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Best way to ‘manage’ tax code when moving to oman

Best way to ‘manage’ tax code when moving to oman

Old Feb 21st 2019, 11:14 am
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Default Best way to ‘manage’ tax code when moving to oman

Hello again everyone,

So it looks like we will be taking the job in Oman, and could be starting as early as mid March

im just looking at how best to manage my tax code - have googled the [email protected] out of it but still a little unsure! Spoke to a tax advisor and they want close to a grand to help me out but I’m thinking it can’t be that hard!

once we have left the country, I will be receiving my military salary (circa £5000 per month) until mid June (my official exit date from my current job). After that I will be receiving my pension (circa £10000 a year) paid into my Uk account.

The Omani company will be paying me OR into an Omani bank account, on a monthly basis.

If I tell HMRC that I am ‘non-resident’ from mid March, I understand I will lose my UK tax allowance and, therefore, be taxed heavily on my remaining months of salary and my pension going forwards.

Is there anything to stop me declaring ‘non-residency’ post June, or will they discover my Omani earnings Over that period and then demand I pay tax on them?

I’m concerned that a relatively simple procedure could end up costing me thousands if I screw up my tax handling!

Thanks in advance,

David

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Old Feb 21st 2019, 12:02 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

There's actually nothing you need to do at all, so tell the expensive accountant thanks but no thanks.

You don't need to tell HMRC you are leaving and becoming non-resident. You can if you like, but you don't need to.

As soon as you move to Oman you effectively qualify to earn your salary earned there tax free. Whether the HMRC knows about it or not is irrelevant. I'm assuming you will be in Oman for at least a full tax year? If not you get charged tax on Omani earnings. See https://www.gov.uk/tax-foreign-income/residence.

Your UK income (ie military salary) will still be taxed in the UK. That never changes. But you don't lose your UK tax allowances by being non resident. You still get the annual 10k or whatever it is tax free so can offset UK income (e.g. if you rent out your house) against that
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Old Feb 21st 2019, 12:04 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

Forgot to mention. You will be overcharged on your tax in the UK this year because it is done pro-rata. You could change tax code I guess, but easier is just ignore it and then fill in a tax return at the end of the year (after April 2020). You'll be refunded what you overpaid, plus interest. Tax return is simple. No need to get an accountant for that
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Old Feb 21st 2019, 12:25 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

Dominoman, thanks for taking the tome to reply

i did wonder if they would even know, maybe my moving of money from Oman back to home would highlight it, but I’m sure it’s well below the threshold they look to with regard to money laundering!

Thats great that I don’t lose my tax allowance, regardless of my residency status, and totally understand what you mean about the tax on UK stuff needing a rebate at the end of the year, so will cross that bridge then.

So, what benefit, if any, is there to informing HMRC of my move?!
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Old Feb 21st 2019, 12:55 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

Originally Posted by DVN999 View Post
Dominoman, thanks for taking the tome to reply

i did wonder if they would even know, maybe my moving of money from Oman back to home would highlight it, but I’m sure it’s well below the threshold they look to with regard to money laundering!

Thats great that I don’t lose my tax allowance, regardless of my residency status, and totally understand what you mean about the tax on UK stuff needing a rebate at the end of the year, so will cross that bridge then.

So, what benefit, if any, is there to informing HMRC of my move?!
A tax rebate. File Form P85.
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Old Feb 24th 2019, 8:18 am
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Default Re: Best way to ‘manage’ tax code when moving to oman

I didn't inform anyone, just moved away 13 odd years ago. They work it out for themselves eventually and send you a self assesment form. Fill it in and bosh, tax rebate.
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Old Feb 24th 2019, 10:00 am
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Default Re: Best way to ‘manage’ tax code when moving to oman

Originally Posted by jam25mack View Post
I didn't inform anyone, just moved away 13 odd years ago. They work it out for themselves eventually and send you a self assesment form. Fill it in and bosh, tax rebate.

So when you say rebate, do you mean on whatever UK stuff you had also coming in? I’m assuming they didn’t touch your overseas earnings?
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Old Feb 24th 2019, 12:19 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

Originally Posted by DVN999 View Post



So when you say rebate, do you mean on whatever UK stuff you had also coming in? I’m assuming they didn’t touch your overseas earnings?
When i left the UK ( 13 years ago) i completed a P85 tax form. I moved here in the month of July and received about a grand back. https://www.gov.uk/tax-right-retire-abroad-return-to-uk all the info is here
it is also the law to tell them you are moving

https://www.gov.uk/moving-or-retiring-abroad

Last edited by reddiva; Feb 24th 2019 at 12:22 pm.
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Old Feb 25th 2019, 7:57 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

Your UK tax residency is like an on/off switch. In any given tax year you are either UK resident and liable for full UK income tax and NI on your worldwide earnings or you are UK non-resident and have no UK liability. There is no in-between status, other than a split-year concession in the year you leave the UK and the year you return to the UK, which HMRC may grant, subject to conditions.

Becoming UK non-resident is not as easy as it might seem. The quickest way is to pass one of the Automatic Overseas Tests (probably either the first or third test for you), which will be 6th April 2020 at the earliest, but backdated to the day you left the UK. Also available are split-year concessions for your residency status in the year you leave and the year you return to the UK, so effectively only part of the year is taxable in the UK.

