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

Cook_County

Well done for figuring out your position under UK domestic law. Have you looked yet to see how this might be modified by the tax treaty?

Spidernick

Cook_County wrote: »

Well done for figuring out your position under UK domestic law. Have you looked yet to see how this might be modified by the tax treaty?

I'd agree with this: if you moved to France 'lock, stock and barrel' (with spouse and kids, if you have any) and if your financial affairs are now mainly run out of France (i.e. you have set up an account there into which your salary is credited and bills are paid), then you would seem to be treaty resident in France once you moved there, in which case the UK would only potentially tax any days you spent working back in the UK (presumably none).

As a previous poster has said, SRT is still very new and even many tax professionals are still trying to get their heads around it (me included)! However, people do seem to forget that SRT is not the be all and end all and often treaty residence can be very useful. In fact, with SRT and the changes with the taxation of UK residents who are domiciled outside the UK, it is anticipated that treaty residence will be looked at a lot more going forward than has historically been the case.

Personally I think you will be fine with claiming a split year. In the unlikely event that HMRC challenged this (with respect they probably have bigger fish to fry and easier targets) you could just amend the return to show you as UK tax resident for the full year, but then complete treaty pages showing you as treaty resident for the period after you moved to France until the following 5 April and then back out the French earnings there. This would leave the overall position unchanged in terms of the net tax due.

Rhidian

JasonPr wrote: »

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.

But what to stop me from just making one up for the whole tax year? My working days are fairly regular and predictable... But as always, because I work independently, there is no-one else to either verify or falsify my claims...

Rhidian

Spidernick wrote: »

Personally I think you will be fine with claiming a split year. In the unlikely event that HMRC challenged this (with respect they probably have bigger fish to fry and easier targets) you could just amend the return to show you as UK tax resident for the full year, but then complete treaty pages showing you as treaty resident for the period after you moved to France until the following 5 April and then back out the French earnings there. This would leave the overall position unchanged in terms of the net tax due.

Thanks for this helpful advice Spidernick. In light of the fact that HMRC can demand up to 1600 in fines for a tax return just three months late, are there are similar fines for amendments to the tax return after the submission deadline?

Spidernick

No, you can amend your tax return on-line up to a year after the original filing deadline (paper filing thereafter) without penalty. If further tax arose as a result then interest would be charged, but that shouldn't happen in your case.

JasonPr

Since several tax professionals have commented: do you know why SA109 is not available online and whether HMRC has plans to add it in the future?

Rhidian

Thanks everyone for all the help. Just one final check: if I do claim split year by completing the SA109, is it the case that I only need to mention my earnings before the date of departure, and therefore all my earnings from foreign employment after the date can be safely omitted?

chrismac1

In fact the sensible approach - given the fine first and ask questions later policy - is to:

1. File something - anything - by 31 January.
2. Use the white space on the return to state any inadequacies or uncertainties. In my view HMRC never read this, but it will come in useful if there is a check.
3. By 31 Jan 16, re-submit with the proper data.

Inevitably I end up needing to do this for between 5 and 10 clients per year. No problems to report.

Spidernick

Rhidian wrote: »

Thanks everyone for all the help. Just one final check: if I do claim split year by completing the SA109, is it the case that I only need to mention my earnings before the date of departure, and therefore all my earnings from foreign employment after the date can be safely omitted?

For the split year you would only report your UK earnings while UK-tax resident. The French earnings would only need to be reported in the event that you are tax resident in the UK for the full year, in which case this would then be on the treaty pages.

urban469

Hi everyone, I've been reading this thread with interest, and what I've learned is that the law (with the automatic residency test and the sufficient ties tests) is incredibly vague.

@Rhidian, I hope you don't mind me jumping in here with my own question. If so, I'll happily move this somewhere else.

I'm also trying to get my head around the law. My situation is this:

-I was employed full time in the UK until mid-March 2015
-I started working abroad full time in mid-March 2015

So here are my questions:

-Can I be 'non resident' for tax purposes even if I'm only outside the UK for a single tax year (2015-16)?
-How many days can I be in the UK in that tax year?

Looking on here, it seems I have 2 ties:

1. Family: no partner in the UK
2. Accommodation: I don't own property, but in previous tax years, I lived at my parents' house, and I still have the right to live there
3. Work: no work in the UK in the tax year 2015-16
4. The 90 day tie: I have spent more than 90 days in previous tax years, obviously
5. The country tie: I will spend the majority of the 2015-16 tax year abroad

So by my calculations, I have 2 ties to the UK (accommodation and the 90 day tie). Am I right?

And if I have 2 ties, that means I can safely visit the UK for up to 90 days in this tax year. Does this all sound correct?