Non-resident status

[Charlie]

After spending the past 55 years resident in the UK I am planning to move as a retiree to Cyprus (which has a double taxation agreement with the UK) on 5 October 2003 with the intention of returning to the UK for a total of no more than an average of 90 days a year ie I will become non-resident. I have read IR20 and IR138 but I would value clarification on some matters.

1: To acquire non-resident status do I have to remain totally out of the UK until the end of the first complete tax year (ie 6 April 2005) or can I return at any time providing my average does not exceed 90 days a year (so that, for example, for the period 6 October 2003 to 5 April 2006 which is exactly 1.5 years or 547.5 days I can return to the UK for 90x1.5 = 135 days).

2: Does my non-resident status begin straightaway so that I can, for example, apply to have my UK building society paid gross so that I pay only Cyprus tax?

3: I plan to do a small amount of writing in Cyprus. Can I be paid by my UK publisher net of UK tax so that I pay only Cyprus tax? The amounts will be quite small. Will I still need to submit a UK tax return each year?

4: Passports are not stamped when travelling between UK and Cyprus. How do I prove, if asked to do so, that I am spending no more than 90 days a year on average in the UK?

[Nigel Lord]

Charlie

Answers to your specific queries are as follows:

1. You do not have to remain outside the UK for any entire tax year. You have to spend less that 183 days in the UK in any tax year, and less than 91 days on average in any consecutive four year period (both excluding days spent in the UK due to exceptional reasons (illness, war etc.). Days of arrival and departure are generally disregarded by the Revenue, but technically the days spent in th UK could be computed by reference to the actual hours and minutes present. Your calculation of the 91 day average is correct as far as it goes, but will depend on what happens in the succeeding 2.5 years. You could not return as a UK resident until you had been treated as non-resident for at least one full tax year, otherwise you would be treated as non-resident throughout the period, (i.e. in the scenario you have provided you could not return permanently until after 6 April 2005).

2. You should complete Inland Revenue form P85 in advance of leaving the UK to establish you intention to become non-resident. See inlandrevenue.gov.uk/cnr/p85.pdf This will enable the Inland Revenue to determine that you may be treated as non-resident from the date of departure (subject to you fulfilling the 183 and 91 day tests).

3. If you carry out your writing outside the UK, you may be paid gross (i.e. no UK tax deduction). If the writing is in the UK you will still be liable to UK income tax but could use your personal allowances. Providing you are not employed no tax should be deducted at source.

4. The onus is on you to establish that you are not UK resident. In practice, if your financial and personal records are consistent with your claims, you should not encounter any difficulties. The Inland Revenue would be particularly interested in bank and credit card statements if you were selected as an enquiry case.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
102 Smarts Lane
Loughton
Essex, IG10 4BS
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com

[Charlie]

Thank you, Nigel, for your speedy and very helpful reply, which I appreciate. Just one small question which I forgot in my original posting. Bearing in mind that there will be (a) some UK building society interest (which I assume I can apply to have paid gross) and (b) a small income from a UK publisher paid to me for work that I will be doing in Cyprus and which can therefore be paid to me with no UK tax deducted, will I still eventually have to submit a tax return for 2004/5 and subsequent years (assuming that I remain non-resident)? Incidentally, how far ahead of leaving the UK should I submit form P85?

Thank you in advance for your help.

[Nigel Lord]

Charlie

You will need to submit tax returns if a)you are liable to tax, or b) if they are issued to you. If there is no liability, but returns are still issued, you may ask the Inland Revenue to consider whether returns are strictly necessary. You are correct with regards to the building society interest.

I would submit the P85 about 2 months before you leave the UK to enable the Revenue time to correspond with you at your UK address.

Please let me know if you need further advice.

Nigel Lord
Lord Associates
Taxation & Business Consultants
102 Smarts Lane
Loughton
Essex, IG10 4BS
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com

[Charlie]

Thank you, Nigel. Very helpful.