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Another Novice Tax question

Another Novice Tax question

Old Mar 16th 2011, 12:52 pm
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Default Another Novice Tax question

Sorry, I have looked at various threads but its such a complicated subject, individual circumstances seem to make a huge difference, here is my question:

I have been offered a contract in Iraq potentially commencing on the 7th April 2011. (US Contract paying US Dollars). Its a rolling contract but I expect to be there for the next few years at least.

I am currently in full time employment in UK paying tax as normal. I have never worked overseas (other than with HM Forces). I have been advised to be tax free that I can just complete a P85 stating that I am non-resident for tax purposes. Does this sound right? My wife will be remaining in our house back in the uk and I plan to visit when I can (but no more than 90 days in any financial year).

Does this sound right, is it much more complicated, I am asking not to ascertain ways around paying tax etc, but I need to understand the offer prior to accepting it.

There seems to be alot of conflicting advice......any pointers appreciated.
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Old Mar 16th 2011, 1:27 pm
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Default Re: Another Novice Tax question

Hi,

The P85 is all you need to submit to HMRC to let them know you are no-longer UK resident.

To stay non-resident (and pay no tax on your Iraq earnings), as a minimum you need to work overseas for at least one full tax year. So best get your contract and visa sorted out and start working out there before 6th April 2011, otherwise you will need to be out there for nearer 2 years to qualify (i.e. tax year 2011/12 and 2012/13).

Remember the 90 day rule is an average per year over 4 tax years. It may become very important to you if you miss the 6th April cut-off and need to apply the 'split year' concession for tax year 2010/11.

Hope this helps.
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Old Mar 16th 2011, 1:32 pm
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Default Re: Another Novice Tax question

Many thanks for the reply, unfortunately my deployment date is fixed as the 7th April, so no changing it.

If you are allowed to be in the country for 90 days in a tax year, the fact that I am going a day or so later would this not simply reduce the amount of time I would be allowed back in the UK for that tax year? i.e. I go on the 7th and therefore would only have 88 days of that tax year to be in the UK? Or have I over simplified it.

If that isnt the case, surely I would only pay tax on the time I spent in the UK, i.e. 1 day? I think I need an accountant....
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Old Mar 16th 2011, 2:07 pm
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Default Re: Another Novice Tax question

If I were you, I would leave the UK before 5th April 2011 to travel to Iraq and complete your P85 with an exit date in tax year 2010/11 i.e. before 5th April 2011. Even thought your contract/ work start is a few days later, I think it's reasonable to consider tax year 2011/12 as a 'full tax year' for UK tax purposes. Check HMRC6 for the exact rules, extract below.

If you don't, then 'split year' rules might apply to all your earnings in tax year 2011/12, which, depending on how long you are away from the UK (four full tax years?), may result in you paying UK tax on the lot.

8.5 Leaving the UK to work abroad as an employee

If you are leaving the UK to work abroad full-time, you will only become not
resident and not ordinarily resident from the day after the day of your
departure, as long as:
• you are leaving to work abroad under a contract of employment for at least a
whole tax year
• you have actually physically left the UK to begin your employment abroad
and not, for example, to have a holiday until you begin your employment
• you will be absent from the UK for at least a whole tax year
• your visits to the UK after you have left to begin your overseas
employment will
– total less than 183 days in any tax year, and
– average less than 91 days a tax year. This average is taken over the period
of absence up to a maximum of four years.
To calculate your annual average visits to the UK:
Total days visiting UK x 365 = annual average visits
Tax years you have visited (in days)
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Old Mar 16th 2011, 2:47 pm
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Default Re: Another Novice Tax question

Originally Posted by Seedubs
Many thanks for the reply, unfortunately my deployment date is fixed as the 7th April, so no changing it.

If you are allowed to be in the country for 90 days in a tax year, the fact that I am going a day or so later would this not simply reduce the amount of time I would be allowed back in the UK for that tax year? i.e. I go on the 7th and therefore would only have 88 days of that tax year to be in the UK? Or have I over simplified it.

If that isnt the case, surely I would only pay tax on the time I spent in the UK, i.e. 1 day? I think I need an accountant....
No, you just need me.

It is not an issue for you to leave the UK on 7th April 2011, provided you spend no more than 90 days in the UK during the tax year 2011/12. During this period, provided you adhere to the rules, your overseas earnings will not be subject to UK income tax.

Please take care when being given 'advice' from people on forums who are not tax advisers, as I see far too much incorrect information bandied about.
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Old Mar 16th 2011, 2:50 pm
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Default Re: Another Novice Tax question

Johnny,

Many many thanks for that, that was helpful, spoke to potential employer who would be willing to start a few days earlier, so that side will hopefully be sorted. Do I complete the P85 prior to going?

Also given that it is a rolling contract, being renewed (possibly after 6 months), is that sufficient as intent to work overseas? The contract I will be on is renewed annually I believe, but that is in July 2011. I would not return to the UK and would be given the option to take the new contract or return, obviously (if the contract was ok) then I would simple stay and my T&C would reflect new contract?

Many thanks again
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Old Mar 16th 2011, 2:54 pm
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Default Re: Another Novice Tax question

Originally Posted by Meow
No, you just need me.

It is not an issue for you to leave the UK on 7th April 2011, provided you spend no more than 90 days in the UK during the tax year 2011/12. During this period, provided you adhere to the rules, your overseas earnings will not be subject to UK income tax.

Please take care when being given 'advice' from people on forums who are not tax advisers, as I see far too much incorrect information bandied about.
Meow,

lol,

Many thanks, so my basic understanding is correct, as long as I do not exceed the 90 days return to the UK? That 90 days includes arrival and departure days too? Will have to be careful.

Thanks again.
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Old Mar 16th 2011, 2:56 pm
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Default Re: Another Novice Tax question

Originally Posted by Seedubs
Meow,

lol,

Many thanks, so my basic understanding is correct, as long as I do not exceed the 90 days return to the UK? That 90 days includes arrival and departure days too? Will have to be careful.

Thanks again.
Yes. Your understanding is correct. Days a of departure and arrival are now counted, although that has changed in recent years.

Do let me know if you require more info, or take a look at the post on my blog (link below) titled 'General advice for British expats'.

Hopefully you'll understand why I spend time doing this when I see misinformation.
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