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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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PRR - I will return to the UK in early August having been an

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PRR - I will return to the UK in early August having been an expat for 14.5 years. During that time I spent 5 days in 2008 working at a non-company location. It would appear that this will severely impact my absence relief, limiting it to 7 years of deemed occupation. This seems incredibly harsh when I worked for 3200 days oversees. Is my interpretation correct, do I have any flexibility as the rule seems incredibly harsh.
Submitted: 11 months ago.
Category: Tax
Customer: replied 11 months ago.
I own a property that cost 285UKP in 1999 and is estimated to be worth 800k UKP today. It has been rented all the time we've been away. Property jointly owned with my wife. I plan to reoccupy in order to get the most tax benefit, but intend to sell and move to a more suitable property/location as soon as I can. All advise to minimize my tax are greatly appreciated
Expert:  TonyTax replied 11 months ago.

Hi.

Can you tell me where you have been living and working for 14.5 years and where you worked for 5 days in 2008 please.

Customer: replied 11 months ago.
Jan 2002- Aug 2009 I worked in USA
Aug 2009 - present I worked in Canada
October 2008 spent 5 days working at a Joint Venture company in Milford Haven, Wales.... majority owned by a 3rd party
Expert:  TonyTax replied 11 months ago.

Thanks.

Leave this with me. I will get back to you later on this morning UK time if that's OK.

Customer: replied 11 months ago.
sure
Expert:  TonyTax replied 11 months ago.

I've had a look at this in some detail and my answer won't be good news for you. You should refer to the HMRC manual pages CG65030 to CG65065 inclusive starting here. Click on "Next Page" at the bottom right when you wish to move to the next page.

It's my understanding that one day of working in the UK will disqualify the whole period of working abroad, not just from that point onwards. Section 223 (3) (b) here is quiet clear. All the duties must be performed abroad. The manual at CG65041 backs this up when it mentions "incidental". It is unfair but there is no mention of flexibility. I'm certainly not aware of any flexibility in the rules that would allow the period up to the Wales job to qualify unless you claim that the Wales job was a new job which, given that it lasted for five days, it clearly wasn't. You could claim relief under the three year rule. If the Canada job was a different job from the US job, you might choose to claim for the whole of that period until you return to the UK. Any of the periods which don't qualify under the absence rules will qualify for letting relief.

I suspect that many people who go abroad to work do ocassionally work in the UK but don't report it and claim full relief in any event, possibly through not fully understanding the rules. It would be up to HMRC to ask for proof that all the work was done abroad. Unless you can argue that the Wales assignment was a different job in the UK after which you returned abroad then the absence abroad relief is not due. You might choose to claim full main residence relief and see if HMRC query it. There is a good chance they wouldn't because of the lack of resources and staff in HMRC.

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

Expert:  TonyTax replied 11 months ago.

Example 9 in HS283 shows how letting relief works. It is worth up to £40,000 per part owner of a qualifying property.

Customer: replied 11 months ago.
Do you know how prior tax returns are recorded? My 2008-09 return indicated the 5 days working in the UK.
Customer: replied 11 months ago.
Is there any flexibility in terms of what defines a new job? During my time in the US I had some distinct roles e.g project manager for an Angola project, then PM for a Nigeria project, then Sakhalin. It was during my time in the US that I was asked to be part of a team performing an independent review of a project in Wales. I never had any responsibility for that project, before or after this review. Whilst in the US my employer was different than in the UK, a different affiliate, and again when I moved to Canada my legal employer was a different affiliate. The rule seems incredibly harsh as I made no financial gain, that I'm aware of, by spending time in Wales and instead it appears I will be harshly punished and all I'm trying to do is return to the home I left and subsequently move to a new home more suited to my family.
Expert:  TonyTax replied 11 months ago.

It depends how you completed and submitted it. If you submitted it on paper, the data in it would have had to be put onto the HMRC computer manually whereas if it was submitted electronically, it would have been processed automatically by the HMRC computer. Either way, it will be accessible. However, with capital gains you never know whether HMRC will pick them up to look at. They are short staffed whatever anybody in government says and resources are stretched. I had a client who sold £2.5 million worth of property about 5 years ago. He'd spent a fortune on development and improvements but made a gain of around £500,000 yet the tax office never asked to see all the receipts and invoices. It's pretty much down to luck whether your capital gains and claims are looked at.

Expert:  TonyTax replied 11 months ago.

If the Wales review had nothing to do with your job in the US, then you may have a case to argue that the period in the UK be discounted. I would certainly take it all the way to a tax tribunal if HMRC denied me the main residence relief. Whilst there appears to be no flexibility in the application of the rule which says that all the duties need to be performed abroad, it would certainly be harsh if you lost out given how long you have been abroad. I will do some more research but I'm struggling to find any case law which might help.

Customer: replied 11 months ago.
Just wondering if your research has come up with any other ideas.
Expert:  TonyTax replied 11 months ago.

I'm working on it now. I've spoken to several people who specialise in ex-patriots in circumstances similar to you and they all said that they tell their clients to avoid at all costs working in the UK at all. However, some also said they'd be inclined to ignore 5 days out of 3,200. f I were you, I'd claim full relief. If I can find any case law or anything else that throws more light on how strictly HMRC invoke the rule that all duties are performed outside the UK.

The reason that you are required to complete the box asking for the number of days worked in the UK on the residence pages has more to do with your UK tax residence status than principle private residence relief.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15882
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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