Non residency retrospectively

jim484

I am nearing the end of a year in which I have been exclusively working abroad, but paying UK hypothetical tax via my company. Do I need to submit a P85 and have non residency approved by HMRC prior to the end of my overseas assignment, or can I recover the tax at my leisure in the following year?

Cook_County

HMRC do not rule on residency, but this is a moot point as you are liable for the hypo in any case.

jim484

I do not understand as the HMRC website states that non UK residents are not liable to the income tax, and I clearly meet the requirements for non residency stated on that same website (full time overseas employment for a whole tax year, do not exceed the maximum number of days in the country etc). I am aware that there is a process whereby the hypotax paid on my behalf by the company (deducted from my salary) can be recovered, but I need to know whether to qualify for this I need to have my P85 approved during the year abroad.

fengirl_2

I think what Cook County means is, that under self assessment, you declare yourself non-resident and HMRC only checks on this through investigation. You can make your claim anytime within 6 yrs.

jim484

I see, so all I need to do is make sure I fill in the tax return properly this coming month? The P85 is not actually necessary then?

Cook_County

Great - but you have paid zero real UK tax so this is still a moot point. You have only paid hypothetical (hypo) UK tax which is your liability to your employer under your employer's tax protection or equalization policy.

jim484

Don't get this either, sorry. As I understood the hypotax is simply an amount held back from your overseas salary that your employer in the UK holds until this time of year, when it is paid on your behalf to HMRC. So once it goes through, you have now paid UK income tax for that past year just as if you were on PAYE back in the UK.

fengirl_2

No, this is not the case. Your employer deducts tax and NIC from your salary on a monthly basis and remits this to HMRC also monthly - he cannot wait until the end of the tax year.

Cook_County

No - hypothetical tax is kept for ever by the employer.

The employer pays (grossed up) all real foreign (host country) and home country liabilities (if any). In this specific case it seems that the real home country (UK) liabilities are probably zero...the employer is of course paying the employees tax in the host country.

jim484

Cook_County - almost correct, except in this case the host/foreign country liabilities are also zero. But UK income tax is still being paid even though technically I should be able to keep the money. Once HMRC have received the money from my employer (which they will do in this case, due to timing) how do I go about reclaiming it? Is it as simple as filling in a self assessment form this coming April (as fengirl suggests) or do i also need to have a P85 form approved as proof of non-residency?

fengirl_2

There is no system of approval for a form P85. Like most things in the tax system in the UK, you make the declaration (whether it is on income, residence or whatever) and sign a form to say its true. It is them up to HMRC to challenge this. The P85 is your claim of non-residence.