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bigduckontax
bigduckontax, Accountant
Category: Tax
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I have been living and working in Brazil since March 2017. I

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Hi,
I have been living and working in Brazil since March 2017. I moved for personal reasons and intend to stay for the long term. I have set-up an entity of our UK firm here, and until July 2018 was paid from the UK while everything was being established here to be paid locally. My tax code was changed and I paid no tax in the UK from March 2017-July 2018 and instead 'self-declared' tax and payments in Brazil (which is done on worldwide income. I own a property in the UK and rent it out (for a loss!) on which I have paid tax on income in Brazil.
For the last few years I've had to fill out a self-assessment tax form and being requested to do so again. As a 'non-resident' I had to acquire special software to complete the return, which is calculating my tax as ~£40K i.e. full tax take on my UK income, for which I was assigned a 0 tax code and paid taxes in Brazil. I had previous advice that I didn't need to pay UK but now I'm concerned! I didn't work a day in the UK and spent around 2 weeks there on holiday in the tax year.
Any advice would be appreciated, or proposals on how you can help.
Thanks,
Ben

Hello Ben, I am one of the experts on Just Answer and pleased to be able to help you with your question.

When you left the UK in 2017 did you send a Form P85 to your tax office?

Customer: replied 6 days ago.
Hello, yes I did. I believe that is what triggered by tax code change and zero tax being claimed through PAYE.

Sounds correct! You will be liable for UK taxation on your net rental income. If this is below your personal allowance, currently 11850, there will be no tax due. In any event of Brazil is taxing you on this income then, under the Double Taxation Treaty between the UK and Brazil, which precludes the same income stream being taxed in both jurisdictions, Any tax paid in one country is allowed as a tax credit against tax [aid in the other. Rentals are invariably taxed in country of origin.

I do hope that you have found my reply of assistance.

Customer: replied 6 days ago.
Thanks for your reply. There is no double tax treaty between the UK and Brazil currently. My concern is that in completing my self-assessment tax return it is reflecting that I owe full tax on income - should I be reflecting my UK income as 0 despite being paid in the UK?

On the contrary, HMRC says there is, but I agree that it is limited to shipping and transport costs.

As you are non resident in the UK then you will only be taxed on the net rental income less your personal allowance. If this is also taxable in Brazil then there is a danger of double taxation which, on the face of it, cannot be avoided.

Customer: replied 6 days ago.
The rental income is fairly trivial overall, my main concern is the UK salary that I received which was not taxed in the UK but I paid tax in Brazil. By submitting the P85 and my tax code was changed so I was no longer taxed through PAYE; however, when completing my self assessment it is showing I owe full UK tax. I'm trying to understand whether this is true and correct or whether I should, as my tax code suggests, be exempt?

You are non resident. You are being paid for work undertaken locally in Brazil. Therefor the current tax treatment is correct.

Customer: replied 6 days ago.
Thanks bigduck! So I should NOT be paying tax on the salary received from the UK for the purpose of work carried out in Brazil? Just to be totally clear!

Correct, that's why the P85 generated an effecitvely'No tax' coding.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 6 days ago.
Perfect - thanks!!

Correct, that's why the P85 generated an effectively 'No tax' coding.

Thank you for your support.