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HMRC wins UK tax ruling/residency

Discussion in 'Teaching abroad' started by happygreenfrog, Oct 21, 2011.

  1. happygreenfrog

    happygreenfrog Occasional commenter

    Thanks for highlighting this.
    Possibly the most important thread on here in a while.
  2. So what would this mean if say you were abroad but your family remained in the UK in that house. Would you still be classified as a UK resident or not? Furthermore, in most cases how would the IR find out where you were? what you were earning etc....if nothing is revealed.
  3. the hippo

    the hippo Lead commenter Community helper

    Ouch! This sounds like seriously bad news if you have property back in the UK. It used to be the case that the Great British Taxman could not touch a penny of your ill gotten gains if you had declared yourself to be "Non-Resident", but now the rules seem to be changing. I would advise anyone who is in this situation to talk to a good accountant. I am sure that most of the posters on this forum mean well and will try to give accurate and helpful advice, but you really do need professional help if you want to be sure that you are not going to get a big tax bill.
  4. David Getling

    David Getling Lead commenter

    This approach to residency is not unique.

    On the plus side however, it people have to up sticks properly, it might weed out some of the money grabbers. One should teach abroad because one genuinely wants to experience a foreign country and teach international students. If all one wants is to earn as much as possible, while wistfully dreaming of paying off the mortgage and retiring to Blighty, then maybe [for the sake of ones students] it's better if one never leaves the UK in the first place.
  5. Perhaps those nice moderators could make this a 'sticky' thread for a while...
  6. stopwatch

    stopwatch Lead commenter

    Obviously it seems that the guy in the test case was an extreme example (ie earning a shedload of money whilst living for the maximum number of days in UK and then spending basically 9 months holiday in Sri Lanka.). His main aim in doing this seems to have been specifically to avoid tax. I don't know for definite but I recall that much of his business dealings took place from/within UK - he merely lived outside UK. Of course with the internet and modern comminications this scenario is fairly easy to set up.
    I think that if you are working overseas but your wife/kids remain in the family house, you may NOT be classed as non-resident and will therefore be subject to tax.
  7. stopwatch

    stopwatch Lead commenter

    I initially moved overseas to pay off the financial damages of an expensive divorce (otherwise I would have gone 'bust'). Since then I have worked overseas to earn more money AND to teach in a much better 'learning environment'
    DG it is possible to be overseas for both motives (perhaps the big bucks are just a bonus!)
    If that is being a money grabber, so be it.
  8. David Getling

    David Getling Lead commenter

    I certainly wouldn't disagree with this. In an earlier I.T. career I did contract work because it meant I could get lots of interesting technical work without having to do any of the management ****. The fact that it was very well paid was indeed a big bonus, but not my sole motivation.

    I was thinking more of the kind of people who start posts like where can I earn the most dosh, and some of the locations, where it's hard to imagine anyone would want to go except for the money.
  9. stopwatch

    stopwatch Lead commenter

    My first posting was in KSA and, as previously mentioned, I went there to earn big bucks to pay off a big pay off.
    Many aspects of living there would be classed as a 'hardship' (for which we were paid an additional, large, hardship allowance). The irony was that, most weekends, if you could get a snapshot of the shenanigans going on, it was anything but!
    It would/will be nice to look for an overseas posting and consider things other than money and well behaved kids when deciding to apply. I would actually like to work in SE Asia, but at present the dosh in Dubai prevents me from making the jump.
    You're right when you say people (often greenbacks) post on here asking solely about earning potential, but I think in the majority of cases this is the primary motivator (along with getting away from UK educational beurocracy, initiatives and bad behaviour)
  10. Well with this ruling many will think twice now before heading way out east as HMR will be watching and asking questions. In reality with the state of the UK who would want to go back anyway after positive experiences abroad.
  11. the hippo

