Split year treatment: 1000 tax for being 5 days over limit!

Rhidian

Hi everyone, I'm writing this because I have a nasty problem with my self assessment for 2013-14.

In October 2013 I moved abroad to work full-time as a postdoctoral research fellow. What this means from a UK tax point of view is that I am officially tax resident for the tax year, but like anyone who moves permanently abroad to work I can split the tax year into two and only declare earnings up to the point I left - this is the so-called 'split year treatment'

However, I was very concerned to see that according to the official documentation I can only claim split-year treatment as a full-time employee if I have worked on average 35 hours per week during my time abroad. Unfortunately my contract in France was for 33 hours p/w - this was just a formality because as a scientist I choose my own hours, and so while in reality I worked 40+ a week including weekends, there is absolutely no evidence that I did any more than the requisite 33 hours, putting me as a part time worker by HRMC rules!!

There is another clause by which I should be eligible for the split-year, which is that I ceased having a home in the UK and moved permanently abroad. But to my horror I realised that I was just on the wrong side of this too - in order to be eligible by this rule I have to have spent no more than 16 days back in the UK after I left. I spent 21 days back seeing my parents.

So to summarise:

- I am a full time worker abroad working 40+ per week, but my official 'contract' for my fellowship (which never really means anything in science) puts me at 33 hours which is below HRMC definition.

- I have moved abroad permanently, but because I visited 5 days more than the 16 day limit, I am viewed as still being a UK resident.

What this means in terms of tax is that I must pay 1000 more than I would have with split year, even taking into account foreign tax credits.

My question is, is there some way around this? I don't want to lie on my tax return, but it would be really nice if someone at HMRC could look at my individual circumstances and allow for the split-year. Is there some panel for borderline cases, or have I just been massively f**ked over by the rules?

Basically, the five days I spent visiting my Mum in March have cost me 1000 in tax, which is just so ridiculous there has to be a way!

quietriot

Rhidian wrote: »

My question is, is there some way around this?

No.

Rhidian wrote: »

I don't want to lie on my tax return

Then don't.

Rhidian wrote: »

but it would be really nice if someone at HMRC could look at my individual circumstances and ignore the part of the law that doesn't suit me.

The law is the law. Consider this an expensive lesson.

Rhidian

quietriot wrote: »

No.

Then don't.

The law is the law. Consider this an expensive lesson.

quietriot, you don't sound interested in offering any genuine help, so at the very least please don't deliberately misquote me.

quietriot

I think you'll find I was perfectly helpful. I pointed out there was nothing you could do, and advised you to tell the truth on your tax return. How is that not helpful?

The final point was me paraphrasing, certainly, but I feel I was accurate in doing so.

chrismac1

HMRC have migrated their site to Gov.uk and most of my reliable links are now non-existent, but I think you should be OK on the basis of your post. I am pretty sure the wording is "this is normally expected to be 35 hours" and they can also take into account other factors, such as evidence of work done, performance reviews and all the other stuff that goes with being "on the books".

Hopefully someone else will come along who has a link for you. In any case I would be claiming split year treatment for you if I were your accountant, and documenting all the evidence to show this would be a full-time job in a hard-working country such as the UK but is 33 hours on paper in countries like France who still have not really taken action to fix their economies 5 years down the tracks.

Rhidian

chrismac1 wrote: »

HMRC have migrated their site to Gov.uk and most of my reliable links are now non-existent, but I think you should be OK on the basis of your post. I am pretty sure the wording is "this is normally expected to be 35 hours" and they can also take into account other factors, such as evidence of work done, performance reviews and all the other stuff that goes with being "on the books".

Hopefully someone else will come along who has a link for you. In any case I would be claiming split year treatment for you if I were your accountant, and documenting all the evidence to show this would be a full-time job in a hard-working country such as the UK but is 33 hours on paper in countries like France who still have not really taken action to fix their economies 5 years down the tracks.

