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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13865
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Hi, a friend of mine is travels overseas for most of the year.

Resolved Question:

Hi, a friend of mine is travels overseas for most of the year. In 2009 she had a no tax ruling from the IR, but she has not been in touch with them since. She had an advice from a tax adviser in 2011 or 2012 that she still had a non tax status, and 3 months ago was advised that despite changes to the non dom rules she is still not subject to tax.
(1) She wants to apply for a mortgage to buy a home in London. As she's not been in touch with the IR since 2009, how can she prove her non-tax status to the mortgage lenders? Would a letter from her tax adviser be sufficient?
(2) Although she is still a non dom within the rules and therefore not subject to UK tax, she may have to spend more time in the UK this year for personal reasons and does not want to be worrying about her tax status. What should she do? Should she take steps to regularise her tax situation or just leave things as they are and get in touch with the IR only if she spends a lot more time in the UK?
(3) on a related point, she does own a UK buy to let property which is rented out. Tax is deducted from the rent by the letting agents, although she has not submitted a tax return since her no tax ruling in 2009. Does the buy to let property or the fact that she is going to buy a home for her personal use affect your advice in any way?
(4) are there advantages to and/or should she set up a UK I company through which she could offset her expenses against income and so reduce any potential income tax she may have to pay in the future to the corporate rate of 20%? If so, how would she do this and what expenses could she set off? Also, as she may not know until say January 2015 if she has spent more time than usual in the UK during this tax year, can she set the company up then and will it protect her for the entirety of this tax year (ie since April 2014) or would it only protect her going forward from the set up date?
(5) Alternatively, is there little or no benefit to setting up a company as opposed to say claiming say a sole trader or similar status?
As you can see there a quite a few issues, and we need some guidance on the best way to proceed. Basically, she wants to make sure her status is protected/confirmed as far as possible and if she should contact the IR that she takes the necessary steps to sort things out so she does not have to worry about her tax status going forward whilst at the same time minimising the tax she may be liable for.
Many thanks! And I look forward to hearing from you,
Best
Rebecca
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi Rebecca
Thanks for your questions, I am Sam and I am one of the UK tax experts here on just Answer.
Lets deal with each of your questions
1) She wants to apply for a mortgage to buy a home in London. As she's not been in touch with the IR since 2009, how can she prove her non-tax status to the mortgage lenders? Would a letter from her tax adviser be sufficient?
She would need to ask the country in which she resides to produce documentation advising her residence within that country. As HMRC only provide certificates detailing for individuals that are resident in the UK for other countries.
(2) Although she is still a non dom within the rules and therefore not subject to UK tax, she may have to spend more time in the UK this year for personal reasons and does not want to be worrying about her tax status. What should she do? Should she take steps to regularise her tax situation or just leave things as they are and get in touch with the IR only if she spends a lot more time in the UK?
She do nothing unless her time in the UK during any one tax year exceeds more than 91 days, at which point she will be reviewed as to whether she is to be treated as UK resident. If the 91 days is exceeded, then she should contact HMRC to advise.
(3) on a related point, she does own a UK buy to let property which is rented out. Tax is deducted from the rent by the letting agents, although she has not submitted a tax return since her no tax ruling in 2009. Does the buy to let property or the fact that she is going to buy a home for her personal use affect your advice in any way?
She should have submitted tax returns each year, as the tax deducted may be in excess of what was required due to expenses incurred on the property, and the possible right to claim UK personal tax allowances.
And within that - she would have also completed a residence section, which would allow HMRC to have provided evidence of her non UK residence status. This needs to be rectified and self assessment tax returns completed.
But she is unlikely to owe HMRC money, the likelihood is HMRC will owe her, due to her non residence position.,
(4) are there advantages to and/or should she set up a UK I company through which she could offset her expenses against income and so reduce any potential income tax she may have to pay in the future to the corporate rate of 20%? If so, how would she do this and what expenses could she set off? Also, as she may not know until say January 2015 if she has spent more time than usual in the UK during this tax year, can she set the company up then and will it protect her for the entirety of this tax year (ie since April 2014) or would it only protect her going forward from the set up date?
You cannot have rental income treated as trade income, so this is not a viable option.
(5) Alternatively, is there little or no benefit to setting up a company as opposed to say claiming say a sole trader or similar status?
