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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello I am a UK citizen and I am working in China at present.

Resolved Question:

Hello I am a UK citizen and I am working in China at present. I rent out my flat in London. I can not claim residency in China but I am allowed to work. So far I am still classed as resident in the UK.. My income from my flat is around 12,000 and my income from work this tax year will be around 8,000. I declare my wages to the UK tax what is the best option am I better off claiming foreign residency or not. I do not visit the UK and have no plans to return.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Are you a UK national? Do you pay tax in China on your earnings? Do you work for a UK employer with a base in China, a Chinese employer or an employer from another country which has a base in China? How long have you been living and working in China? What will you do if and when you decide to leave your current job?
Customer: replied 3 years ago.

Hello Tony I am a British National and I pay a small tax on my earning around 5%. No my employer is Chinese and based in China I have been living and working in Asia for nearly five years and also taXXXXX XXXXX holidays. After my current contract runs out in July 2014 I will go on holiday for three months

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 3 years ago.

thank Tony my expenses for the flat this year will be around 5000 inlcuding an allowance for furniture

Expert:  TonyTax replied 3 years ago.
Hi again.

Given that you appear to be paying UK tax on your salary that would suggest that you did not complete a P85 at the time that you left the UK. If you did, I'd be interested to know what response you got if any from the tax office in the UK.

Unless you are treated as resident in another country it can be difficult though not impossible to lose your UK residency status. I would suggest that if you have not completed a P85 before now, that you do so and send it to the tax office with a covering letter setting out your last 5 years. Regardless of your tax residency status in the UK, you will still be liable to UK tax on your UK rental income.

Having said that it is difficult to be treated as non-UK resident if you don't have official residency elsewhere (though you are clearly living in China), you should look at the new tax residency rules set out in RDR3 here. A more readily understandable summary of the rules can be found here. These became effective from 6 April 2013. I would say that you pass one or more of the automatic overseas tests so it may be worthwhile making the claim for non-UK tax residency.

Article 4 of the UK/China tax treaty here says that you will not be treated as resident in China if you are only taxable in China on Chinese sources of income and capital gains. If you were treated as both UK and China resident at the same time, Article 4 allows the individual to ask for an adjudication by the relevant tax authorities of both countries.

Article 15 of the tax treaty deals with employment income. Give that you spend all your time in China and you work for a Chinese employer, your earnings will be taxable there. What needs to be decided is whether you should be paying tax in the UK on the China earnings. If you should, you should get credit for the Chinese tax paid.

Given that you are not benefiting from UK government services that you are contributing towards, if I were you I'd be inclined to complete and submit a P85 to the UK tax office and await a response. Any national insurance you pay, however, even voluntary contributions will help towards benefit entitlements. There will be nothing to stop you returning to the UK in the future.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

if I claim non residency will this effect my personal allowance and will I pay tax on the full income from my flat? At present I can deduct the PA from the rent. I did not fill in a P85 and it is my employer who deals with my tax here in China

Expert:  TonyTax replied 3 years ago.

You will still be entltled to a personal allowance as a non-UK resident individual. Many UK nationals who live abroad offset their personal allowance against UK rental income.

 

You may not be aware of the non-resident landlord scheme. Read about it here.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

thank for that Tony I did not know about this One last question can I still claim for the expenses on my flat if I am none resident ?

Expert:  TonyTax replied 3 years ago.
Yes, you can.
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