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I have been living and working in Thailand, in my own jointly-owned

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I have been living and working in Thailand, in my own jointly-owned Thai company, for 22 years. I didn't fill in a P85 when I left. I return to England every year, to live in my family home with my parents, which is my official residence. I also rent a house in my name in Thailand on a rolling annual contract. I usually spend a minimum of 7 months in Thailand annually and the reminder in the UK. Some years I didn't return to the UK at all. I am spending more and more time in the UK and am about to buy a caravan and sublet it, which means I will have to declare income tax on this in the UK. My concern is that as this will be the first tax activity on my account since 1993 they will check my account and look into my past tax activity. I believe I have done nothing wrong, as there is a double tax agreement with Thailand and my taxes in Thailand are in order, but I can't work out where I will be classified as "resident", and if there is a difference between being a resident or non-resident for domicile reasons and being a resident or non-resident for tax purposes. Will I be asked to back pay tax in the UK for the past 22 years?
Let me take a look at this and I'll get back to you. It will take a while so please bear with me.
Customer: replied 2 years ago.
OK. Thank you.
Hi again.
Click on each of the links below for a basic guide on UK tax residency and for a more detailed guide:
The rules on UK tax residency changed with effect from 6 April 2013. If possible, you should look to spend no more than 90 days in the UK in a tax year. That was certainly the case prior to 6 April 2013 and you really cannot go wrong if you stay at that level now.
Based on the information you have provided, its likely that you were resident in the UK and Thailand at the same time in some of the tax years since you first left the UK. Article 4 of the UK/New Zealand tax treaty at
deals with residence. In a case of dual tax residency, paragraph 2, sub-paragraphs a to d inclusive and paragraph 3 act as tiebreakers. I'd have thought that, given up to now you have had no UK source income since you left the UK, that your primary tax residence would be Thailand which would mean you would not have to pay tax in the UK on non-UK source income.
It's not a given that you will be asked to account for your whereabouts and economic activity simply because you will be receiving rental income in the UK. Many non-UK residents do so and have no problems whatsoever.
You can write to HMRC, PAYE and Self Assessment, BX9 1 AS to have your tax status determined by HMRC in the UK and the relevant tax office in Thailand if you need to. By that I man if a non-specialist tax office causes problems for you. Your letter will be forwarded to the specialists who deal with international issues. Their address is here but the protocol is to write to the regular address for correspondence directly. If you aren't asked to account for the period sicne you left the UK, don't volunteer that information.
I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
Sorry, the links you have given me are already all the information, the exact same pages, as I have been reading myself over the past year. They are the origins of my question above!I still don't understand my particular situation, if I am now resident or non-resident, and if being resident for tax purposes is the same as being a resident under all other circumstances? Is there a difference?I appreciate the advice of not volunteering information unless asked, but this is my whole concern, that I MIGHT be asked. I also don't know how this impacts on other areas of my life, such as the right to vote, entitlement to the NHS, etc. As far as I'm concerned, I have always been resident here, just not living here all the time, but I know those are not official terms. I want to be a resident, this is my home country and I will be moving back here full-time at some point in the future.I will always be in the UK for more than 90 days in a tax year from now on; at the moment it's more like 140 days a year and quite likely more than 180 days in the near future. My salary and tax will continue to be paid monthly in Thailand wherever I am. I just need to stop worrying I might be hit with a huge tax bill I never saw coming.I'm pretty sure I am now resident in the UK, under the new laws. You suggested I try to keep it under 90 days a year - is that because it is beneficial, tax-wise? To make me a non-resident?You say many non-UK residents receive rental income and have no problems whatsoever - is this because there isn't a problem? Do they self-declare this income or not bother because as non-residents, it's not necessary to declare such a small amount (the maximum I would earn by subletting would be about £8,000 a year)?I think the main question, and my main worry, is: is it possible, and if so at what point and under what circumstances, that the tax office may decide I have to ALSO pay tax in the UK on my Thai salary, either now or in the past?Many thanks.
Being resident for tax purposes is different to the other uses of the word residence. I cannot help you with voting and NHS entitlement as that is beyond my remit. NHS entitlement is usually linked to your national insurance payment record.
Under the old UK tax residency rules, pre 6 April 2013, you would be treated as UK resident if you averaged more than 90 days in the UK per tax year over a rolling four year period so it was necessary to keep a careful record of your days spent in the UK to avoid breaching the level at which you would be treated as UK tax resident. Given what you have told me, its possible that you were tax resident in the UK in some or all of the tax years prior to 2013/14 but without doing a detailed analysis, its impossible to say. Take a look at HMRC6 below for an example calculation (page 47):
If you had to pay UK tax on your Thai earnings, you would get credit for tax paid in Thailand against your UK tax liability on the same income under the terms of the double tax treaty (Article 23) but I'd be very surprised if HMRC went back all the way to when you left the UK. Articles 17 and 18 of the tax treaty deal with employment income and director's fees.
