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TonyTax, Tax Consultant
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Overseas earnings tax query -16. am just putting details

Resolved Question:

Overseas earnings tax query for 2015-16.
Hi, am just putting details together to help husband will his SAF. UK resident for 2015-16 under ' 3 sufficient ties rule'. But went to middle east to work full time since 22/5/15 and will continue to work overseas to at least end 2016-17 tax year. I think he qualifies for split year treatment for tax on earnings. But I am unclear if he has to pay uk tax on these earnings for all of them or on a remittance basis. Main hmrc guidance suggests that he is not liable for income tax for this period if in uk for less than 82 days and if he works at least 35 hrs a week and has accommodation abroad . Which he does. . But is he liable for tax on remitted to uk amounts or all of income - as the 3 uk ties remain? And is the 82 days reduced because of 3 sufficient uk ties for this period? I hope this makes sense. Thank you. Lynda
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
I have not yet received an answer, and it is over 24 hours now (sent question yesterday at just after 1pm). Thank you.
Expert:  TonyTax replied 1 year ago.

Hi.

I'm taking a look at your question now.

Expert:  TonyTax replied 1 year ago.

You seem to have worked out that your husband will qualify for split year treatment for 2015/16, the tax year he left the UK to work full-time abroad. Assuming that is the case and he is non-UK resident in 2016/17, the fact that he sends money back to the UK to pay bills such as the mortgage does not make that cash taxable. That would defeat the object of qualifying for split year treatment. To qualify for split year treatment, you have to be resident in the UK in that tax year. If you aren't UK resident and don't therefore qualify for split year treatment, then by definition, you are non-UK resident and won't pay UK tax on your foreign earnings.

I'm assuming that you have seen Table E on page 53 in RDR3 here as you mentioned 82 days. So long as your husband did not spend more than 82 days in the UK between 22 May 2015 and 5 April 2016 inclusive and he complies with the other criteria, he will not pay UK tax on his foreign earnings. The number of days he can spend in the UK in the tax year of departure from the UK is reduced because of the fact that he left the UK part way through the tax year not by the number of ties he has. As I said earlier in this answer, he has to be treated as UK resident in the tax he left the UK in order to qualify for split year treatment.

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

Customer: replied 1 year ago.
Thanks 'Tony Tax' (love the name btw). I have a few other questions, which I think are all related/follow-up: however, if you think these are separate questions and require further fee, please let me know. I do prefer email communication, due to work situation, and also so that I can update my husband more easily.The reason I was confused was because a tax advisor offering free initial consultation recently seemed to advise my husband that - to qualify for split-year treatment in 2015/16 - his allowed days in the UK for 2015/16 and 2016/17 were reduced because of to the '3 sufficient ties rule', specifically the days allowed in the UK after he had started his work abroad on 22/5/15. Although I could not find any hmrc guidance that would indicate this. Specifically, he said that:a) my husband was only allowed in the UK for 45 days between 22/5/15-05/04/16 (not 82 days as I had read), due to 3 sufficient ties (accommodation he could use here, family tie, more than 90 nights here). I thought this did not matter, as my husband would already be considered UK-resident for 2015/16 - but your view on this point would be appreciated. For clarity, my husband was in the UK from 6/4/15-21/5/15 (approx 46 nights - less 4 nights holiday in ROI), before his overseas contract started; and 55 nights during his period of working abroad from 22/5/15-5/4/16. In retrospect, maybe the tax advisor was trying to help us see if my husband was non-resident for 2015/16!?b) that my husband is only allowed in the UK for 45 days in 2016/17 because the 3 sufficient ties rule (family, 90 days, available accommodation) - whereas I had thought this was 90 days, as I think he will meet the 3rd automatic overseas test for 2016/17.
3 related questions here:
1) if my husband does meet the 3rd automatic overseas test for 2016/17 (which I think he does, and can prove, as regards ***** ***** hours, accommodation use abroad, in UK less than 91 days, and does not work here) - do the 3 sufficient ties matter, or reduce the days he is allowed here from 90 down to 45 as the advisor suggested? I think you have answered this one previously, but want to be absolutely clear - I can't find any hmrc guidance that would suggest this is the case, but am uneasy as this is what my husband seems to have been advised previously.
2) Is the nature of my husband's accommodation abroad and the basis he holds it, relevant? The normal practice out there is for one person to have a lease on a flat, and the others to rent a room and pay money to the leaseholder, as out there only one person is allowed to be named on the lease. My husband has been the 'renter' in 2015/16 - bar initial 1-month in employer-sponsored hotel when his contract started - again this is normal practice when an overseas contract starts there. However, in your opinion, would you generally advise that someone in my husband's situation becomes a main leaseholder for 2016/17, and beyond to 2017/18? Again, I am not quite clear from the hmrc guidance whether being able to prove you have rented a room from a 'leaseholder' is sufficient proof of accommodation abroad to meet overseas automatic test criteria - even if that is normal practice abroad for the majority of overseas workers. Does he have to rent or lease his accommodation for any minimum period of time each e.g. 30 nights. This first year 2015/16 he has moved around whilst trying out different areas to live in, which I don't think matters as he is still UK-resident, but of course we need to understand whether this becomes more important for 2016/17, to meet the automatic overseas test.
3) Finally, I know that the rules on split-year treatment (for 2015/16) depend on showing you are non-UK resident for the following year (2016/17). But how can HMRC judge this when my husband submits his 2015/16 SAF, but has not yet completed his year working abroad in 2016/17 (and beyond)? I understand that HMRC automatically applies split-year treatment. Would it be normal just to declare on 2015/16 SAF that the 3rd automatic overseas test for 2016/17 will be met, or do you advise to send additional evidence e.g his work contract, actual hours worked, bought a car etc, with the SAF; or to provide further evidence only if/when hmrc requests it? Or would it be normal for HMRC to charge income tax for overseas income in 2015/16, and refund it after 2016/17? We just need to understand this, to help with cash-flow and plan for tax payment if necessary. I guess this is where my previous query about tax on acquired or remitted income came from, but I am relieved from your first response that this shouldn't happen for his period working abroad in 2015/16.'Tony', I would be grateful for your clarification on the above, am aware there are a number of additional questions. As mentioned, please let me know if there is a further fee.Thank you for your help so far.RegardsLynda
Expert:  TonyTax replied 1 year ago.

