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TonyTax
TonyTax, Tax Consultant
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Emigration Will be receiving a police pension (22000 p/a after

Customer Question

Emigration
Will be receiving a police pension (22000 p/a after commutation) and going to hopefully work teaching English in Thailand.
I will by then own 2 or three properties in England which I intend to rent out.
What are the most tax efficient ways to receive my pension.
Can I declare one of my properties as my home but still rent it out while out of the country and is this tax advantageous.
P85 - Do I have to declare I intend to live full time in Thailand at this point when I don't know how things will work out.
Any other related advice to this situation that I haven't identified here eg re banking /transferring money, other tax issues. Thanks
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

Can you tell me whether you will be working on a self-employed basis or on an employed basis in Thailand. Have any of the properties you will own by the time you go abroad been your main home? When was each property bought exactly (month and year)? Will you be leaving any immediate family behind in the UK?



Customer: replied 3 years ago.

Hi

Employed as a teacher in a school.

No none of the properties will have been my main home.

I am in the process now of buying all three properties in Shrewsbury where I have a brother and father resident.

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.

Expert:  TonyTax replied 3 years ago.

Hi again.

As you will read here, your Police pension is a "government service pension" and will be taxable only in the UK. You will qualify for the personal allowance notwithstanding the fact that you will be non-UK resident.

Any rental surpluses you make (income over deductible expenses) will be taxable in the UK. You can read about allowable expenses here and here. You should also read the notes here as you will be a non-resident landlord.

From 6 April 2015, gains made on the disposal of UK residential property are very likely to be made subject to Capital Gains Tax in the UK. However, it is intended that only gains arising from 6 April 2015 to the date of sale of the property will be subject to UK tax. If you buy your properties before then, you will need to have them valued as at 5 April 2015 as those values will be your costs for CGT purposes.

In light of that, it might be a good idea to elect for one of the properties that you buy to be treated as your main home by writing a letter to that effect to the tax office. However, in order for a property to be treated as your main home, you do have to live in it at some point, though not necessarily as soon as you buy it.

There is a relief for absences whilst working abroad as an employee whereby that absence is treated as a period of residence in a property that is designated as a main home. The property must be occupied as such both before and after an absence abroad, however. The property can be let during an absence whilst working abroad and still be treated as the owner's main home in these circumstances.

It's not made clear in the legislation that a voluntary move abroad does not qualify for this relief whereas a move abroad as a result of an employer asking an employee to work abroad definitely does so I would take it that it does. Take a look at HS283 and the notes starting here for more information. This relief is also only available if you don't have a home abroad which you own or let on a long term basis whereby that let or lease has some residual value if you can sell it before it expires.

You should complete a P85 regardless of the fact that you are not sure how long you will be abroad. To avoid UK tax on your Thai earnings, you need to complete at least one full tax year as a non-UK residence. That period will start on the first 6 April after you leave the UK.

Take a look at the notes here, here and here on the new UK statutory residence test. You are limited on the amount of time that you can spend in the UK in order to maintain your non-UK resident status.

I hope this helps but let me know if you have any further questions.



















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Customer: replied 3 years ago.

"To avoid UK tax on your Thai earnings, you need to complete at least one full tax year as a non-UK residence. That period will start on the first 6 April after you leave the UK"


 


I am obviously misunderstanding this bit - it cannot be the case that one is expected to pay tax on foreign earnings in both states..

Expert:  TonyTax replied 3 years ago.
It is possible to pay tax in two countries on the same income but that is where the double tax treaty if there is one comes into play. If you didn't complete at least one full tax year as a non-UK resident and had to pay UK tax on your Thai earnings, the Thai tax would be offset against your UK tax liability on the same income.

Article 16 of the UK/Thailand double tax treaty here deals with employment income.