You can technically be dual resident for tax purposes because of the way the rules around residency work in two different countries. If that is the case, then the tiebreaker rules comes into play and, for me, you would be classed as resident in Thailand because you have a business there.
You say that you have always classed the UK as your home. Tax residency isn't about what you want or think. It's based purely on the facts. Certainly, once you hit 183 days in the UK in a tax year, you are UK tax resident and that may impact on your tax residency situation in Thailand.
If you stay in the UK for under 91 days per tax year and you carry out full time work abroad, then you will be non-UK resident for tax purposes. Given the amount of time you spend in the UK you may not achieve the required number of hours (see RDR3) to be classed as working full time abroad. This is the only test you could be definitively classed as non-UK resident under simply because of the number of days you now spend in the UK.
Failing the automatic non-residency tests means you have to look at the automatic UK tax residency tests. I don't see that any of those will make you UK resident for UK tax purposes.
In the case where you are not automatically non-UK resident or UK resident, you have to consider which of the pre-defined ties you have to the UK and the number of days you send in the UK. As far as I can see, you would certainly have one tie, the accommodation tie, two if you spent more than 90 days in the UK in either or both of the previous tax years. With two ties, you would need to spend less than 121 days in the UK to avoid being classed as UK tax resident.
I've had clients who have spent as long as you have living and working abroad and some have never heard from HMRC on their return. Admittedly, they didn't spend as much time in the UK as you do but the fact is they were not generally asked to account for every day of every tax year since they left the UK. HMRC simply don't have the staffing levels to do that.
As a UK national, you will be entitled to a personal allowance to use against your rental income which means you won't pay any UK tax on it. The personal allowance is currently £10,600. All non-resident landlords should register with HMRC under the non-resident landlord scheme whether they have tax to pay or not but there will always be those who don't do as they should.
I cannot possibly predict what HMRC will ask you if you return to the UK full-time. They may never ask anything but if you appear on their radar as an employee or as a new sold trader they may write to you as you didn't complete a P85 before you left the UK. How detailed that information request is impossible to say. I've been in tax for 36 years and I'm never surprised at HMRC inconsistency.
What I would say is that you have recognised that you may have been UK tax resident in earlier tax years. As I said earlier, even if that was the case, you would get credit for tax paid in Thailand.
You are almost certainly UK tax resident now based on days and UK ties and should consider appointing an accountant or tax adviser to look at your situation and movements in detail with a view to registering for self-assessment if you are UK tax resident so that you can disclose your Thai income. Certainly, you should do that if you return to live most of the year in the UK. If HMRC ask about earlier years, you will simply have to answer their questions as best and as honestly as you can but I certainly wouldn't lose any sleep over the possibility.
Unless its an arithmetical question, nothing in tax is certain. There are differences in every case and if that comes across as not answering the question definitively, then as somebody who prefers certainty, its something I've learned to live with.
Customer: replied 2 years ago.
Thank you, ***** ***** very helpful. I have also been pouring over the print-outs on the SRT and also on Dual Residency and would like to summarise it, the way I understand it, to check I am understanding this correctly now.I believe I am a dual-resident. According to the SRT, I am not automatically non-resident nor resident in the UK but on based on ties I definitely have two: the accommodation tie and the 90 day tie. So I now am a UK resident for tax purposes.But the UK has a double taxation agreement with Thailand and I have been reading the dual residents leaflet plus the Thailand double-taxation treaty and I also seem to qualify as a tax resident of Thailand. As I have homes in both countries, Permanent Home category can't count. But on Centre of Vital Interests I think I qualify as I have a business in Thailand, I pay income tax every month and don't work at all in the UK, my (rented) home is my own name (UK home is my parents home) and my main possessions (including pets) are there. If that isn't correct then the next category, Habitual Abode, might apply as I spend more time there than in the UK. None of this is mentioned in the SRT.So which takes precedence or how does this work? As a UK tax resident and also a Thai tax resident, with the UK having a double taxation agreement with Thailand. Is the double taxation agreement only for non-residents? That doesn't make sense to me, as there is a whole form catering for dual residents. This is what is still confusing me.
The SRT is simply a mechanical way of determining whether an individual is UK tax resident or not. The tiebreaker in the double tax treaty can be used if the respective tax residency rules of each of the countries involved both determine that an individual is dual resident, ie resident in two countries at the same time.
Many people never ask the tax authorities to get involved to make a decision one way or the other. They pay tax in the country the income is derived from, disclose in the other and claim double tax relief.
A double tax treaty isn't only for non-residents. It covers situations where an individual may be resident in one country only but receives income from another. The treaty determines where that income is taxable. It can be in both and that's where double tax relief comes in.
Customer: replied 2 years ago.
