GedRobinson

I am considering taking a position in the Middle East. Of course, one of the attractions is the tax-free status of the position, but having never worked abroad before, and having read the Inland Revenue website about taxfree foreign earnings, I am confused. Maybe someone could help clarify matters for me.

The IR website seems to suggest (or at least I interpret it this way) that as a normally resident UK citizen, taking a job abroad, in order to avoid my UK tax burden, I would have to be out of the UK for one entire financial year, (and not return for more than x days in that period).

It's the "one entire financial year" thing which bothers me. Am I to understand that I need to be out of the UK from April to April?? If I'm not, let's say I move out of the UK in mid-April and stay for a whole year contract ..... what will the UK tax man want from me??

Surely not "normal" taxation of my earnings for that financial year??

Can anyone explain in laymans terms how I should interpret the IR rules on this subject.

Thanks,

Ged

Tootsie Frickensprinkles

You've got it right. At least one whole financial year. Part years after or before are then fine.

Eeyore

Actually, if you look at *other* parts of the IR website, matters become even more confused...

There's one section where it effectively states that although you do indeed need to be out of the country for an entire tax year in order not to be charged any tax on earnings for that year, if you return to live in the UK the following year, the IR can decide that you weren't really a foreign resident for the previous year, because you weren't living outside the UK for long enough.

The rule of thumb they quote is that to near-enough guarantee that you won't be liable to any tax on the income earned while living outside the UK, you need to be away for a minimum of three years. In respect of the number of days you can spend back in the UK per year, you need to be careful, because rather than work to a fixed number per year, they average them over three years.

Of course, for most expats that will never be a problem, because they are only likely to spend 30 days per year (that's the average leave entitlement here) back in the UK anyway, which is nowhere near pushing the limits as far as the IR is concerned.

Annoyingly, the UAE has a tax treaty with the UK, which means that if the IR wants to find out how much you earned out here, it can do so directly without involving you

Danni

so your saying if I accept a job out there, starting in June 07 for three plus years then I will be still liable for income tax in the UK

W10

no - if you stay three years you'll be fine.

If you stay less than one then you will be liable for tax on anything you earn

Anything inbetween is a little unclear

Blue Cat

I have in the past heard of people who return to the UK on the 1st of April otherwise they are liable for tax on the years earning before if that makes sense. Don't go home - mean permanently on say the 10th of march or you could get stung?

Norm_uk

Hi Ged

Yes it confusing - but UK income tax laws only apply in other juristictions where there is income tax so...

...if you are working in Spain (where there is income tax) you are liable for UK income tax. But...

...if you work in Dubai (where there is NO income tax) you don't have to worry about it.

There's always exceptions but I am guessing you are not an international money launderer with a huge unpaid UK tax bill which would give the IR cause to come looking for you...

What you should be worried about what will happen to the money you earn and save here (if you are planning to save what you would have given to the taxman back home that is)...because if you take money back with you it could be liable for tax, there are ways around this of course.

Hope that helps.

Norm


PS: I'm a financial advisor if you hadn't already guessed

Danni

Thanks for the reply, I'll hopefully be bring back over a 150K and I'm aiming to invest it in property after my long stay. I will have a UK address and I'm trying to research all angles. Are there websites etc which inform you on this sort of thing.

Also I intend making voluntary national insurance contributions whilst I'm away and can you continue to invest in stakeholder pension and ISA's.

Cheers

Ozzidoc

You wont be able to maintain your isas - they are for UK tax residents.

Bob

can keep them though once you've buggered off, you just can't contribute to them while your non resident in the uk.

Ozzidoc

Technically, you cant keep as them as tax free.

GedRobinson

HI Norm ... thanks for your reply. That's very interesting, but adds even more confusion to my already over-wired brain.

I hadn't read or heard about the "UK tax law only applying to other taxation states" bit which you talk about.

Of course I DO intend to bring back money I save whilst abroad, but in essence, what I want to do is pay off my UK house mortgage with it.

But basically, I am in need of some professional advice, I think.

That's my conclusion at this stage ;-)

Ged

Norm_uk

Well if you save your tax free income earned here offshore you'll only be paying tax on it once it goes back to the uk...

It really depends how you intend to pay back your mortgage - feel free to PM if you want more info as I can't really give bespoke advice over the forums