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Sam
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Category: Tax
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I spent nearly 10 years of my 18 years working abroad for a

Resolved Question:

hi, i spent nearly 10 years of my 18 years working abroad for a UK company and paying income tax in the UK. I was made redundant, whilst working abroad, with a settlement agreement. It was paid taking into account 30k was tax free and the remainder was paid deducting 40 pct tax.
my Qs.
-can i obtain foreign service relief ?
i read somewere, it should be for the settlement amount minus 30 k and multiplied by year abroad divided by total employment years?
-now that the payment already occurred, do i recover the overpaid tax from HMRC and how?-where do i put this income from the settlement on my self assesment?
thanks. P
Assistant: Thank you. Can you provide any more details to help us find you the right Expert?
Customer: it is about tax on termination payment and foreign service relief. thanks
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.

Hi

Thanks for your question

Can you clarify that almost 10 if the 18 years was spent working abroad for the UK company - and your statement is not clear.

Also was it the latter years of the employment and when you advsie "almost" 10 years cab you clarify exactly how long it was.

How much was the total settlement payment and was it paid whilst till abroad, or had you returned back in the UK by the time it was paid.

Was any of the payment relevant to pay in lieu or holiday pay or bonuses/commission?

I can then advsie further what might be exempt along with the £30K redundancy exemption

Thanks

Sam

Customer: replied 1 year ago.
hi sam.
it was 9 years and 11 months working abroad and the latter years abroad. I am still abroad now and will not return to the UK. So it is 1 month short of 10 years. How do i prove the numbers of year abroad,what documentation? Over my time aborad i continued paying UK income tax and in Belgium (where i live now) i got exempt for that foreign income that was already taxed in the UK,
The settlement was for 150,000 pounds gross and i was paid 99727 pounds net by the company (deducting tax on 120 k of the 150 k i.e. 30 k tax free rule)
It was not payment in lieu of notice or bonus or commission. It was purely for severance due to redundancy via a settlement agreement,
thanks P
Expert:  Sam replied 1 year ago.

Hi

Thanks for your response and the additional information - sadly then you missed full exemption on this payment by 1 month and can only have a proportion in additional to the £30K tax free.

This will be 119 months/216 (adjust this so its accurate) of the £120,000 (£150 less £30K exemption) = £66,111 also exempt so the taxable element will just be £53,889

HMRC may ask for prove of time abroad and this can be provided by your employer (either at the time with paperwork you retained) or now - so ask them to clarify your length of employment and allocated time abroad.

if you are completing a paper self assessment then you also need to complete an SA1010 (additional information page) and this will be entered on Page (AI) 2 share schemes, employment lump sums where you can claim the appropriate reliefs.

If you complete the online self assessment then it asks whether you had any employment lump sums, to which you fill in that appropriate section as you did

Thanks

Sam

Customer: replied 1 year ago.
thanks Sam. i never received any paperwork to prove my time abroad. So are you saying it is sufficient for HMRC to see a written confirmation from my employer? No other forms or application required by the employer or employee? becausde i happen to know my employer never applied to HMRC for changed status when going abroad at the time. will employer get any potential problems with the "late" acknowledging of this status?
thanks Paul
Expert:  Sam replied 1 year ago.

Hi

A written confirmation from your employer will be evidence enough to detail the dates you were abroad from and to within employment.

I assume you also would have advised HMRC that you were working and living abroad all these years from the date you ceased to be resident in the UK?

It was your responsibility to advsie HMRC not your employers - and if you have been completing self assessment tax returns without advising HMRC of your non residency then you cannot have the foreign relief - as this will be the first they know of your time in employment abroad, and as this relates to more than 5 years ago HMRC cannot accept amendments to tax returns prior to that date.

This will then be down to whether HMRC are willing to accept non residency for all those years which would have been a status you would needed to have proved each year (that no more than 90 days were spent back in the UK and none of them for work purposes)

I think you need to get a ruling from HMRC first before claiming this relief OR not claim the relief at this time so you can complete the self assessment but ask for a review to see if you do in fact qualify - and amend the return at a later date of they agree you are entitled to it

But I fear this may be a problem - did you advsie this in your self assessments?

Thanks

Sam

Customer: replied 1 year ago.
thanks Sam. is there somewhere online on the HMRC site in my tax account where i can see my actual status i.e. resident or non resident? things got complicated with changes in 2013 rules.
But what i can say is: i filled out self assesments with info about my number of days working abroad. and from day 1 in 2006 when i moved to Belgium, HMRC are also sending my tax codes and self assesment forms to my address in Belgium. assume then that HMRC are in the know and my only status can be of "non-resident" ?
regards Paul
Expert:  Sam replied 1 year ago.

Hi

No - this cannot be viewed online by you - HMRC advsie you of your status each year which starts with you ideally having completed form P85 advising this employment being taken abroad, for them to review your status, and then with the annual completion of the self assessment tax return with the employment page and also the residency page allowing them to see whether the status agreed still was in tact.

The fact your tax codes are sent abroad is not prove of status - did you actually complete the residency page each year? Or just advise in the information sheet of your days working abroad? Where did you report this information ?

Thanks

Sam

Customer: replied 1 year ago.
Thanks sam. On the resudent page of the self assesment form i never ticked the box'if you were not resident in uk put x in the box' what i did do was put 12 days in the 2 questions 'how many days did you spend in uk' and how many workdays did you spend in the uk'
Rgds paul
Customer: replied 1 year ago.
I did that each year since 2006. Thanks
Expert:  Sam replied 1 year ago.

Hi Paul

Then you need to contact HMRC as to whether they took this to mean you were not resident as I fear it would not have been enough especially as they then failed to follow up asking you for more information and you do need to establish this before proceeding with a claim for foreign relief against this lump sum payment

Let me know if I can assist further, or, if you have all that you need, then it would be appreciated if you could rate me for the level of service I have provided (or click accept)

Thanks

Sam

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