Non Resident Tax Query

chiefmissile

Hi,

Wondering if someone can answer some tax questions. my wife and i are moving to Oman for 3 years in December. My wife has been a home maker for three years and has not paid tax. We own our own property which we rent out as we live in married quarters, the house is owned by me, and the rental income paid to my wife.

We are also from Sep 08 holding £110000 for my parents in my wife's name (They live in canada and are waiting for a better exchange rate before sending it across) her savings account is paying 6.36% gross and as yet she has not breached this years £5200 tax free allowance, this will happen when we are in Oman.

If she registers as non resident from December will her savings account continue to be exempt from tax even though her tax free allowance will be breached?

Will it only be free from tax if it is banked off shore?

How would inland revenue look at holding my parents money for them?

Can my wife use her unused tax free allowance from the last three years, effectivley back dating it?

Will the rental income from our property be exempt from tax while we are away?

Hope this question is easy to understand and that someone can help

fengirl_2

If the house is owned by you, your wife cannot receive the rental income for tax purposes, so there is an issue there.
If the money in the bank all belongs to your parents, then it is not assessable on your wife. It is assessable on them and so their residence position needs to be looked into. I presume there is some sort of paperwork to confirm its their money.
No money held offshore is free from tax if the person who holds the account is liable to UK tax.
Personal allowances only relate to the tax year in which they apply. They cannot be backdated or transferred (which is effectively what you have done by putting the property income in her name.)
The rental incoem will continue to be laible to UK tax, but your personal allowance is available to set against it, assuming you have no other UK income - but you seem to be in the services in which case your UK earnings are still liable to tax.

BritRael

I think you will be fine.
Her allowance is for income earned in the UK, so her income in Oman will not count (providing she is out of the country for the required number of days - approx 90). She certainly will not breach her allowance with the bank interest Although to get interest tax-free you will both have to fill in the R85 form (pretty sure thats the number) which you can get at your banks and BS's.
As for the rental income, I believe that this is not subject to tax. This is my understanding from reading about it on the IRS website last year - but please check.
Good luck in Oman. I'm there right now and its a great country to work/live in, although it has gotten a bit expensive in Muscat.
Good luck.

chiefmissile

Thanks for all the advice, it all sounds really complicated. I have never been asked to fill in a self assessment form, how would the Inland revenue find out about what my situation is unless someone informed them? or they adudited my tennants/property letting agency. I expect the HMRC rely on people contacting them to request a self assessment to be initiated? or trawel through sites like this and see if they can get any personal information, thats why i don't have any personal info that could leave me traceable. I am just worried about contacting HMRC inase i open a whole can of worms, maybe i should go to an accountant and see where i stand?

BritRael

Jimmo - my comments are based on the position of a civilian expat while overseas (status of 'non-resident for tax purposes'). I had not assumed from the thread that chief was military, but as he didn't deny it in his last post, it looks like your assumption was possibly correct. If so, I have no knowledge or advice to offer.

Cook_County

chiefmissile wrote: »

Thanks for all the advice, it all sounds really complicated. I have never been asked to fill in a self assessment form, how would the Inland revenue find out about what my situation is unless someone informed them? or they adudited my tennants/property letting agency. I expect the HMRC rely on people contacting them to request a self assessment to be initiated? or trawel through sites like this and see if they can get any personal information, thats why i don't have any personal info that could leave me traceable. I am just worried about contacting HMRC inase i open a whole can of worms, maybe i should go to an accountant and see where i stand?

Tax evasion is a criminal offence, not a money saving technique.

HMRC will find out because the tenant will withhold & you will tell them.

chiefmissile

Cook_County wrote: »

Tax evasion is a criminal offence, not a money saving technique.

HMRC will find out because the tenant will withhold & you will tell them.

Thanks, don't quite understand "Tenant will with hold and you will tell them" ? My tennant already pays me the monthly rent in total. Do you mean that my tennant will fill in a self assessment and so mention me on their tax return?

The_Tax_Man

BritRael wrote: »

I think you will be fine.
Her allowance is for income earned in the UK, so her income in Oman will not count (providing she is out of the country for the required number of days - approx 90). She certainly will not breach her allowance with the bank interest Although to get interest tax-free you will both have to fill in the R85 form (pretty sure thats the number) which you can get at your banks and BS's.
As for the rental income, I believe that this is not subject to tax. This is my understanding from reading about it on the IRS website last year - but please check.
Good luck in Oman. I'm there right now and its a great country to work/live in, although it has gotten a bit expensive in Muscat.
Good luck.

