Split Year Tax

eeniebeanie

Hi,

I am hoping that someone can help me with understanding the above rules.
My boyfriend has been working in Africa since 3rd July 2010, it is a permanent PAYE job (non UK company) and his initial intention was to stay out there for a couple of years maybe more. He has now decided though that he wants to return to the UK and will be coming back on 1st July 2011. I have looked at a lot of HMRC guidance on claiming non residency and claiming split tax year for 09/10 but it is all so confusing. We obviously hope that 09/10 tax year he won't have to pay UK tax on his income from working out of the country but we just aren't sure at the moment what he needs to do or what forms he should fill out. I called an Accountant and they said he could fill out a self assessment tax form and claim for split tax treatment as a non resident. I am not sure whether this is correct though as the HMRC mentions about it having to be a full tax year (April - April) but they said July to July still counts?! Any help would be greatly appreciated on this so that a decision can be made as to whether he comes home now or stays out their longer!!

Oh just to add he is not in a double taxation country!
Cheers

pchelpman

Hello eeniebeanie

Split year treatment (SYT*) can be confusing but remember the essential, vital, fact is this > to qualify for SYT the "period of absence" from the UK MUST include at least a whole complete UK tax year, 6th April to following 5th April.

Unfortunately, if his situation runs its course as you describe, he will not qualify for SYT, you are right and that accountant you consulted was wrong.

To cover a whole tax year your boyfriend would have to be out of the UK until 6th April 2012 at the earliest.

If he returns to the UK any earlier than that then I'm afraid he will remain a UK taxpayer, obliged to file UK Tax Returns declaring his worldwide income and gains to HMRC.

Assuming he doesn't qualify for SYT then his UK Tax Returns for 2010/11 and 2010/12 must declare all his worldwide income & gains AND, as you say is there no DTA with the country in question, he must claim "unilateral relief" for foreign tax paid.

To paraphrase my advice to another MSE member .....

If UK income tax is due on that foreign income then, normally, the resulting UK tax bill will be reduced by the amount of foreign tax paid on that income.

Note that the foreign tax on the income can only be used to reduce the UK bill to zero.

In other words, if the foreign tax paid is larger than the UK tax bill two things will happen.

1. Your boyfriend won't have any UK income tax to pay on that income but...

2. HMRC won't give you a "refund" of any excess foreign tax paid (HMRC won't repay another country's tax).

Hope that helps but, if not, ask again.

All the best.



* this is my acronym so to avoid the need to keep tying the phrase. It's nothing official.