Self Employed to Non Resident Tax

ARM10

Hello,

Under the current HMRC guidelines, a person is non-resident for UK tax purposes if s/he spends less than 183 days per tax year in the UK, and less than 91 days per tax year in the UK averaged over 4 years.

If I register as self-employed with HMRC for the first 30 days of the tax year serving a UK company as the sole client. Then I file a P85 and move abroad to work full time as an employee for a subsidiary of the same UK company for the remainder of the tax year. Do I still pay tax on those first 30 days and have to file a self-assessment at the end of the year ?

I know if I had worked as an employee full time abroad for that UK company and made occasional trips back to the UK for meetings amounting to 30 days, then the entire tax year would not be liable to UK tax. Are the rules different if it's a combination of self-employed and employee for the same company ?

I know HMRC like to be difficult when you present them with an uncommon situation, so I thought I'd gather all the facts and opinions before approaching them!! :rotfl:

Any help appreciated.

pjclar02

Hello there

It is my view that you would not break UK residency in those circumstances, and therefore you would be liable to UK tax on your worldwide income for the tax year.

ARM10

pjclar02 wrote: »

Hello there

It is my view that you would not break UK residency in those circumstances, and therefore you would be liable to UK tax on your worldwide income for the tax year.

Thanks, could you elaborate and point to the specific HMRC rules that led to your conclusion so I can make informed decisions

antonic

http://www.bailii.org/uk/cases/UKSC/2011/47.html

In the Supreme Court, where it was decided that as all links with the UK were NOT broken, then people were still liable to UK tax.

ARM10

antonic wrote: »

http://www.bailii.org/uk/cases/UKSC/2011/47.html

In the Supreme Court, where it was decided that as all links with the UK were NOT broken, then people were still liable to UK tax.

Just for clarification, the situation refers to a permanent leave from the UK (as applicable under point 21. of your link). The days in the UK relate to training for the company and are considered "merely incidental" (See HMRC's guideline in EIM40204 Example 2 below):

http://www.hmrc.gov.uk/manuals/eimanual/eim40204.htm

My primary concern is the switch from self-employed to employee, rather than a question about non-residency rules in general. Sorry for any confusion!

pjclar02

Hello there

I think you are referring to the split year treatment available by concession (ESC A11), which would enable you to be treated as non-resident from the date you leave the UK. However, for this to apply (even if you were an employee) you would have to leave the UK for at least a whole tax year. As you have intimated that you would only be abroad until the end of the tax year, then the concession will not apply and you will be subject to the normal residency rules.

Hope this helps.

ARM10

pjclar02 wrote: »

Hello there

I think you are referring to the split year treatment available by concession (ESC A11), which would enable you to be treated as non-resident from the date you leave the UK. However, for this to apply (even if you were an employee) you would have to leave the UK for at least a whole tax year. As you have intimated that you would only be abroad until the end of the tax year, then the concession will not apply and you will be subject to the normal residency rules.

Hope this helps.

I will be in the UK from April 2012 to May 2012, and abroad from June 2012 to April 2013. Thereafter there are no plans to return to the UK. The question relates to financial tax year 2012-2013.

Cook_County

On what grounds do you think you would be self-employed as against an employee throughout? What about PE issues in the new country of residence? What about social security and VAT isssues?

ARM10

Cook_County wrote: »

On what grounds do you think you would be self-employed as against an employee throughout? What about PE issues in the new country of residence? What about social security and VAT isssues?

The company wants to remunerate me for time I spend training in the UK, but does not want to put me on PAYE (they said this specifically) as it's a one off situation. Since they are paying me in the UK into a UK bank account whilst I'm in the UK it suggests self-employed ?

The destination country has a permanent establishment, as defined specifically within a double taxation agreement.

There's no VAT (that I would need to charge as self-employed) as the remuneration from the 30 days is less than the threshold.

jimmo

Can we clarify a few details?
Are you currently resident in the UK and looking to emigrate in May 2012, or are you currently resident somewhere other than the UK and just visiting the UK for a month?
Is your working relationship with the company ongoing or will it commence in April?
As you will be training you are not exactly going to be self employed in the sense that you will not be providing a product or service to a client or customer.
So, on the face of it, the company’s intention to treat you as self-employed whilst training in the UK looks questionable to say the least. However, it is impossible to judge whether there will be any practical consequences until we better understand your situation.

ARM10

jimmo wrote: »

Can we clarify a few details?
Are you currently resident in the UK and looking to emigrate in May 2012, or are you currently resident somewhere other than the UK and just visiting the UK for a month?
Is your working relationship with the company ongoing or will it commence in April?
As you will be training you are not exactly going to be self employed in the sense that you will not be providing a product or service to a client or customer.
So, on the face of it, the company’s intention to treat you as self-employed whilst training in the UK looks questionable to say the least. However, it is impossible to judge whether there will be any practical consequences until we better understand your situation.

I am currently resident in the UK and looking to emigrate in May 2012. My working relationship with the company will commence in April 2012, or at the discretion of the company, March 2012.

If the company's intention to treat me as self-employed is questionable, and they are evading (their) PAYE obligations - that is their tax responsibility and not mine, correct ? So for the purposes of this discussion I suppose I don't need to be concerned ?