Remote working income tax (UAE)

hmc279

Hi,

I am moving to the UAE at the end of May and will continue to work for my current UK employer for 2-3 months remotely from there. My understanding of the Statutory Residence Test is that I will not be a UK tax resident for the 2023/2024 tax year per the automatic overseas test #3 given that I will be a) working full-time overseas, b) plan to be present in the UK less than 91 days total during the tax year and c) my total number of working days in the UK before I leave will be less than 31.

I have a handful of questions around my tax liability as part of my move, if anyone can help with answers to any of the below I would be very grateful:

1) Firstly just want to confirm that my understanding is correct per the Statutory Residence Test ?

2) Am I able to submit a P85 form in advance and therefore receive my income for the 2-3 months of remote working without any income tax deductions ? Or do I have to pay the tax and claim it back at the end of the tax year ?

3) For the work that I do in the UK between 6th April 2023 and the end of May (when I intend to leave for the UAE) - am I able to also claim this tax back at the end of the tax year ?

4) Am I liable for income tax on my income from renting my UK property out whilst living in the UAE ? If so at which rate i.e. does personal allowance still apply or do I give this up when I become non-UK tax resident ?

5) Am I eligible for VAT reclaims on purchases made in the UK once I give up my UK tax residency ?

Many thanks in advance

Jeremy535897

You won't meet the automatic non-residence test 3 for the whole year, because of the significant break rule. However, you may meet it from the day you go abroad, due to case 1 of the split year rules, based on what you say, but a lot depends on the time you work. See:
https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm12040 et seq

Useful examples here:
https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm12080

I doubt you will be able to escape the deduction of PAYE on work here. Your personal allowance should help to cover it, although there is also your UK tax liability on UK rent to deal with, which is not exempted either by your non-UK resident status or by Article 6 of the UK-UAE double tax agreement (see below). I assume you are a British citizen. See:
https://www.gov.uk/tax-uk-income-live-abroad/personal-allowance

Note Article 6 and Article 14 of the UK UAE double tax agreement:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/584114/UK-UAE-DTC_GOV.UK-in-force.pdf

Becoming non-UK resident won't allow you to reclaim VAT. You may face customs duties if you take goods to UAE.

hmc279

Jeremy535897 said:

You won't meet the automatic non-residence test 3 for the whole year, because of the significant break rule. However, you may meet it from the day you go abroad, due to case 1 of the split year rules, based on what you say, but a lot depends on the time you work. See:
https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm12040 et seq

Useful examples here:
https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm12080

I doubt you will be able to escape the deduction of PAYE on work here. Your personal allowance should help to cover it, although there is also your UK tax liability on UK rent to deal with, which is not exempted either by your non-UK resident status or by Article 6 of the UK-UAE double tax agreement (see below). I assume you are a British citizen. See:
https://www.gov.uk/tax-uk-income-live-abroad/personal-allowance

Note Article 6 and Article 14 of the UK UAE double tax agreement:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/584114/UK-UAE-DTC_GOV.UK-in-force.pdf

Becoming non-UK resident won't allow you to reclaim VAT. You may face customs duties if you take goods to UAE.

Thanks for your detailed response.

Right so the period from 6th April to the date that I leave for the UAE is considered a gap from overseas working (as still in UK) and will exceed the 31 day limit ? Seems I was forgetting to consider this period...

Yes I am a British citizen, so assuming the split year rules apply in my case, I would presumably therefore owe income tax for the circa 2 months of UK work done prior to leaving and also the full year's rental income ? Although as you say this should hopefully be largely mitigated by my personal allowance.

Following on from that, do you know if the P85 form would exempt me from the income tax on the PAYE payments post my leaving the UK ? Or does the tax have to be paid up front and then reclaimed after the tax year finishes ?

Noted on the VAT point, thanks

hmc279

Sorry follow up question... I am due to go on holiday in the UAE from 28th April to 8th May - if I elect to work at least 1 day during this period, from the UAE remotely, does this therefore make me eligible for the automatic non-residence test 3, because it will break up the 'significant break from overseas work' into 2 periods of less than 31 days rather than one period of more than 31 days ?

Jeremy535897

I didn't count the days because I don't think it matters. I think that you have a problem doing anything about the period from 6 April to when you first go to the UAE. A period cannot be a "break", significant or otherwise, before the overseas work even commences. Whether you can start the period earlier by working while on holiday will depend on when you start your full time work overseas. I do not know whether you and your employer can manage to agree on this.

When you are being paid for full time employment abroad, I would expect that a NT code would be operated, so no tax was deductible, but talk to your employer.