensions or widows’ pensions 
taxable income from purchased life annuities except annuities under personal pension schemes 
 
There are exceptions – if you want support with your taxes and planning, contact us. 
 
 
The internationally mobile worker, and where your company taxes are paid. If you visualise that a company has a single director who is personally situated out of the UK, but the company is UK registered, the question arises as to where you would pay the company’s corporation tax. 
 
 
Under the Statutory Residence Test (SRT), an individual is either UK resident or non-UK resident for a full tax year, and at all times in that tax year. 
 
Let that phrase sink in - if you do nothing, you might be UK taxed on foreign income. Don't be caught out - tax planning is essential. 
 
However, if during a year the individual starts to live or work abroad, or comes from abroad to live or work in the UK, the tax year will be split into 2 parts, if their circumstances meet specific criteria: 
 
a UK part for which they will be charged to UK tax as a UK resident 
an overseas part for which, for most purposes, the individual will be charged to UK tax as a non-UK resident. 
 
If you are planning to emigrating or immigrating, you really must get your Split Year Treatment sorted out. If you need help, you know where we are. 
 
 
HMRC uses various global data sharing initiatives to obtain bank statements for foreign bank accounts used by overseas landlords. It also reviews data from tenancy deposit schemes to cross-reference landlords against those declaring rental income. 
The penalty for undeclared UK rental income is up to 100% of the amount of tax HMRC believes is owed. Where the source is offshore, the penalties can be even greater and as much as 200% of the unpaid tax. These penalties are in addition to the tax liability itself. Landlords are likely to face lower penalties if they voluntarily make a disclosure. 
 
 
If you are moving abroad, and have worked for part of the year in the UK and paid taxes (PAYE), then you ought to check if a tax refund is due before you leave as you might not have used all your personal allowances… or file your last UK tax return as soon as you can after 5th April. 
 
 
Yes! An “offshore installation” is specifically excluded from the seafarer tax exemption. The following list of offshore installations is given as a guide only: 
 
Fixed production platforms 
Floating production platforms 
Floating storage units 
Floating production storage and offloading vessels (FPSOs) 
Mobile offshore drilling units (drill ships, semi-submersibles and jack-ups) 
Flotels. 
 
 
According to HMRC, a working day is just 3 hours long! 
 
 
Your employer might ask you to visit and do some work in the UK – there are very strict rules about this, and you must keep a careful eye on the number of days that you work more than 3 hours in the day in the UK... and take our advice on your tax liability and residency status. 
 
 
A non-resident that has a legal obligation in the UK may require us as their accountants to act as their Process Agents - this is an agent for the service of process (or a process agent) is the representative of a contractual party upon whom the court or arbitration proceedings may be served. 
 
Common practice in England and Wales has evolved to make use of this provision to specify that service can be made on a process agent located in England and Wales, thereby removing the need on the serving party to serve proceedings outside of England and Wales. 
 
 
A lot of the people who take up contracts of employment abroad take too literally the adverts which read “tax free salary”. Just because your salary is paid in foreign currency, by a foreign company and into an overseas bank account, this has little bearing on your UK income tax liability. 
 
To decide if you are a UK Tax Resident, you need to carefully undertake the detailed assessment defined in the Statutory Residency Test - then, and only then, will you know your tax position. We can help, call us - your wealth and peace of mind might depend on it. 
 
Double Taxation Agreement 
If you work in the UK but are subject to taxation in your home country on your world-wide income, then don't worry, providing there is a double taxation treaty between the countries, this ensures that you only pay tax once - so call us and check you tax status. 
 
 
HMRC has a special form for people who are going to be away from the UK for a complete tax year. Visit their site for the "Leaving the UK - getting your tax right" P85 form in good time before you leave. 
 
 
If you are “resident” in the UK then you are subject to tax in the UK, but if you are non-resident, then you will be taxed in the UK if you have a “source” of income that is generated in the UK which isn't relieved by the terms of an applicable double tax treaty. 
 
This means that you can still be subject to UK taxes even if you don’t usually live in the UK. We can assist you if you are an internationally mobile sports or music performer
 
Under the Statutory Residence Test (SRT), an individual is either UK resident or non-UK resident for a full tax year, and at all times in that tax year. 
 
