Income received whilst abroad

[stevej10]

I would be grateful for any thoughts on the following.

An individual (British) who previously lived in the UK took employment abroad in Indonesia. The contract was for an initial 6 months with documentation to support that the intention to stay abroad was longer (depending on the future viability of the business of the employer).
The individual started employment abroad in June 2005 and that particular employment ended in September 2006. The employer was based in the UK and deducted tax (administrative error?) although the employee worked abroad for most of the year.

The individual then worked in Dubai from September 2006 to March 2008 which was not taxed. At which point he then returned to the UK to retire and to help care for a close relative who fell ill.

During the years abroad the individual visited the UK a lot less than 90 days per tax year, with the lion's share of the time being related to employment rather than personal.

The individual had a rental property in the UK throughout the period which was used solely for rental purposes. He understands that this is taxable in the UK.

The individual sold his primary residence just before moving abroad, although he then purchased another house in the UK in 2006 as his long term intention was to return to the UK.

The individual received a UK pension which was taxed in the UK.

My questions are:
1) Upon submitting tax returns from 2004/05 to 2010/11 is the individual likely to be deemed none-resident in the UK during his time abroad (i.e. split year treatment in 2005/06 and 2007/08 and completely none-resident in 2006/07)?
2) Is the individual likely to be able to get the income tax back on his employment income taxed in the UK which was carried out abroad (June 2005 -September 2006)?
3) Will any of the individual's foreign income be taxable in the UK in retrospect?

Any thoughts would be greatly appreciated.

Steve

[maths]

Whether the individual acquired non-UK residency and ordinary residency from the day following departure in June 2005 is unclear.

The reason is that the initial contract of employment terminated in Sept 2006 before the individual had spent one complete tax year abroad.

What date di it terminate and from what date did the new contract commence?

Were the two contracts with the same employer or "group" or with unrelated employers?

You also state:

the individual visited the UK a lot less than 90 days per tax year, with the lion's share of the time being related to employment rather than personal.

Are you saying he worked whilst back in the UK; were these incidental duties; how many days in each tax year were involved?

[stevej10]

Thanks for the reply Maths.

The first employment ended in June 2005. The second employment started the next day.

The second employment was within the same group of companies as the original employment.

Also, the work that was carried out in the UK was incidental as his primary duties were carried out abroad. The bulk being in respect of sorting out his visa to travel, legal agreements for foreign employer etc).

Total days in the UK were:

2005/06: 56 (work: 30)
2006/07: 34 (work: 8)
2007/08: 31 (work: 9)

Many thanks for your thoughts.

[etf]

Hi stevej10

An employee who works abroad full-time for at least one full tax year (6 April to 5 April) will usually be treated as not resident and not ordinarily resident (NR/NOR) from the day after their initial departure until the day prior to their final return, provided return visits to the UK do not exceed 182 days in any tax year and average less than 91 days per tax year.

If an employee were to return to the UK in a gap between two overseas employments this would probably attract scrutiny from HMRC. In this situation, the second overseas employment appears to have flowed on immediately from the first employment and therefore this should not prevent a NR/NOR claim.

An employee who performs substantive UK duties needs to be careful that they are not of a magnitude which might support a claim from HMRC that they prevent the employee's non-UK duties from being regarded as full-time. Recent HMRC guidance suggests up to 9 days substantive UK duties in a tax year should not on their own scupper a NR/NOR claim.

Where substantive UK duties are performed, the associated earnings will be taxable in the UK and therefore it will be advantageous if the client's UK duties can be shown to be incidental.

I have copied below a link which details time limits for making repayment claims.

http://www.hmrc.gov.uk/about/deadlines-taxpayers.htm

A NR/NOR taxpayer will not usually have to pay UK tax on their overseas income.

Kind Regards

etf

http://theexpatriatetaxfactory.com