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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4939
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hi, I left UK on 28th of July 2011 to come and work in Saudi

Resolved Question:

Hi, I left UK on 28th of July 2011 to come and work in Saudi Arabia (KSA). My original plan was to bring my family (Wife and 3 children) to KSA and settle there but when I joined the company it took the company just over an year to sort out my KSA Aqama (residence permit). By that time my son already started his GCSE studies and I had to cancel the plan to bring my family to KSA. My family continue to live in UK and came to KSA on holidays couple of times.
I applied for non-residence status by completing P85 in Dec-12 and sent to HRMC. HMRC acknowledged my non-residence application on 11th Jan-13.
Now, I want to come back to UK as it has been very difficult to live all those time alone without the family.
I would like to know do I have to complete the current tax year 2013-14 to avoid paying tax on salary earned in KSA as I completed the P85 form in Dec-12 even I was in KSA since Jul-11 or as I have already completed one tax year (tax year 2012/13) regardless when I sent my P85 I can come now before the end of tax year 2013/14?
I have already handed over my resignation to my employer with notice period due to end on 28th of Feb-14. My resignation is still not accepted by my employer.
During my stay at Saudi Arabia I spent following number of days in UK to stay with my family:
Tax Year 2011/12 = 18 days
Tax Year 2012/13 = 56 days
Tax Year 2013/14 = 35 days
Departed London 28/07/2011 10:00
P85 sent in Dec-12
Acknowledgement from HMRC 11 Jan-13

Moreover I have two properties in UK:
Property -1: Lived there with family for about 11 years then moved to property two and rented out the property. Rental and expenses are already declared to HMRC through online self assessment.
Property-2: Lived there since Oct-2008 apart for I have left for KSA but my family still lives there. Now when I come to UK, we are planning to move to property -1.
Could you let me know how long do I have to stay at my first property again to classify it as my main residence so that I can sale my property -2 as soon as possible?
I do not have any saving, all the saving have been used to reduce the mortgage and other loans.

Thanks, Manzar
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

I am another expert on this site and I am able to help you.
[q]
I would like to know do I have to complete the current tax year 2013-14 to avoid paying tax on salary earned in KSA as I completed the P85 form in Dec-12 even I was in KSA since Jul-11 or as I have already completed one tax year (tax year 2012/13) regardless when I sent my P85 I can come now before the end of tax year 2013/14?

[a]
If you were to stay away until 6 Apr 2014 then you would avoid paying tax on earnings in Saudi for the current tax year.

I will revert to you shortly after I have done some calculations on capital gains
Customer: replied 3 years ago.

As I have already mentioned that I have completed tax year 2012/13 (one full tax year completed) then why I have to complete 2nd tax year as well? I should only be taxed for any earnings once I am back in UK regardless I am back in UK tomorrow or end of current tax year. Am I right?


 


Thanks, Manzar

Expert:  taxadvisor.uk replied 3 years ago.

Rules pertaining to UK residency of tax purposes changed from 6 Apr 2013.

You will not pass the automatic overseas tests for a tax year and therefore because of family ties would be regarded as UK resident

The automatic overseas tests and examples are covered on pages 9and 16 of RDR3 here
http://www.hmrc.gov.uk/international/rdr3.pdf

As far as Property 1 is concerned, please advise likely gain if you were to sell the property before 5 Apr 2014 to enable me to do some what if calculations or can I assume the gain based on current valuation is c 200k and also please confirm if the property is owned jointly with your wife.


Many thanks

Customer: replied 3 years ago.

Thanks, XXXXX XXXXX help.


 


Waiting for the 2nd part of the question about my property, and property-1 to be classified as main residence.


 


Manzar Rehman

Expert:  taxadvisor.uk replied 3 years ago.
Thank you for your reply

I have assumed the gain to date is c. £200k in the absence of other information.

[q]
Could you let me know how long do I have to stay at my first property again to classify it as my main residence so that I can sale my property -2 as soon as possible?

[a]
As the property -1 was your main residence at some point before you let it, if you were to move back to it, with effect from 6 Apr 2014 additional relief for final 18 months instead of final 36 months would be available. Also letting relief will be available...
Based on my calculations you could sell it within one year of moving back and there will be no CGT payable. Here are my calculations

Potential capital gain £200,000
months
Period covered as main residence 144
Period unoccupied 0
Period covered as let property 66
Total period of ownership 210
Final 18 months relief 18
Private residence relief £154,286
Gain subject to CGT £45,714
Number of owners 2
Gain per owner £22,857
Maximum letting relief available - lower of
Fixed amount set by HMRC per owner £40,000 £40,000
Private residence relief £77,143
Gain on the part of the property that's been let £22,857
Letting relief £22,857
Gains chargeable to CGT £0
Gains annual allowance (£10,900 per owner) £10,900
CGT on amount nil

If on the other hand, the property is in your sole name only then the calculations are

Potential capital gain £200,000
months
Period covered as main residence 144 (say Oct 1997 - Sep 2008 plus)
Period unoccupied 0
Period covered as let property 66 (Oct 2008 - Mar 2014)
Total period of ownership 210 (say Oct 1997 - Mar 2015)
Final 18 months relief 18
Private residence relief £154,286
Gain subject to CGT £45,714
Number of owners 1
Gain per owner £45,714
Maximum letting relief available - lower of
Fixed amount set by HMRC per owner £40,000 £40,000
Private residence relief £154,286
Gain on the part of the property that's been let £45,714
Letting relief £40,000
Gains chargeable to CGT £5,714
Gains annual allowance (£10,900 per owner) £10,900
CGT on amount nil

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4939
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.
Your reward of a bonus is greatly appreciated.

Best wishes
Customer: replied 3 years ago.


I think my 2nd part of the question was not clear:


 


I have two properties:


 


Property-1 bought in May 1997 and lived there till Oct-2008.


 


Property-2 bought in April 2002 and rented out till Jul-2008 and then I with my family moved in from property-1 to property-2 on Oct 2008.


 


My family still lives at property-2 whereas property-1 was rented out from Dec-2008.


 


Now, when I, finally, come back to UK I would like to move back to property-1 and sold property-2 (where my family currently resides).


 


Would HMRC will still treat property-1 as my main residence while my family had been away from that property for almost five years and still be able to claim main residence benefit if I decide to sell the property in future?


 


What will be tax implication on property-2 if decide to sell the property on coming back to UK and do not claim it as my main residence?


 


Thanks, Manzar


 

Expert:  taxadvisor.uk replied 3 years ago.
Thank you for your question...

You will get private residence relief on Property -1 for all the period it was your main residence i.e period to Oct 2008 and then for all period once you move back to date of sale provided you are living in it for this period..

If your family has been living in Property -2 since Oct 2008 then HMRC would regard Property -2 as main residence since Oct 2008 based on facts.

If you were to sell Property - 2on your return, then based on information propvided all gain would be covered by private residence relief and letting relief.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.


So, by selling property-2, I still would retain the benefit of main residence of Propery-1 while I lived there before/after moving to/from property-2.

Expert:  taxadvisor.uk replied 3 years ago.
Yes you would.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

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