Let that phrase sink in - if you do nothing, you might be UK taxed on foreign income
 

Working Overseas Tax Questions  

 
To assess the UK and Australian tax position on distributions from a trust, we must ascertain whether the beneficiaries and trustees are UK or Australian tax resident under each country’s domestic laws and, in some cases, under the UK/Australia double tax agreement (DTA). 
 
We must also consider the UK tax implications of a UK trust ceasing to be resident here for tax purposes. This may occur if some or all of the trustees cease to be UK tax residents. 
 
Key points: 
 
Residence status is key to considering the complex tax issues that can arise when dealing with trusts. 
Australian resident and temporary resident status. 
The trustee’s status and the importance of central management and control. 
The application of the UK/Australia double taxation agreement. 
The Australian taxation of UK trust income distributed to 
Australian tax resident beneficiaries. 
UK tax implications of the trust ceasing UK tax residence. 
UK or Australian double tax relief may mitigate double taxation. 
 
If you require further advice on this complicated subject, email us. 
 
 
Depending on how long you'll be away and presuming that you’re working for a foreign employer, then you will not be paying towards your UK State Pension entitlement so you may be best advised to pay voluntary (Class 3) National Insurance. 
 
 
While you're working away from the UK, there is no requirement to pay towards your student loan. Let the Student Loan Company know if you'll be away for over 3 months, and they'll make the necessary arrangements with you. Similarly, let them know when you're back, so you don't end up being penalized for late/non-payment. 
 
The issue isn’t where you earn your money, it’s whether you’re a “UK Tax Resident” that matters – HMRC have tests they apply to see if you still pay UK taxes. There are various criteria for this, but time spent here is a major factor. For instance, if you're in the UK for more than half the year, then you’ll probably be deemed a UK resident and have to pay your taxes here. 
 
 
Regardless of whether you’re an expat or non-resident, if you visit the UK, please ensure you keep meticulous records of your travels both to the UK and from it. 
 
We’ve been working with a chap who’s been subjected to inquiry by the tax office, and they’ve now sent a record produced by the UK Home Office of his international travel to the UK, but their record fails to show that when he was in the UK, he then travelled into mainland Europe. 
So the HMRC record shows he was in the UK when he wasn’t – he had left, visited France and then returned to the UK before travelling home to the Middle East. 
 
The record retention, travel documents etc, should be kept for at least seven years but also worth preparing your annual travel summary, and sharing with your accountant (us hopefully) as that also then provides a dated and timed contemporaneous record of travel. 
 
 
If you’re needing to employ overseas staff, the only way now to bring in skilled labour from abroad is to act as a sponsor, and to engage those workers under PAYE contracts. Additional checks must also be made when engaging workers for the first time: identity checks must be completed on all individuals, and Right to Work share codes must be verified. 
We’re delighted to work with Patricia Marleau who is a great immigration lawyer if you need to arrange your sponsor license, and of course our internal HR and Payroll team will always be available to help our clients. 
 

Property Tax Questions  

 
The new register will require overseas entities that own UK land to declare their beneficial owners or managing officers. Overseas entities will not be able to buy, sell, transfer or lease land, or create a charge against the land in the UK unless they’ve registered with Companies House. 
 
Overseas entities who already own land in the UK will be given 6 months to register their beneficial owners or managing officers. This 6 month period will not begin until the new register has been launched. Any new purchasers will need to register with Companies House from the day the register comes into effect. 
 
Once the overseas entity has registered and provided all the necessary information, an overseas entity ID will be provided by Companies House. This ID will then need to be shared with the relevant land registry (depending on where the land is situated in the UK) whenever the overseas entity buys, sells, transfers, leases or charges land in the UK. The overseas entity will need to update its information every year. 
 
 
Failure to correctly make a capital gains tax declaration to the HMRC within 60 days after conveyancing (transferring ownership of) your property is likely to result in a penalty – even if there is no capital gains tax to pay. 
If the completion date was between 6 April 2020 and 26 October 2021 you should have reported and paid within 30 days of completion of conveyance. 
 
Please ensure that you seek our professional advice before finalising any declaration or capital gains tax calculation. 
 
 
If you’re setting up an international business or expanding into markets overseas, you’re most likely to need people working abroad for you, so how will you arrange to pay them? 
 
