UK tax and working in China.
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camcomuter
Posts: 4 Newbie
in Cutting tax
My brother has been working in China on contracts for Chinese employers (including the state news agency Xinhua) for the last 7 years He has never returned to the UK – or even left China- during this period. He has no intention to return to the UK.
He has married a Chinese wife and has a son by this marriage and is currently employed and renting a flat in China. He has no ties with the the UK – no UK house or other permanent residence, no income from the UK, and has no dependent relations, close or otherwise. He was not working when he left and was not required to fill in a tax return in the tax year that he left.
Recently he inquired about any entitlement he may have for a UK state pension and was assailed with questions which imply he may owe UK tax on his China earnings.
He now understands he did not fill in the correct tax form when he left, but has been entirely resident in China. Could he be liable for UK tax for time he has been in China? Or is his residence in China sufficient to disqualify him from paying UK tax? Does he need professional advice, or would a letter to HMRC setting out his position regarding residence in China be enough? He believes he has paid the appropriate taxes in China, but records are poor for his early years, and tax was paid at source by the employer. He is clearly worried by this turn of events.
He has married a Chinese wife and has a son by this marriage and is currently employed and renting a flat in China. He has no ties with the the UK – no UK house or other permanent residence, no income from the UK, and has no dependent relations, close or otherwise. He was not working when he left and was not required to fill in a tax return in the tax year that he left.
Recently he inquired about any entitlement he may have for a UK state pension and was assailed with questions which imply he may owe UK tax on his China earnings.
He now understands he did not fill in the correct tax form when he left, but has been entirely resident in China. Could he be liable for UK tax for time he has been in China? Or is his residence in China sufficient to disqualify him from paying UK tax? Does he need professional advice, or would a letter to HMRC setting out his position regarding residence in China be enough? He believes he has paid the appropriate taxes in China, but records are poor for his early years, and tax was paid at source by the employer. He is clearly worried by this turn of events.
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Recently he inquired about any entitlement he may have for a UK state pension and was assailed with questions which imply he may owe UK tax on his China earnings.
Who implied he may owe UK tax on his China earnings?
He can check his current State Pension entitlement via his personal tax account on gov.uk (assuming he can access that website from China!)0 -
The gov.uk website may help you
https://www.gov.uk/tax-foreign-income/residence0 -
@Dazed and confused - thanks for your reply. In the process of trying to set up a personal tax account HMRC have asked him for details of all his tax paid in China for the last 7 years. We are trying to find out if he is sufficiently "resident" in China for this not to be necessary as it would be almost impossible now. And yes it is very difficult to access the Gov.uk website from China!
@isasmurf - thanks for the link. We have been to the link and he seems on the face of it to be non-resident given the facts. But why then is HMRC asking all these questions about his tax in China if he is non-resident? Does he have to apply for non-resident status, or would a letter to HMRC setting out the facts be sufficient? And on the facts do people think he would be classed as non-resident for UK tax purposes?
We are trying to find out if there is a simple solution to this, or the process is likely to be more complicated and he needs to take professional advice. Thanks for your help.0 -
camcomuter wrote: »Recently he inquired about any entitlement he may have for a UK state pension and was assailed with questions which imply he may owe UK tax on his China earnings.camcomuter wrote: »@Dazed and confused - thanks for your reply. In the process of trying to set up a personal tax account HMRC have asked him for details of all his tax paid in China for the last 7 years. We are trying to find out if he is sufficiently "resident" in China for this not to be necessary as it would be almost impossible now. And yes it is very difficult to access the Gov.uk website from China!
@isasmurf - thanks for the link. We have been to the link and he seems on the face of it to be non-resident given the facts. But why then is HMRC asking all these questions about his tax in China if he is non-resident? Does he have to apply for non-resident status, or would a letter to HMRC setting out the facts be sufficient? And on the facts do people think he would be classed as non-resident for UK tax purposes?
We are trying to find out if there is a simple solution to this, or the process is likely to be more complicated and he needs to take professional advice. Thanks for your help.
Maybe it is because he inquired about a UK pension entitlement. Why would he do that if he has never worked and paid tax here.0 -
Thanks for replying asghar - he is nearing retirement age and he worked in the UK most of his life before leaving for China 7 years ago. As stated, he has never returned even for a visit. He had an uncertain employment history before he left but when in work paid tax and NI. He was unsure whether he had paid enough NI to qualify for a UK state pension under the new regulations. Hope that clarifies.0
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camcomuter wrote: »Thanks for replying asghar - he is nearing retirement age and he worked in the UK most of his life before leaving for China 7 years ago. As stated, he has never returned even for a visit. He had an uncertain employment history before he left but when in work paid tax and NI. He was unsure whether he had paid enough NI to qualify for a UK state pension under the new regulations. Hope that clarifies.
Sorry, I misunderstood, thought he had never worked in the UK before he left.
Just looks like HMRC are looking for proof that he was non-resident in those years for tax purposes, which he is finding tough.0 -
After a quick look online, it appears that UK and China have a double taxation agreement. So if he's not resident in the UK, he shouldn't have to pay UK income tax on income earned in China. If he gets some UK pension income in the future (and he should check that non-residence won't affect this income, I don't know), this will (I think) be subject to UK income tax with the usual rates and allowances.
It might be worthwhile him "retrospectively declaring" non-residence to HMRC. Stretching my memory here, but I seem to remember that I couldn't find any info on a time limit on submitting P85 back when I looked into it. The idea is that you send them P85 around the same time you leave the country, but it doesn't seem to be time-barred. So maybe he could send P85 stating he left the UK seven years ago and this would prompt HMRC to consider him non-resident from that date onwards?
I lived and worked outside the UK for around five years and I omitted / forgot to send P85 to HMRC. However, for the last three of those five years I had some rental income from my property in the UK. For those three years, I just submitted self-assessment forms, declaring the rental income, but also stating that I was non-resident. Only the rental income counted as taxable income in the UK - my employment income in Singapore and South Korea attracted only the tax liability in those countries, not in the UK as well.
In short, I think he should be okay.....0 -
If it is a State Pension, this is always paid without tax deducted, and would likely be less than the personal allowance here anyway.
However if it is a bigger pension, or there is any private pension being paid from UK, you would have to read the double taxation agreement to see where it has been agreed that pensions will be taxed.
For example, My husband has a small state pension from Norway, the DT agreement states that pensions will be taxed in the country of residence, unless they arise from Government service. As a result, he pays all his tax in UK.0
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