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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Thank you for answering my earlier question so well. I have

Resolved Question:

Thank you for answering my earlier question so well. I have another question:
If I decide to be Non Domiciled in UK (but resident and ordinarily resident in UK) and I receive foreign income from employment from a legal entity in the Netherlands which I do not remit to UK, i.e just leave on a bankaccount in NL, do I then need to pay income tax over this foreign income?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Where will you be doing the work for the Dutch employer, the UK or the Netherlands or elsewhere?
Customer: replied 2 years ago.

UK

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.
Hi again.

The concept of ordinary residence ceased to have any effect from 6 April 2013.

An individual does not decide to be non-UK domiciled. You either are or you are not UK domiciled in the UK. Take a look here for information on domicile.

If you live and work in the UK, then you will be taxable on your earnings in the UK even if your employer is a foreign employer with no presence in the UK. Take a look here for the basic rules applying to such circumstances on tax and NIC and here and here on more specific rules on NIC.

If any of your work was carried out in the Netherlands, then to the extent that you remit that proportion of your earnings to the UK, it will be taxable in the UK. Relief will be given for tax paid on the same earnings in both countries. Article 14 of the UK/Netherlands tax treaty here deals with employment income.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Thanks and I will have a more detailed look. But I always understood that if I decide to pay £50.000 (previously £30.000), as a number of my friends in the UK do in similar circumstances, I can be a Non Dom and pay tax on foreign income only if I remit to money to the UK. Has this now changed?

Expert:  TonyTax replied 2 years ago.

No, it hasn't changed. The non-dom rules apply to non-UK source income. The fact that you are doing the work in the UK overrides that unless your employer has an agreement from the Dutch and UK tax authorities to say that, in your specific case, your earnings will only be taxable in the Netherlands.

I've had clients who live abroad and who work for a UK based company and they pay tax in the overseas country if they are tax resident there unless they work in both countries in which case the earnings are split for tax purposes in which case part may be taxable in both countries with relief for double taxation being given. You should consult your employer's in-house accountants.

Customer: replied 2 years ago.

Ah ok that clarifies it, so if it is income from a non UK source for which I have not done work in the UK, which for example applies to income from investments in NL then the non dom rules apply, but not if I work in the UK on behalf of a Dutch legal entity.

Not sure whether I can ask a related question still?

Expert:  TonyTax replied 2 years ago.

That's the jist of it. It can become more complicated if an individual is effectively doing the job they used to do, in the Netherlands in your case possibly, by remotely accessing company computer servers from abroad.

Waht is your other question?

Customer: replied 2 years ago.

it relates to redundancy payout and PAYE information (could well be additional charge Frown)

Expert:  TonyTax replied 2 years ago.
OK, go ahead.
Customer: replied 2 years ago.

I am employed by a UK legal entity of a big multinational. If I were to receive a lumpsum (potentially redundancy, not sure, or a negotiated "deal") from a legal entity based in NL from the same Multinational, will this amount be reflected on the P45or P60 of the UK based PAYE tax reference? I am not sure what happens here, but would find it strange that two different legal entities (one UK and one Dutch) go on the same PAYE tax reference.

Expert:  TonyTax replied 2 years ago.
Can you elaborate on the circumstances please. For what employment would the redundancy payment be for? Are there two separate jobs? Did you work in the Netherlands for the parent company and then move to the UK to work for a subsidiary company?
Customer: replied 2 years ago.

In order to get a redundancy payment (which is a termination offer after many years of service all over the world) I need to be repatriated to the Netherlands where my employer can apply the Dutch redundancy rules for me. So I will be placed on a payroll of the Dutch legal entity I started with in the Netherlands many years ago and get my payout in the Netherlands. However, I will not migrat to the NL but only be there for a few months and then return to the UK.

Expert:  TonyTax replied 2 years ago.
Thanks.

I would expect the UK tax authorities to be interested in sauch an arrangment and it really is one for your employer's in house accountants to look into with their professional external advisers. A large multinational will have access to expert international cross border tax advice as this type of situation will occur quite often I would have thought.

To the extent that the redundancy payment relates to your work in the UK, it may be taxable in the UK, possibly on a proportionate basis. The fact that you may return to the Netherlands for a few months and be put on a local payroll won't change your residency status in the UK unless you didn't return to the UK. Again, your employer may be able to get the UK and Dutch tax authorities to agree a treatment specific to you.
Customer: replied 2 years ago.

Ok thanks, ***** ***** it up with them, though I am unclear as to whether the P45 form here in UK can show the lumpsum amount which originates from a Dutch source. Would have thouight not possible, but don't know whom to ask.

Expert:  TonyTax replied 2 years ago.
I would doubt it. Large companies with international subsidiaries will have separate payroll tax references in every country that they operate in. Your employer will be well versed in how this works and they, the Dutch HQ or your UK based employer, will tell you if such a payment will be included on your P45. Even if it isn't, HMRC in the UK may think it is an artificial arrangement if they get wind of it.
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