Paying people overseas is more complicated than you’re used to for your UK employees and we can help if… 
 
you have a UK employee doing occasional work abroad 
you have an overseas employee doing short term work in the UK 
you have an overseas employee working longer term in the UK 
help you identify if you have established a “corporate presence” overseas. 
 
 
As with most other jurisdictions, the UK tax system is based on the dual considerations of “residence” and “source”. 
If you are “resident” in the UK then you are subject to tax in the UK, but if you are non-resident, then you will be taxed in the UK if you have a “source” of income that is generated in the UK which isn't relieved by the terms of an applicable double tax treaty. 
 
This means that you can still be subject to UK taxes even if you don’t usually live in the UK. Contact us and we can assist you if you are an internationally mobile sports or music performer. 
 
 
Any vessel engaged in exploitation of mineral resources by means of a well whilst standing or stationed in any waters, is an offshore installation. If you work on an offshore installation anywhere in the world, you are not regarded as a “seafarer” for the purposes of the deduction and your earnings for duties performed on such a vessel or structure will not qualify for the deduction. 
 
 
If your company has a single director who is personally situated out of the UK, but the company is UK registered, the question arises as to where you would pay corporation tax. 
If the country in which the owner/operator resides deems that the company is taxed there on the basis that it is being managed and controlled where the sole director shareholder is now living, the company will have reporting and tax obligation in both the UK and the resident country. 
The client will need the resident country to confirm that the company is resident as per its domestic laws – we recommend consulting a local tax advisor to confirm this. 
We then need to follow the residency section at article 4 often referred to as the ‘tie break test’. Para 3 is relevant here and the extract notes a company ‘shall be deemed to be a resident only of the State in which its place of effective management is situated.’ 
Effective management is discussed in the OECD Model Tax Convention commentary 2017 and explained that this should be considered on a ‘case by case basis’. It flags considering where board meetings are held, where senior day to day activities are carried out and accounting records are kept etc. 
 
 
As every tax treaty is agreed between the two jurisdictions rather than through the EU or EEC, there will not be any impact on any tax treaties between the UK and any other country. However, watch for when there are trade deals are negotiated as there may be changes then – if in any doubt, contact us and we’ll advise if there’s been changes on treaties that you’re depending upon. 
 
 
It’s a question that our specialist Crypto Tax Advice team are asked quite often – if their purchases of crypto are offshore are they taxed in the UK. 
HMRC’s guidance is very clear, and it depends on your Residency Status – if you personally are resident in the UK under the Statutory Residence Test (if in doubt, talk to the specialist team at @Expat Tax Advice) then you will suffer UK tax on your crypto assets. 
The argument that we hear being used is that if the wallet is held offshore, doesn’t that change the situs test – the answer is who has the wallet key – if you have the wallet key, then no, you have control and if UK resident, then you’re subject to UK tax. 
But what about an offshore agent having the wallet key, how does that affect situs – I haven’t seen a court case to determine this yet, but our thoughts are that if the agent is under your control, such that you can tell the agent to give you the key number, then you still have control. 
If you would like any support with any issue mentioned here, then contact us. 
 
 
You should review & take the residency tests each year because even quite minor differences can change the status… the hours you work abroad, your travel pattern, has your family moved and a myriad of other changes can have a significant impact 
Before you make any big decisions relating to you, your work, family etc., take our advice first. 
 
 
For those who are about to start working & living overseas, you need to go through the “Statutory Residence Test”, and you’ll see that in the 3rd automatic overseas test that days working in the UK is vitally important. 
Everyone seems to be aware of, but overly focussed on the 91-day rule but often forget to focus on the 31 work-day rule – one of the automatic tests says… 
 
You’ll be non-UK resident for the tax year if you work full-time overseas over the tax year and: 
 
you spend fewer than 91 days in the UK in the tax year 
the number of days on which you work for more than 3 hours in the UK is less than 31 
there is no significant break from your overseas work (talk to us about that definition) 
 
If you’re required to work in the UK whilst being non-resident, contact us for our active support and advice. 
 
 
It is possible that your foreign income will be taxed twice – both in the UK if deemed a UK tax resident, and the country in which the income originates. If this is the case, you can usually claim tax relief to get at least some, if not all, of this tax back. 
 
How much tax relief you can claim depends on the double taxation treaty. 
 
