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bigduckontax, Accountant
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Hi, I returned back to UK in November 2013 after working

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Hi,
I returned back to UK in November 2013 after working on a US contract in Afghanistan from June 2010. I was paid in US dollars, but directly into a UK bank account.

On leaving the UK in June 2010 I submitted P58 to HMRC and continued to pay tax on a UK Military pension with a tax code of 944L. I received notification that for 2014/15 this will change to 994L?

I secured a new UK job in March 2013 handed in a P45 from previous employer. I have subsequently advised by HMRC that for 2013/14 my tax code for this position would BR.

My queries are:
1. When and how will my tax code move off BR?
2. As my combined earnings for 2014/15 will take me into the 40% bracket, will my tax code change on my UK military pension?
3. How will the tax on my earnings from Afghanistan be calculated and verified?

Thanks in advance
bigduckontax

Hello, I'm Keith and happy to help you with your question. I am an ex RAPC and AGC(SPS) Major so have been in your situation myself. What HMRC are doing is applying your tax code to your military pension and arranging for your new employer to deduct tax at the basic rate. You should warn your tax office of your likely income for the year. They can arrange for the extra 40% tax element to be collected by reducing your tax code on your military pension to make you tax neutral by the year end. This is rather better than your new employer being told to deduct tax at 40% and you having to self assess and get back the resultant overpaid tax at the end of each tax year.

 

Please elaborate on your earnings from Afghanistan? From what you are saying it seems probable that your earnings there were outside the scope of UK tax as you were non resident whilst working overseas. In that case the P58 will trigger an end to this position and the tax year of return will be divided into two parts, one resident and one non resident. In these situations there will invariably be either a shortfall or an over payment. If the under payment does not exceed 3K HMRC will usually recover the unpaid tax through your tax code. I do hope I have helped, welcome home!

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Customer: replied 4 years ago.
Keith,
Thanks for your reply. I must first apologise as it was a P85 that I submitted and was classed as Not Resident from June 2010. I have not dealt with anyone from HMRC since then.

The letter I received confirming my submission of P85 states that the UK has no double taxation agreement with Afghanistan. My earnings from Afghanistan for April - Nov 2013 were approx £32k and my UK pension is £10620 per year and I believe the tax will be approx £6k plus NI contributions of approx £3k for 2013/14.

Will HMRC ask for this to be paid back directly or will they deduct it from my salary/ pension? I can pay this back directly.

Prior to June 2010 I had paid NI contributions for 27 years. I am sure that I will contribute at least another 3 more years worth before I retire. Will HMRC want me to pay the NI contributions for June 2010 to March 2013 straight away, and do I have to?

As I was not resident from June 2010 to Nov 2013, will I need to pay tax on my Afghanistan earnings for tax years 2010/11, 2011/12, 2012/ 13?
If so, how will this be recovered?

Do you advise that I call Cardiff Tax Office to discuss.

Thanks for the welcome home and advice.
No they will not. When you were in Afghanistan you were classed as non resident in the UK and in general terms not liable to UK taxation except, of course, on your military pension. The P85 ends that for Afghanistan earnings from the day of your return to the UK and effectively splits the tax year as I explained earlier. You owe nothing in respect of your earnings in Afghanistan and HMRC are not entitled to ask for it anyway. If they attempt any recovery through your tax code then object strongly to their antics. The lack of a double taxation treaty with Afghanistan is an irrelevance. You are not seeking to use the tax paid there against a UK tax assessment as there is, in this situation, no UK assessment appropriate.

I would never advise anyone to contact any HMRC office by telephone. There is far too much chance of being misunderstood. The staff at Ty Glas Road are notorious for getting hold of the wrong end of the stick if they can even find the stick at all and are generally all at sea outside bog standard PAYE. Keep everything in writing then they can be called to account.

As regards XXXXX XXXXX position depends upon your contribution years. Lack of years can reduce your State Pension. You need 30 years worth as at the date of your going on to your State Pension. Remember that you do not have to make any contributions over the age of 60, these are credited automatically. If you are going to have below 30 years however contributions can be made above 60 to bring you into line for a full entitlement. This happened to me when I was made redundant at 58, but a few small part time employments kept my card stamped, to use an old expression, and I made the full 30! If there is a danger of a short fall in your case than you can make contributions voluntarily to cover missing years. The HMRC office in Newcastle handles such matters. I did this in 1964 to fill in the period between age 18 and leaving school to begin full time employment. Theoretically you don't have to pay NI when in full time education, indeed you don't, but then you find yourself short of years at a later date far in the future!
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