I think you need to be careful with this type of advice as what you have said contains many flaws. Breaking residence is far more complicated than leaving the UK for 90 days, UK sourced income remains subject to UK tax regardless of residence without the use of a tax treaty and it is highly unlikely the IRS have published guidelines on the taxation UK rental income.

BritRael

The_Tax_Man wrote: »

I think you need to be careful with this type of advice as what you have said contains many flaws. Breaking residence is far more complicated than leaving the UK for 90 days, UK sourced income remains subject to UK tax regardless of residence without the use of a tax treaty and it is highly unlikely the IRS have published guidelines on the taxation UK rental income.

Thanks for that. I've just noticed that typing error; I was not implying that you can leave the UK for 90 days for non-taxable status. (although that would be nice ) I meant that you are allowed 90 days in (the poster stated that they are going for 3 years..). Yes, it is more complicated than that; the average (over a rolling 3 years per year ) is 90 days allowed in the UK (known as 'the 90 day rule'). Another recent complication is that the rules have changed on when this timing starts; it is now from tax year to tax year. Therefore, the poster (going I believe in December) will not start to count until April 6th.
I've been working overseas for the last 20 years and go back to the UK between 20 - 90 days per year. I do not pay tax on earnings or savings held in the UK. In this regard, I have found the IRS to be very helpful. In fact I was overseas for 2 years before I found about interest on savings. I then contacted the IRS who advised me to apply for a refund + future exemption (while my non-resident for tax purposes remained), and when I returned 6 months later I had a nice check waiting for me.
As for tax on rental income, I posted a question on this subject 2 years ago on an expat site that I subscribe to and was informed that this was exempt. I checked on the IRS website at the time (as stated) and found this to be correct. However, I also advised the poster to check for his particular circumstances. Check for yourself, its a very informative website.

Cook_County

BritRael wrote: »

Thanks for that. I've just noticed that typing error; I was not implying that you can leave the UK for 90 days for non-taxable status. (although that would be nice ) I meant that you are allowed 90 days in (the poster stated that they are going for 3 years..). Yes, it is more complicated than that; the average (over a rolling 3 years per year ) is 90 days allowed in the UK (known as 'the 90 day rule'). Another recent complication is that the rules have changed on when this timing starts; it is now from tax year to tax year. Therefore, the poster (going I believe in December) will not start to count until April 6th.
I've been working overseas for the last 20 years and go back to the UK between 20 - 90 days per year. I do not pay tax on earnings or savings held in the UK. In this regard, I have found the IRS to be very helpful. In fact I was overseas for 2 years before I found about interest on savings. I then contacted the IRS who advised me to apply for a refund + future exemption (while my non-resident for tax purposes remained), and when I returned 6 months later I had a nice check waiting for me.
As for tax on rental income, I posted a question on this subject 2 years ago on an expat site that I subscribe to and was informed that this was exempt. I checked on the IRS website at the time (as stated) and found this to be correct. However, I also advised the poster to check for his particular circumstances. Check for yourself, its a very informative website.

Britrael

You are somewhat confused & your advice is flawed.

The 90 day test is non-statutory although all of the professional accounting & tax bodies are pressing for a statutory residence test. It has certainly not recently been introduced as you imply! One always loooks at UK tax years - although some tax treaties use different periods for some purposes so one would need to know the country concerned.

The 90 day test is certainly not a carte blanche exemption from UK tax either.

You continue to refer to the IRS rather than HMRC. Why?

Cook_County

chiefmissile wrote: »

Thanks, don't quite understand "Tenant will with hold and you will tell them" ? My tennant already pays me the monthly rent in total. Do you mean that my tennant will fill in a self assessment and so mention me on their tax return?

1. Your tenant has an obligation to withhold tax under the non-resident landlords scheme. Your tenant will report this on his/her own tax return.

2. You will file a return each year with HMRC. Failure to do so would to my thinking constitute tax evasion so you may end up in jail. This is a tax saving website, not a website designed to tell people how to evade tax.