If you have already paid tax on your foreign income, you can usually claim Foreign Tax Credit Relief in your UK Self Assessment tax return. The amount of tax relief you will get will all depend on the ‘double-taxation agreement’ that the UK holds with the other country. Even if the UK doesn’t hold an agreement with the other country, you might still be able to get tax relief as long as the foreign tax corresponds to UK Income Tax or Capital Gains Tax. 
 
You might not get the full amount of foreign tax you paid back. If a smaller amount is set by the double-taxation agreement, or the income would have been taxed at a lower rate in the UK, you will get less in tax relief. 
 
 
The US, similar to the UK where we're based operates a process that you're taxed on your worldwide income so you would need to look at the double taxation treaty between US and Canada to ensure that if Canada is going to tax you, that this tax is offset against taxes you pay in the US. 
Expat Tax Advice wow I thought USA was the only country that did the worldwide tax thing based in citizenship. 
Ry Lee - the US is the only one that taxes you wherever you are in the world if you're a US Citizen; the others tax you on worldwide income based on residency. 
 
 
Many, but not all, double taxation agreements contain an Article dealing with the earnings of teachers. Where there is such an Article a UK teacher who goes abroad in order to teach in the other country will normally be exempt from the other country’s tax on the earnings from teaching. 
Some agreements, however, provide that the remuneration of visiting teachers can only be exempted from tax in the country visited if it is ‘subject to tax’ in the UK (see, for example, Article 19 of the Barbados agreement). 
Where a UK teacher visits one of the countries concerned, but remains resident and ordinarily resident in the UK, they should, on request, be provided with a letter on headed note paper, signed by an Officer of HMRC, certifying the amount of their earnings subject to UK tax. 
 
 
As a British citizen seafarer, you are filing your tax returns in the UK, you have a home and probably family here as well, so you might ask what’s the situation if you’re buying an investment property in the UK. 
 
To be defined as a seafarer, you will spend the majority of your time out of the country, and of course, you wouldn’t be tax resident anywhere else as you’re on the high seas. 
 
Whilst there is a 3% additional SDLT for all 2nd residential properties regardless if they’re bought in your own name or in a company. There is an additional 2% SDLT for non-residents buying in their own name or in a company in which they are shareholders... and that includes seafarers
 
 
A qualifying day is one in which you are absent from the UK at midnight. Under normal circumstances HMRC would regard being outside the twelve mile limit as being outside the UK, but by concession they may be prepared to accept that where a vessel leaves its UK berth before midnight and goes to a foreign port, then that is a day out. 
 
 
An estimated 248 overseas investors in UK buy-to-let properties came forward to admit tax evasion in the last year. Many of these people will be UK expats living abroad rather than foreign investors. 
These individuals can face severe consequences if they are found to have withheld any tax owed to HMRC and fail to come forward under the scheme. This could include tough financial penalties or even criminal prosecution. 
The best way to ensure that landlords are paying the right amount of tax is for them to seek expert advice and inform HMRC of any uncertainties they might have. This would minimise the risk of a severe financial penalty, or even a jail sentence. 
Recently, HMRC has become increasingly effective at identifying landlords that are not paying the correct amount of tax on their rental income. 
The penalty for undeclared UK rental income is up to 100% of the amount of tax HMRC believes is owed. Where the source is offshore, the penalties can be even greater and as much as 200% of the unpaid tax. These penalties are in addition to the tax liability itself. Landlords are likely to face lower penalties if they voluntarily make a disclosure. 
 
 
Anyone from outside the UK thinking of investing here and taking advantage of where the UK has commoditized property, then this video may be exactly what you need. If you're an Expat or other non-resident, and want to invest in property from abroad, this video explains the tax positions and structures
 
 
Talking with the head of HMRC investigation team, and all the insurers, there is now a fair warning that HMRC will be stepping up their general tax Enquiries. 
 
I’m bound to say it, but if HMRC are about to unleash the dogs on you, this is the time you need a good accountant, not a cheap one. Make sure that your advisors can cope with what potentially lies ahead. 
Review with your accountant any claims you’ve made for government support so that you’re prepared to respond promptly and succinctly to any enquiry. 
Make sure that you have your “fee protection” in place so the costs of defending any Enquiry are met by the insurers, and not extracting cash from your pocket. 
 
If we can be of service, contact us. 
 