a The ties rules doesn't apply in the tax year of departure from the UK See Table E on page 53 here. Your husband left the UK between 1 May 2015 and 31 May 2015. He was, therefore, allowed to spend 82 days in the UK in 2015/16. There is no mention of ties to the UK from paragraph 5.1 to 5.25 inclusive which cover leaving the UK. If you look above Table F on page 60, the number of UK ties are relevant for the period between 6 April and the date of a return to the UK inclusive. A look at the flowchart for "leavers" here will show that there is no mention of ties to the UK.

1 Look at paragraph 1.9 here. The UK ties only come into play if the automatic overseas tests and the automatic UK tests are failed. Look at the bottom of the flowchart here. The box is labelled "non-conclusive tests".

2 Accommodation is only relevant when he leaves and returns to the UK or if he fails all of the automatic tests for any one tax year. It is irrelevant as far as the automatic overseas tests are concerned.

As a rule of thumb, your husband needs to be spending less than 91 days in the UK in any one full tax year. So long as he is automatically non-UK resident, the UK ties test does not apply.

Expert:  TonyTax replied 1 year ago.

a The ties rules doesn't apply in the tax year of departure from the UK See Table E on page 53 here. Your husband left the UK between 1 May 2015 and 31 May 2015. He was, therefore, allowed to spend 82 days in the UK in 2015/16. There is no mention of ties to the UK from paragraph 5.1 to 5.25 inclusive which cover leaving the UK. If you look above Table F on page 60, the number of UK ties are relevant for the period between 6 April and the date of a return to the UK inclusive. A look at the flowchart for "leavers" here will show that there is no mention of ties to the UK.

1 Look at paragraph 1.9 here. The UK ties only come into play if the automatic overseas tests and the automatic UK tests are failed. Look at the bottom of the flowchart here. The box is labelled "non-conclusive tests".

2 Accommodation is only relevant when he leaves and returns to the UK or if he fails all of the automatic tests for any one tax year. It is irrelevant as far as the automatic overseas tests are concerned.

As a rule of thumb, your husband needs to be spending less than 91 days in the UK in any one full tax year. So long as he is automatically non-UK resident, the UK ties test does not apply.

Customer: replied 1 year ago.
Thank you, ***** ***** great. Are you able to give me a view on 3) above too? Then that will be it, no more questions. I am much relieved. I won't forget to rate.Lynda
Expert:  TonyTax replied 1 year ago.

Clearly, your husband can't prove that he not UK resident in 2016/17 definitively until after the end of that tax year but HMRC will allow a split year claim for 2015/16 in advance. Don't send anything to HMRC unless they ask for it. All you need to do is make sure your husband spends no more than 90 days in the UK in any one tax year.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
That's fab, thank you Tony for your help, it has put my mind at rest. That's it.RegardsLynda
Expert:  TonyTax replied 1 year ago.

Thanks.