If I were you, I'd do the following...
Recognise that this whole area is complex, and consider paying a UK professional to look after your tax affairs
Leave the UK and start working full-time before 5th April 2019
Work full-time overseas for at least a full tax year
Limit your days visiting or working in the UK (See RDR3)
Keep detailed records of your hours worked both overseas and in the UK. Signed timesheets or similar
Keep detailed records of your travels, particularly visits to the UK. Boarding passes or similar.
Open and contribute to a UK private pension scheme before you leave the UK (you can still contribute £2880 per year for the subsequent 5 tax years and get 'free' 20% tax rebates automatically)
Contact HMRC and set up a Direct Debit to pay Class 2 NI contributions to secure your future UK State Pension entitlement.
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Old Feb 25th 2019, 8:26 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

Originally Posted by dominoman View Post
Forgot to mention. You will be overcharged on your tax in the UK this year because it is done pro-rata. You could change tax code I guess, but easier is just ignore it and then fill in a tax return at the end of the year (after April 2020). You'll be refunded what you overpaid, plus interest. Tax return is simple. No need to get an accountant for that
(i) the tax year in the UK starts on April 6, so I am not sure in what respect he will be "overcharged" for "this year", and (ii) in any case tax allowances are given for a whole tax year, so, from the perspective of income tax in the UK it is usually optimal to the leave the UK as soon after April 6th as you have gross taxable income equivalent to your annual tax allowance, thereby making you eligible to claim back all income tax deducted at source, assuming that you have no further taxable income in the UK for the rest of the tax year (until the following Aril 5th).

If my understanding is incorrect, please can you explain where and how, because it worked as I described above when I left the UK.
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Old Feb 26th 2019, 6:13 am
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Default Re: Best way to ‘manage’ tax code when moving to oman

Interesting replies everyone, thank you!

So my actual timeline will look like this:

18 March 2019 - move to Oman, start work for new company. Paid in OR into Omani bank account.
19 June 2019 - last day of service for RAF, therefore last day of full salary from UK source.

From then on, will be receiving a UK military pension into UK bank account.

To keep things ‘clean’ I will ask the Omanis not to pay me anything until 6 April 2019, and I’ll tell HMRC I left the Uk On this date also. Does that sound sensible?
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Old Feb 26th 2019, 8:41 am
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Default Re: Best way to ‘manage’ tax code when moving to oman

Whatever you do, don't mess with HMRC.

In your shoes, I'd leave on 18th March as planned, inform HMRC I'd done so, and use the next tax year 2019/20 to pass one of the Automatic Overseas Tests. That way the current tax year is split for you and your UK tax liability ends the day you left the UK.

If you leave the UK on or after 6th April, you will be deemed UK resident for the whole of that tax year, but it can be split for you. However, you won't be able to use a split-year to pass the Automatic Overseas Test and 2020/21 would then become the first full tax year available to you. That might not be a problem for you, unless things don't work out in Oman and you repatriate before 6th April 2021, in which case you will have remained UK resident and liable for UK tax on all your worldwide earnings, including your Oman earnings.

Best get professional advice if you are in any doubt. Becoming and remaining UK non-resident is not straightforward, particularly when working in the volatile Middle East.
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Old Feb 26th 2019, 10:12 am
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Default Re: Best way to ‘manage’ tax code when moving to oman

Originally Posted by Johnnyboy11 View Post
Whatever you do, don't mess with HMRC.

In your shoes, I'd leave on 18th March as planned, inform HMRC I'd done so, and use the next tax year 2019/20 to pass one of the Automatic Overseas Tests. That way the current tax year is split for you and your UK tax liability ends the day you left the UK.

If you leave the UK on or after 6th April, you will be deemed UK resident for the whole of that tax year, but it can be split for you. However, you won't be able to use a split-year to pass the Automatic Overseas Test and 2020/21 would then become the first full tax year available to you. That might not be a problem for you, unless things don't work out in Oman and you repatriate before 6th April 2021, in which case you will have remained UK resident and liable for UK tax on all your worldwide earnings, including your Oman earnings.

Best get professional advice if you are in any doubt. Becoming and remaining UK non-resident is not straightforward, particularly when working in the volatile Middle East.

Spot on. Don't game anything.

Leave on March 18th - file P85, get a small refund for that year.
Then if it goes to the shit you can return on April 2020 and be tax free. Declare leaving on April 6th and you'd had to wait until April 2021.
You only lose the 10k allowance if you are not british.
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Old Feb 27th 2019, 5:06 am
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Default Re: Best way to ‘manage’ tax code when moving to oman

Originally Posted by Pulaski View Post
(i) the tax year in the UK starts on April 6, so I am not sure in what respect he will be "overcharged" for "this year", and (ii) in any case tax allowances are given for a whole tax year, so, from the perspective of income tax in the UK it is usually optimal to the leave the UK as soon after April 6th as you have gross taxable income equivalent to your annual tax allowance, thereby making you eligible to claim back all income tax deducted at source, assuming that you have no further taxable income in the UK for the rest of the tax year (until the following Aril 5th).

If my understanding is incorrect, please can you explain where and how, because it worked as I described above when I left the UK.
Because he said he'll still be receiving pay in the UK of 5 k / month till June. He'll be being taxed PAYE on that on the assunption that he will be earning 5k/month all year, so will need to claim back the difference at the end of the tax year.

Regardless of whether he informs HMRC he's leaving he should fill in a tax form at the end of the tax year. That way you are sure you're paying what you should on your UK income, and it's an easy way to get back any tax that is overpaid.
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Old Feb 27th 2019, 2:37 pm
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Default Re: Best way to ‘manage’ tax code when moving to oman

Originally Posted by dominoman View Post
Because he said he'll still be receiving pay in the UK of 5 k / month till June. He'll be being taxed PAYE on that on the assunption that he will be earning 5k/month all year, so will need to claim back the difference at the end of the tax year. ...
I would call that undercharged, because by the time he has got his refund he will have paid little or no tax on his income in the UK for 2019-20.
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