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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13942
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Hi Sam I have been working in Saudi Arabia since October 2013 and am a British National

Resolved Question:

Hi Sam
I have been working in Saudi Arabia since October 2013 and am a British National. Do I have a tax liability in the UK on my Saudi income for my 2013/14 tax return? I also have two properties in the UK which I jointly own with my wife (one was our principle residence and the other was an investment property).What is my tax situation on the properties for my 2013/2014 tax return.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question and asking for me
1)Can you advise how long this overseas contract will see you out of the UK and what visits you had back to the UK from October 2013 to 05/04/2014
2)Are both properties rented out
3)Have you advised HMRC that you have left the UK (filling in form P85) and has your wife gone with you?
4)Do you have tax deducted from your rents from a managing agent or the tenants (or have you applied for the Non Resident Landlord scheme to have rents paid gross, without deduction of tax)
I an then advise further
Thanks
Sam
Customer: replied 2 years ago.

Hi Sam

1. The Overseas contract is ongoing i.e. no fixed time limit. I have been back to UK once (from 19-27 December 2013).

2. Both properties are now rented out (our pricipal residence has been rented out since Oct 2013).

3. Have not told the HMRC that I have left the UK as was not sure if things would work out in KSA i.e. might have come back eralier.

4. Tax has not been deducted by the agent as I plan to pay this when I submit my tax return.

Expert:  Sam replied 2 years ago.
Hi Arun
Thanks for your response
I am afraid you do not have a choice regarding the tax position on the rented properties, you should have told HMRC that you had left the UK to take up this work abroad, and that you had rental income, so they could arrange for tax to be deducted form the rents if no application to the non resident landlord scheme was implemented.
I would now advise that you rectify this - regardless of whether you plan to come back to the UK soon or not.
Link here for form P85 http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=5Ay4eloD0nw
Link here for application for the non residents landlord scheme
http://www.hmrc.gov.uk/international/nr-landlords.htm
If you do not apply for the non resident landlord scheme then the managing agents or tenants should be deducting basic rate tax from the gross rents to pay over to HMRC, so you do need to address this. And I am shocked that the managing agent has not advised you of this, as they should be familiar with the treatment of rents when the landlord is not living in the UK. I would take this up with them first and foremost.
I will also advise that if you come back to the UK before 05/04/2015 to live and work, then you will be treated as liable to tax on your worldwide income - so yes, will be liable to tax on the income you are earning in Saudi.
If however, you plan to remain out of the UK working beyond 05/04/2015, then as
1) you would have completed a full tax year living and working out of the UK and
2) your visits back to the UK for this year (2014/2015) are less than 90 days and your visits from October 2013 to 05/04/2014 were less than37.5 (approx.) which is a pro rata of 90 days (which it was) then you will be treated as not resident and not liable to tax on this income earned abroad.
However your UK rents will remain liable to UK tax, as these arise in the UK, and its just a question of what your plans are regarding a return to the UK regarding the Saudi income.
Can you be more specific of your plans to returning to the UK?
Thanks
Sam
Customer: replied 2 years ago.

Thanks Sam

I will do the needful with my managing agents. The contracts in Saudi are on a rolling basis. So renewal is done automatically. My first year finished on 1st September so my contract automatically renews for another year.

Expert:  Sam replied 2 years ago.
Hi Arun
Thanks for your response
But what are your plans - your intentions
Thanks
Sam
Customer: replied 2 years ago.

Hi Sam

I plan to stay in Saudia Arabia for another 2 years i.e. till 1st October 2016.

Thanks

Arun

Expert:  Sam replied 2 years ago.
Hi Arun
That's great - thanks
Then you only declare your half share of the rental income on the tax return (UK property section) - and also complete the residency section detailing the date you left the UK and how many days you have spent in the UK, and make sure you claim personal allowances as a British citizen.
Your wife needs to do the same for her half share.
I should also advise that if you plan to file online HMRCs free online services do not support the file of the residency page, so you will either need to purchase software that supports the file of it all online, engage an accountant to do this for you, or file a paper return. Please note that the deadline for the paper returns was 31/10/2014 - so if you choose to go down this route you will be charged £100 penalty for the late file (and this x 2 as there is your wifes' tax return too)
You need not declare the income from Saudi, as you will be treated as not resident for UK tax purposes, so only liable to tax on UK arising income, from which your personal allowances (The first £10,000) will be tax free and the reminder liable to tax.
Let me know if you have any follow up questions, but if you could rate the level of service you have received from me, it would be appreciated, as this ensures that I am credited for my time by just Answer.
Thanks
Sam
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