Not viable, as advised at question 4
Let me know if you have any follow up questions
Thanks
Sam
Customer: replied 2 years ago.
Dear *****,
Many thanks. Very helpful. Just a couple of points following on ..
(1) I should mentioned she is a journalist and travels abroad from place to place. She is therefore not resident anywhere else. In light of that, how can she prove her no tax status to the potential lender?
(2) would your advice that she only needs to get in contact with the IR after she's been in the UK for more than 91 days apply on a year by year basis? What happens if she was In UK 60 days last year? Can the 31 days be rolled over into this year?
(3) noted re she needs to now submit tax returns re the buy to let property. I assume she needs to submit separate Returns for each tax year since 2009. Is that correct? Could she be subject to penalties for not submitting them before?
(4)(5) could she not set up a company though through which only her income as a journalist could be channelled? If not, is there any other way she can try to minimise her tax exposure if she is in the UK for more than 91 days?
Thanks
Expert:  Sam replied 2 years ago.
Hi Rebecca
Thanks for your further questions
(1) I should mentioned she is a journalist and travels abroad from place to place. She is therefore not resident anywhere else. In light of that, how can she prove her no tax status to the potential lender?
If she has no one country that is treated as her residence, and the fact we all have to pay tax, then she should be opting for one country to oversee her tax position (usually her country of birth. And in light of that, that country would be treated as her country of residence too.
(2) would your advice that she only needs to get in contact with the IR after she's been in the UK for more than 91 days apply on a year by year basis? What happens if she was In UK 60 days last year? Can the 31 days be rolled over into this year?
NO she needs to get in touch with them now, as she should have been filing tax returns to declare the rental income that arises in the UK, and to manage her tax position of her income as a journalist.
And the 91 days now stand alone in one tax year (there use to be an averaging looked at over 4 years, but not any more,
(3) noted re she needs to now submit tax returns re the buy to let property. I assume she needs to submit separate Returns for each tax year since 2009. Is that correct? Could she be subject to penalties for not submitting them before?
Yes its one tax return per year, yes there will be penalties for late filing - and if tax is owed (which for just the rental income is unlikely) then penalties and interest for late payment. However in light of the fact that no tax has been paid anywhere on the journalist income, there is then this issue to deal with too.
(4)(5) could she not set up a company though through which only her income as a journalist could be channelled? If not, is there any other way she can try to minimise her tax exposure if she is in the UK for more than 91 days?
She could yes - this would be viable assuming she works for many organisations (rather than just one or two, in which case she is an employee and cannot trade as self employed or as a limited company for risk of being in breach of the IR35 legislation)
But she then would be charged corporation tax on the income through the limited company, and also considered for tax and National Insurance on any salary drawn - so in essence be taxed twice on the same income. And although there are tax efficient ways to draw money personally from a limited company - such as dividends, as soon as this exceeds £41865 a year, then there is higher rate tax to consider.
And this is no longer just an issue of spending less than 91 days in the UK, as clearly no one has been taxing this income as a journalist and like I have already advised, we all have to pay tax somewhere.
Whether there is scope to have another country act as the resident country - so that we just come back to considering rental income in the UK - but then the 91 days must not be exceeded - or the UK then become the country of residence and taxation for worldwide income.
Thanks
Sam
Customer: replied 2 years ago.
Dear *****,
Many thanks. Very helpful, and I am now able to see the wood for the trees! I'm still unclear though on the following point - if she treats the U. As her country of residence which must be the most likely, what would she have to provide to a potential mortgage lender to prove a no tax status? Would a letter from her tax adviser be sufficient (because anything from the IR will probably take a long time to get, even if she starts to regularise the situation now by starting to file tax returns)?
Thanks
Rebecca
Expert:  Sam replied 2 years ago.
Hi Rebecca
Thanks for your further question - you may find that she is not going to be treated as not resident - as she will have to pay tax, and if this is to be the UK, then she will not have a no tax status.
Only a tax body can ever provide a certificate residency, in whatever country that is, and its used for double taxation purposes, rather than for mortgage applications but a tax adviser will not have the authority to provide this, you will need to discuss this further with the mortgage lender.
Let me know if you have any further questions, but if in the meantime you could rate/accept the level of service I have provided, it would be appreciated.
Thanks
Sam
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