Paying tax when working abroad

Cherry_Bomb

OH has been offered a job as a contractor in Afghan working for a Canadian company. It's 4 months on 1 month off rolling contract. The company are going to be paying him monthly into his UK bank account.

I'm completely confused by the tax situation. How does it work if it's not a UK company and he's going to be out of the country for so long but with a UK bank account? Bearing in mind he'll be home every 4 months.

I certainly don't want to be getting into any trouble dodging tax etc. We are going to be looking to get an accountant if it's too complicated for me to deal with so just looking for some advice if anyone's done something similar.

Thanks

jennifernil

Start here....

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/LeavingOrComingIntoTheUK/DG_10026136

There are some links to follow for more info.

pjclar02

Hello there

The first thing to consider is whether your other half will remain UK resident for tax purposes. Based on the facts provided, I would think he will not break UK tax residency. As such, he will remain taxable on his worldwide income.

Assuming your other half is self-employed and already within the self-assessment system then you would just record the income on his tax return and account for UK tax accordingly. The situation will be more complicated if he is liable to tax in Afghanistan (if there is any), as he may well be dual resident. Therefore you will need to consider the UK/Afghan double tax treaty.

The residency position will be key - so your first step should be to establish for certain whether or not he will remain UK resident.

Hope this helps

bartnwood

Hello Cherry_Bomb,

He may be able to be classed as UK resident but not ordinarily resident meaning that his employment income could be classed as foreign income and therefore would only be taxed on funds remitted to the UK if he is eligible for the remittance basis.

It is a very complex area, his individual circumstances would need to be looked into in detail and visits to the UK would need to be carefully monitored etc.

I would advise that you seek professional advice before he leaves as a good Accountant will ensure that his liability to UK tax is protected where possible!

bartnwood

Also, depending on his visits to the UK he may well be able to be classed as non resident meaning his earnings would not be taxable

antrobus

bartnwood wrote: »

...
He may be able to be classed as UK resident but not ordinarily resident ..

I doubt that very much. A person is 'ordinarily resident' if they normally live in the UK, and it's pretty obvious that the OP and husband both regard the UK as their home.

bartnwood wrote: »

Also, depending on his visits to the UK he may well be able to be classed as non resident meaning his earnings would not be taxable

He may indeed. But that point was better made here:-

pjclar02 wrote: »

...The first thing to consider is whether your other half will remain UK resident for tax purposes. Based on the facts provided, I would think he will not break UK tax residency. As such, he will remain taxable on his worldwide income....

bartnwood

Hello antrobus,

antrobus wrote: »

I doubt that very much. A person is 'ordinarily resident' if they normally live in the UK, and it's pretty obvious that the OP and husband both regard the UK as their home.

In my post I stated may be able to be classed as not ordinarily resident and I am also not assuming their future plans. Simply, one way or the other it is an option.

"He may indeed. But that point was better made here:-"

I disagree as the facts are that he may well be entitled to be classed as non resident for UK tax purposes then his earnings would not be subject to UK taxation.

The aim is not to 'dodge' tax but rather to advise the OP of how earnings can legally not be subject to UK tax which would obviously be of benefit to them.

Cherry_Bomb

Thanks for the replies. Yes we are both British, lived in the UK since birth. I've did have a look at the link but it's honest to god still confusing me!

He's not going to be self employed. He's signed the contract and will be starting end of October. So he'll work for 4 months and then come home for a month and so on and so on. I've been reading having to be out of the country for X amount of days over the tax year. So for this tax year he'll have been working as normal up until October. Then he'll be off returning in Feb. Does that mean any earnings for this tax year are taxable? But next tax year he'll only be back in the UK for July and December so that won't be taxable? He won't be liable for tax in Afghan

Definitely going to be getting an accountant for this but it would be nice to get my head around it too!

pjclar02

Hello there

So there will be no definitive break from the UK, which means that in order to break UK residency your other half needs to meet the "full time working abroad" tests. If he leaves the UK to take up full-time employment in Afghanistan and the employment spans a complete tax year, then it is possible that he could be non-UK resident. Therefore, the employment would need to last until at least 6 April 2014.

The next step is to consider on average how many days he spends back in the UK. I have worked out that approximately his days in the UK will be 30 in 2012/13, 61 in 2013/14 and 93 in 2014/15. If this is the case, then the average for all three years will fall below the 91 days which would make him resident in the UK. Therefore if my assumptions are correct regaridng these days (and I suggest you explore this further) then it is possible that he would not be resident in 2013/14 and 2014/15.

He will automatically be deemed resident in 2012/13, however he may be able to qualify for split year treatment (by concession) which would make him non-resident from the date of departure and may give rise to a UK tax rebate due. Again, this would need exploring in greater detail.

Hope this helps

Cook_County

He can of course claim credit for Afghan taxes - and doubtless will need to file Aghanistan tax returns in any case.

UK rates are probably higher than Afghan rates so he may still owe the difference to HMRC.