 
HMRC will allow special treatment to be given to expats that face risking their non-residence tax status through being stuck in the UK longer than anticipated. 
The tax office has now declared that people who face impairing their non-residence tax status through having to stay in the UK longer than planned could apply for special treatment under "exceptional circumstances" regulations. 
HMRC has acknowledged that the epidemic is affecting people's ability to move freely to and from the UK, or requiring them to remain unexpectedly. It has announced that it will 'look sympathetically' at any individual cases where the virus has caused issues or difficulties. 
However the 60-day annual exceptional day limit set out in the 2013 statutory residence test is still in place and relevant, and HMRC warned it will consider the facts of each individual case before deciding to disregard days spent in the UK due to exceptional circumstances. 
In a guidance note HMRC said it will treat people quarantined or self-isolating in the UK, those advised not to travel or unable to due to border closures and people asked to return to the country by their employer due to the outbreak as exceptional circumstances. 
 

Covid Tax Questions  

 
The Covid lockdown has seen thousands of UK-based workers leave the UK for at least part of the lockdown period. They continue to work overseas which means that many of these UK workers will now become liable to tax and social security payments in the overseas countries where they live – this will seriously reduce the tax take the government can expect. 
 
The success of home working in the past 18 months may result in a permanent loss of revenue to HMRC, as increasing numbers of highly skilled UK employees chose to relocate at least partly to holiday homes abroad and spend more of their working time in those locations rather than in the UK. Many global companies have encouraged employees to work ‘from anywhere’, as a means of attracting and retaining global talent. 
 
The Covid lockdown has seen some UK tax residents who usually work overseas as ‘commuters’ in countries such as the Netherlands, Switzerland, or the Republic of Ireland, spend more time in the UK than would usually have been the case. This will result in some additional revenue for HMRC. However, this additional revenue will be wiped out and exceeded by those now choosing to work abroad. 
 
 
Current travel restrictions may make it more complex for companies to manage their tax residence and economic substance positions if they are reliant on directors travelling to meetings in other territories. For example, if board meetings have to be held in the UK or remotely, or the company is effectively controlled by directors in the UK as a result of travel restrictions arising from the Covid-19 crisis, in theory, this may affect whether or not the company is liable to UK corporation tax. 
 
In addition, if there are not sufficient staff in a particular location or jurisdiction as a result of the crisis, the business may not be able to prove that it has a sufficient economic substance in the jurisdiction, and the anti-avoidance legislation of other tax jurisdictions may therefore apply. 
 
Different jurisdictions may well take different approaches during the Covid-19 crisis. For example, Jersey has announced that it is relaxing its economic substance and residence rules during the crisis. We would expect other jurisdictions to make short term concessions in time but, to date, the UK government has yet to make any comment on corporate residence issues or related tax rules. 
 
Any business that may be affected by residence or economic substance issues as a result of the Covid-19 crisis should seek our expert advice on their specific circumstances. 
 
 
In some situations, days of presence in the UK do not count towards the totals of some of the day-counting parts of the statutory residence test. These arise when ‘exceptional circumstances’ prevent a person from leaving the UK. The legislation indicates that such circumstances are the result of life-threatening illness or injury to the individual, their spouse, partner or minor children, or because of conflict or natural disasters, or, as several years ago, when a volcano in Iceland erupted, meaning that many planes were grounded. 
 
As of 20 March, HMRC have announced that time spent in the UK as a result of the Coronavirus may be treated as ‘exceptional days’ for the purpose of the statutory residence test. 
 
A day will be treated as an ‘exceptional day’ where: 
 
an individual is put under quarantine as a result of the virus 
an individual is advised by a health professional or public health guidance to self-isolate in the UK because of Coronavirus 
official Government advice is not to travel from the UK as a result of Coronavirus 
an individual is not able to leave the UK because international borders are closed 
an individual is requested to return to the UK by their employer because of Coronavirus 
 
It is worth noting that not all of the day-counting tests are affected by this announcement, and whether an individual can claim these days will depend upon the terms of the statutory test under which she or he is claiming to be non-UK resident. 
 
Finally, all taxpayers who are hoping to claim exceptional days because they have been affected by Coronavirus should be aware that the legislation itself limits the number of ‘exceptional days’ that can be claimed in a tax year to a maximum of sixty. 
If your question isn't listed here, please contact us and we will be very happy to help! 
Our site uses cookies. For more information, see our cookie policy. Accept cookies and close
Reject cookies Manage settings