I’m totally confused now between double tax treaties and dual residency.You said before: "I'd have thought that, given up to now you have had no UK source income since you left the UK, that your primary tax residence would be Thailand which would mean you would not have to pay tax in the UK on non-UK source income.” Does this sentence assume I am resident or non-resident in the UK? Or have dual residency?What exactly is double tax relief? Let’s say I am a UK resident (according to the SRT) and earn a salary of £12,000 p.a. in Thailand (to keep the maths simple for me). From that I pay income tax at 10% so my nett pay is £10,800. Will the UK tax office tax me again and, if so, on how much? If the personal allowance is £10,600 in the UK, would I just be taxed in the UK on the nett Thai amount (£10,800 - £10,600) = £200? Or the gross Thai amount (£12,600 - £10,600) = £1,400?
You also said: “As a UK national, you will be entitled to a personal allowance to use against your rental income which means you won't pay any UK tax on it.” So what happens to the above paragraph when I add £8,000 income from caravan sub-letting in the UK? If I am a dual resident, is the Thai tax taken care of in Thailand, and the UK tax taken care of in the UK, so my full £10,600 tax free allowance covers the caravan rental in the UK, or are the two incomes added together?And would the situation change if I everything in the above two paragraphs were true except for that particular year I was non-resident in the UK? Or if I wasn’t a dual resident?You also mentioned: “All non-resident landlords should register with HMRC under the non-resident landlord scheme”. But now we’ve decided I am a resident, at least from this year forwards, so I wouldn’t need to do this, is that right?
Also, if I am a UK tax resident in any particular year, must I complete a self-assessment form regardless of any other circumstances?Many thanks and sorry for so many questions.
Where there is dual residency, the tax treaty tiebreaker can come into play. As far as I can see, you have dual residency based on the information you have given me. However, a tiebreaker is there to break a tie to put it bluntly, the tie being that you have dual residency.
Double tax relief is there to stop an individual paying tax on the same income in two countries. If I am resident in the UK and I have paid some foreign tax on a foreign dividend, for example, on which I am taxable in the UK due to my being tax resident in the UK, I can get relief for that foreign tax by offsetting it against my UK tax liability so that I don't pay tax twice, ie pay double tax.
Alternatively, I may be able to apply for a refund of the foreign tax which may take much time and effort and even if I do that, I will pay more tax in the UK because I won't have paid foreign tax because that foreign tax will have been repaid to me. In simple terms, its as broad as it is long most of the time.
If you were liable to UK tax on your Thai salary, the first £10,600 would be covered by your personal allowance so you would pay UK tax on £200. If the UK tax was less than the Thai tax, then you would pay no UK tax on your Thai salary.
The two incomes would be added to together, You would pay more UK tax but you would also get more of the Thai tax offset. That is unless you claimed that your main economic interest was in Thailand, that claim was accepted by HMRC in the UK and you didn't have to pay UK tax on your Thai salary.
If you were not UK resident or dual resident, you would not pay UK tax on your Thai salary.
See paragraphs 2.1 to 2.3 below for the definition of a non-resident landlord:
Most people in the UK don't complete self-assessment tax returns because they don't need to. Use the questionnaire below to determine whether you need to complete a tax return. It's a good exercise for individuals to do each year.
Customer: replied 2 years ago.
So, let me see if I finally understand this.If I:
- am a UK resident
- pay tax in Thailand on my salary
- claim that my main economic interest is in Thailand and this is accepted by HMRC in the UK
then I will not have to pay tax in the UK on my Thai salary.Alternatively, if I:
- am a UK resident
- pay tax in Thailand on my salary
- cannot satisfy the HMRC that I am a dual resident
then I will have to pay UK tax on my Thai salary but it will be subject to the double tax relief agreement.And possible payment of UK tax due on my Thai salary this tax year would be calculated as follows:
£12,000 salary paid in Thailand
- £ 1,200 tax paid in Thailand
= £10,800 taxable gross amount for UK purposes
- £10,600 UK personal allowance
= £ 200 taxable income in the UK @ 20%
= £ 40 tax to be paid in the UKI do need to complete a self assessment tax return as I have income from overseas. Would you advise me to do something about all this now, or wait until the end of the tax year, or whenever the tax assessments are due? I've never done one before.Many thanks.
1 You would need to ask HMRC to contact the Thai tax authorities so that they can agree on your tax residency status using the tax treaty tiebreaker if you are dual tax resident.
2 Yes. Many UK nationals work in the Middle East on a 4 week on 4 week off rotation so they never lose their UK tax residency status and so they pay UK tax on their foreign earnings. If any foreign tax is deducted, so long as there is a tax treaty between the two countries, they will be able to offset the foreign tax against their UK tax liability.
3 The gross would be £12,000. The Thai tax would come off the UK tax liability, not the income. You would pay UK tax on £1,400 at 20% which is £280 and that would be covered by the Thai tax deduction. I missed the fact that you took the tax off the gross income previously. You would only do that if there was no tax treaty. It's called unilateral relief but it doesn't apply here.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thank you so much for all your help. I do finally understand where I stand (I think) and am now prepared to move forward with the tax office, with an accountant helping me. This was extremely useful and very helpful.
Thanks for accepting my answer.