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Where Taxpayers and Advisers Meet

Proving non-UK residency

Joined:Tue May 18, 2010 7:05 am
Proving non-UK residency

Postby ian.lavey » Tue May 18, 2010 7:23 am

I am a UK citizen, but a little over 2 years ago I moved with my Hungarian wife to Hungary. We bought a house there in her name only.

I work as a commercial pilot for a company who's management base is in London, but the operations base is in Lisbon. I used to have a UK contract and paid UK income tax, but when I moved to Hungary I changed to a non-UK contract and now pay Portuguese tax. I filed a P85 and have since submitted a tax return to the HMRC for the first year of being out of the UK, as we still have a house in the UK which is rented out. This has been processed.

As part of my work I do come and go to the UK but it is in the order of about 40 days a year.

Hungary and Portugal have a double-taxation agreement and I do not need to pay more tax in Hungary. In fact I have been told by the Hungarian tax authorities I do not need to submit an Hungarian tax return or even get an Hungarian tax number, as my sole income is from outside Hungary.

BUT...I have been told by HMRC to prove I am non UK resident for tax purposes or I risk being charged 2 years-worth of UK income tax above the Portuguese tax I have already paid!!

I have been given a certificate template for the local tax authorities to fill in and stamp, but because I have not registered with them, they won't do it, as I don't exist as a tax resident in Hungary, as far as they are concerned.

So how do I prove I am non-UK resident for tax purposes? The Hungarian house is in my wife's name and all the domestic bills are also in her name, as she speaks Hungarian and I don't, it was easier to set up that way. I don't even have an Hungarian registered car. I do have an Hungarian bank account into which my salary is paid.

Any advice would be most welcome, as I'm very worried I will be fingered for 2 years-worth of UK tax, which seems crazy when I don't live there.

Many, many thanks in advance of any replies.

Joined:Wed Aug 06, 2008 2:19 pm

Re: Proving non-UK residency

Postby Taxbar » Tue May 18, 2010 3:42 pm

Dear Ian,

HMRC's specialist unit:- Centre For Non residents (CNR) have a clear policy of attacking Pilots on their residency position and have investigated several hundred in the last few years.

There efforts culiminated in the Shepherd and Grace cases, where both Pilots were effectively held to be UK resident, even though one lived in Cyprus and the other in South Africa.

Grace went all the way to the Court of Appeal and may face a re-hearing of some aspects of his case!

I have been involved in several pilots cases and it needs good expert advice to resolve these cases successfully.

Double tax treaties are complex and need clear legal advice to determine whether they can save you!

Daniel Feingold
Senior Partner
Strategic Tax Planning

Joined:Tue May 18, 2010 7:05 am

Re: Proving non-UK residency

Postby ian.lavey » Wed May 19, 2010 7:26 am

Thank you Daniel, for your swift reply.

While your answer isn't the good news I was hoping for, at least it clarifies the position I find myself in.

I am trying to get some official statement from the authorities in Hungary which I will then send to the HMRC and hope this satisfies their requirements.

If this doesn't work I shall be back on this forum looking for advice on the next step to take.

Thanks again.

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