I have some questions relating to a few areas of taxation. I would be grateful for some advice.
I am 60 years old and have recently retired from my employment with the local council.
I will be receiving a tax free lump sum as well as a small private pension amounting to about £1500 per year.
I have foreign nationality but I am a UK citizen and resident and I have lived in the UK for over 30 years.
For the last 20 years I have lived in the same property which has been my main and only home.
Within the next month or so I will be starting work abroad.
I will be working as self employed and have been told by the family paying for my services that the work should last 3 years or more. Although this cannot be guaranteed absolutely.
This job will require me to spend 2 out of every 3 weeks abroad. This amounts to approx 242 days per year.
I will therefore be in the UK for a maximum of 123 days per year.
1. My first question relates to residence for tax purposes.
Will the above description enable me to be classed as non-UK resident for tax purposes? And therefore I would only pay UK tax on income arising within the UK?
Is it going to matter (in terms of tax residence) that my children are all still in the UK and I still own a property there which I will be letting out (as a non resident landlord)? Will these be classed as ties to the UK that will inhibit my non-residency application?
Also, if for example my work abroad were to unexpectedly come to an end after about 1 year, how would this effect my UK tax situation? Would HMRC ask for back payments and declare that my residency was UK based all the time because I did not fulfil the 3 years of working abroad? Or are they more reasonable?
Also how easy is it in general to change my residency back to UK if my work comes to an end at any point before or after 3 years?
Is it worth all the hassle for a possible £6000 income tax saving per year? Or is it a lot of effort and would it leave me with a lot of restrictions and confines etc?
I’ve read that HMRC are generally fairly relaxed about the granting of non-residency and are only really concerned with high net worth individuals who present a potential big loss to the tax coffers, would this be right?
2. My second question relates to being a non-resident landlord.
Assuming that I become a non-UK resident for tax purposes, would I be right in thinking that the rental income arising within the UK from my UK property will be taxed as normal under UK tax?
And I would still be able to deduct mortgage interest etc?
Also my UK private pension would be taxed under UK tax to I presume?
3. Finally in terms of capital gains tax.
I plan to sell my UK property within the next 2 to 5 years.
This property has been my main and only home for the past 20 years and has not been used for any business purpose.
If I become non-UK resident for tax purposes, will this in any way effect my entitlement to the PPR relief (principal private residence relief)?
What if I don’t come back to re inhabit the home before selling and instead continue living abroad and sell it from there after say 3 years?
Would I be right in thinking that within the last 3 years before sale of the property I will be entitled to PPR relief whatever the circumstances, whether I am tax resident or not?
It is very important to me that I do not compromise this PPR relief as it is obviously a huge tax saving that I would not want to jeopardise. This is the most important factor in deciding whether or not I go ahead with this non-UK residency application so specific advice on this is essential.
Those are the main issues. I would very much appreciate any help and advice on the points I’ve raised. Also any suggestions of things I might not have considered or potential pitfalls etc.
Many many thanks in advance,