Thanks for your advice - I agree that morally I should qualify. The only problem is that there is literally no record of the hours I worked. I was given complete freedom in my fellowship which means that nobody, including myself, ever kept a record of my hours - all that matters in science is your publication record! Nobody cares whether you drop in at midday, and conversely nobody gives you overtime for working weekends!

So in the very unlikely scenario that HMRC query my claim and ask for evidence, they would only have my word on it, which makes me feel a little uncomfortable. And you're absolutely right, 33 hours on paper is entirely standard in France, where 35 hours is the legal maximum anyway, and everyone works way more than that in reality - I most certainly did. But this is more of a cultural observation that solid evidence.

What is the worst case scenario if they investigate and decide that I was misguided and should have paid UK taxes on my income?

JasonPr

I agree with chrismac1 that you should claim split-year treatment.

The relevant link is https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/381705/rdr3_1_.pdf but presumably you've read this document already because you obviously know your stuff.

It's irrelevant what your contract says: see step 2 in section 1.10 which says "not the hours specified in your contract". So it seems that you meet the third automatic overseas test but cannot proof it because you didn't do the required record keeping. It's hard to say how strict HMRC will be. The whole SRT (Statutory Residence Test) is new and I doubt many people do the required record keeping, so hopefully HMRC will be lenient but who knows. I'd also start the required record keeping for the rest of 2014-15 since a) you're now aware of this requirement and b) maybe you can use January-April to show what your typical hours are like.

Oh, and why do you do a Self-Assessment return? Are you required to do one? If not, maybe a P85 would be better? If you do a Self-Assessment return, note that you cannot do the residence pages online iirc so you need tax software since you missed the deadline to file on paper. TaxCalc is one example.

By the way, did you work in the UK before you left (i.e. employed, not doing a PhD on a scholarship)? If so, you may want to consider paying voluntary NIC2 to build up a UK pension in an inexpensive manner.

JasonPr

One more thing: you said you spent 21 days in the UK but was that 3 weeks in one go or split over several trips?

Remember that a day only counts when you spend midnight in the UK, so if you travelled to the UK several times it's likely your "21" days are in fact fewer days.

But note that the 3rd automatic overseas test takes precedence over the 1st test.

Rhidian

Thanks for the tips JasonPr. I need to do a self-assessment anyway because I have private tuition income from the part of the year before I left, but I left straight after the PhD so no full-time UK income. And yes, I'm aware of the appalling lack of an SA109 in the HRMC software - I almost choked on my coffee when I realized that I had to spend 20 quid simply for the privilege to claim split-year.

I have indeed read the quote in question: "not the hours specified in your contract". My only worry is that there are no records, and I never had any means by which to keep them. For 2014-2015 it shouldn't be a problem - I have a new position with a much more formal contract which dictates 40 hours per week, so there will be no issues claiming non-residence this time next year.

I'm very tempted to just claim split year and deal with them if they query it, hopefully I won't get into any trouble for deliberate tax avoidance and worst case I'll be simply fined a percentage of the tax due. I shall phone HMRC tomorrow and see what they say, although my experience is that they point blank refuse to give any advice in these sorts of borderline cases.

Today I waited 30 mins and ended up with a guy who had never heard of the SA109. Which is annoying because if I do claim split-year, the SA109 is a complete nightmare of a form to complete. I hate the fact that self-assessment at this level involves determining stuff like 'UK ties' which are defined so vaguely in the official legislation that its difficult to believe that they form part of a 'statutory test'.

JasonPr

Rhidian wrote: »

For 2014-2015 it shouldn't be a problem - I have a new position with a much more formal contract which dictates 40 hours per week, so there will be no issues claiming non-residence this time next year.

Unfortunately, I have to disagree. SRT requires daily record keeping for the 3rd automatic overseas test, so my suggestion is at least to do it for January to April 5. See chapter 7 in the PDF I mentioned.

I'd keep a simple spreadsheet with date, time started working, time ended working, task or something similar.

Apart from that, I agree with what you suggest.

JasonPr

Unrelated question: do you have a SIPP?