    the hippo Lead commenter Community helper

    Hmmm. Not so long ago this ancient and wrinkled pachyderm wrote a few lines on the "Unemployed Teachers" forum, suggesting that teachers who cannot find jobs in the UK should think about applying for teaching jobs overseas. The response I received was a tad unpleasant. It seems that there will always be many British teachers for whom the whole idea of moving to another country and teaching there is totally out of the question.
    On the other hand, it could be that this court ruling does in fact mean that the goalposts have been well and truly moved. This probably will not affect those who have no property in the UK and really are "non-resident", but those of us who do have a flat or a house in the UK and only go overseas for a few years may find themselves clobbered with a big tax bill when they return to Good Old Blighty. As for how the Great British Taxman will find out, my guess is that the onus will be on the individual to produce something called an Income Tax Return.
    In conclusion, I would say that the confusion and uncertainty created by this court ruling will mean that many teachers who are currently in the UK will be a lot more reluctant to teach overseas. Many teachers who go abroad for a while usually want to keep their property in the UK, both for the rental income and because it gives them a toehold if they want to return. However, if that then means that you cannot claim to be "non-resident", it also means that you probably will have to pay Income Tax on your foreign earnings. I am just glad that Mrs Hippo and I bought our properties in Bulgaria, so we will not be planning to return to the UK and the welcoming arms of the Inland Revenue.
  12. Glad to hear the typical 'Sod the rest I'm alright Jack attitude'. With the state of the UK I suspect it will probably only be a matter of time when the british government start looking into the earnings resident or not from those who continue to remain Brits by their use of the passport which enables them to command higher salaries. They're after every penny to pay for their global adventures and domestic mess.
  13. mousethew

    mousethew New commenter

    I am in no way an expert, but I would think being taxed on income earnt overseas is unlikely under double taxation agreements. I assume it means it's harder to claim non-residency status and avoid tax on money earnt in the UK through rent, interest paid on savings etc whilst earning in a job overseas. I guess it might depend on where your salary is paid. My wife and I don't claim non-residency anyway and continue to pay tax on our savings accounts, building society etc as being non-resident would complicate things (such as our savings in bonds) more than we would save.
  14. lovely.lady

    lovely.lady Occasional commenter

    How does this ruling affect the double taxation rule? Also for some countries in Europe, Italy for example, teachers can be tax free for 2 years so will this also disappear?
    I'm also working overseas in order to earn money to pay off my UK mortgage but I can then sell the house and move overseas.
  15. Sandman

    Sandman New commenter

    This case has been going along for some time.

    "The dispute centred around IR20 guidance and entrepreneur Robin Gaines-Cooper. He left the UK in 1976 but was judged by the Revenue to be resident between 1993 and 2003 due to the number of days he spent in the UK." Independent article.
    I think it is a case of somebody who was returning frequently to the UK arriving for four days using the concession that the first and last days don't count and maximising this on a frequent basis. So from the revenues point of view although he technically met the residency day count he was spending nearly twice the amount of time allowed in the UK. Don't think this is what too many teachers who work overseas are doing and I am confident this ruling has no impact on me.
    New residency rules need to be studied very carefully when released. If similar to Canada it is a lot more onerous to achieve non residence for tax purposes. However as there are going to be fewer and fewer public sector jobs you would think that the government would be encouraging workers to be geographically mobile,earning foreign earnings to help balance of payments and potentially having wealth to invest in UK.The alternative is social secuity payments.People who are not burried in debt are good for the economy.
  16. stopwatch

    stopwatch Lead commenter

    Very good final point. I would imagine that the majority of expats eventually spend/use the majority of their overseas earnings in the UK.
    In addition, an expat returnee with a paid off mortgage and cash in the bank is going to be less of a drain on benefits than an unemployed UK resident claiming for housing and unemployment.
  17. Horses for courses. HMR will no doubt judge all cases on their merits and I suspect its the big fish they usually focus on and once in a while if your unlucky they will probe and ask further. As far as I recall my accountant advised some time ago they can go back 6 years if they want to. If you've been honest and transparent we have absolutely nothing to worry about. Its the runners who have been ducking and diving that may have sleepless nights ahead of HMR implement this precedent on all and sundry.
  18. stopwatch

    stopwatch Lead commenter

    ..... Bump. There you go I didn't even remember I had started the thread myself. Old timers disease rules OK!

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