Are you leaving the UK permanently?
UK Property Tax Specialists
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Tax return forms are available free of charge from HMRC. We are independent accountants and not part of or affiliated to HMRC. We remove the stress and anxiety of preparing your tax return by completing and filing your tax return for you. We shall help you to pay the least amount of tax by advising you about the expenses which you are entitled to claim.
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Are you resident in the UK?
From 6th April 2013 there is The Statutory Residence Test
Firstly you need to consider the automatic tests to determine whether or not you are resident in the UK:
The automatic overseas test:
1.You were resident in the UK in one or more of the previous three tax years and you spend fewer than 16 days in the UK in the tax year; or
2.You were not resident in the UK in each of the previous three tax years and you spend fewer than 46 days in the UK in the tax year; or
3.You work full-time overseas without any significant breaks during the tax year, you spend fewer than 91 days in the UK in the tax year and fewer than 31 days are spent working for more than 3 hours in the UK. There are certain exceptions,
You will automatically be treated as not resident in the UK for that tax year.
The automatic UK test:
1.You spend more than 183 days in the UK in the tax year; or
2.You have a home in the UK for a period of more than 90 days, are present in that home for at least 30 separate days during a tax year and there is a period of 91 consecutive days (some of which fall in that tax year) where you have no home overseas or if you have a home but have not been present in one home overseas for more than 30 days; or
3.You work full time in the UK (over 3 hours per day) for any period of 365 days with no significant break (at least 31 days) and more than 75% of the total number of those work days are in the UK,
You will automatically be treated as resident in the UK.
If you do not meet either of the automatic tests then the following ties to the UK are taken into account:
A Family tie
If your spouse or civil partner (unless you are permanently separated), your partner (if you are living together) or your child if under 18 years old are resident in the UK then you have a family tie.
An Accommodation tie
If you have a place to live in the UK which is available for a continuous period of 91 days or more during the tax year and you spend one or more nights at your own home or you spend 16 or more nights at a close relativeís home then you have an accommodation tie.
A Work tie
Normally, if you do more than three hours work in the UK for at least 40 days in the tax year then you have a work tie.
A 90-day tie
If you have spent more than 90 days in the UK in either or both of the previous tax years then you will have the 90-day tie.
A Country tie (only if you were resident in the UK for one or more of the previous tax years)
If you were present in the UK at midnight for more days in the tax year than any other country then you will have a country tie.
Assuming the automatic tests above are not met, you will be treated as UK resident in the tax year if you have at least the following number of ties:
Days spent in the UK UK resident in 1 Not UK resident
of last 3 years in any of last 3 years
16-45 4 N/A
46-90 3 4
91-120 2 3
over 120 1 2
If the automatic tests above are not met and you do not have the number of ties above for the days spent in the UK, you will be treated as not resident in the UK for that tax year.
What happens in the year you leave or return?
Provided that you either leave or come to the UK permanently or you meet certain conditions, you should be able to claim split year treatment for income tax purposes. This means that all your income and capital gains up to the date of departure or after the date of return is added to your UK income for the period you were non-resident when establishing the income and gains which are liable to UK in the relevant tax year.
This is a brief summary and 105 pages of guidance is available in Booklet RDR3 which is available on the Government website.
Donít forget to tell the taxman when you go.
If you are a British or EU citizen, you should continue to get personal allowances while you are abroad.
So what is taxed?
A UK resident pays tax on all his/her income and capital gains arising in the world. There are special rules (which are not dealt with here) for individuals who are not domiciled in the UK. Domicile is not simple and just because you are resident in a country, does not mean that you are domiciled in that country. If you are domiciled in the UK and go to live abroad but you keep your British passport, you will probably remain domiciled in the UK even though you will not be resident.
Generally, you are only assessed to tax on income received in the UK. The main exception is that if you work for the Crown, the income is taxable in the UK wherever it is earned. There are double tax treaties with some countries which means that some income received from the UK may be taxed in your country of residence and may not be taxable in the UK.
However, income from a property in the UK is usually taxed in the UK wherever you reside.
Tenants or agents have a responsibility to deduct basic rate tax from any rent paid to non-resident landlords. If you wish to continue receiving UK rental income gross whilst you are non-resident, you should submit Form NRL1 to the HMRC Centre for Non-Residents. HMRC should then grant approval for rents to be paid to you gross and notify the tenant or agent as appropriate. Your rental profits will still remain taxable in the UK but this will help with cash-flow.
Bank Interest paid without a tax deduction
If you are a non-resident and you reside in a country which has a double taxation agreement with the UK, then you can apply to receive your bank interest without deduction of tax using for R105 (available from the Government website). You will still need to declare the income on your tax return but you then claim double tax relief, so there may be reduced or no tax to pay in the UK. The interest may be taxable in your country of residence.
Other income arising in the UK may still be taxable in the UK depending on the Double Tax Treaty with your country of residence.
Income Tax Refund when you leave
If you have been employed in the UK, you will have paid income tax under PAYE. You may have paid too much tax, depending on when you leave your job in the UK. You may claim a refund on leaving the UK using form P85. You will need to declare the income you expect to receive in the UK after you have left (including property income) which will be taken into account when calculating your refund. You may also need to submit a Tax Return for each year. There is no corresponding refund of National Insurance contributions.
Normally, permanent non-residents are not liable for gains made whilst they are abroad except when a residential property is disposed after 5th April 2015. If split year treatment is not available then make sure that the asset is not disposed before 6th April after the date of departure or there may be a Capital Gains Tax liability. Non-residents are subject to Capital Gains Tax on gains made on the disposal of an asset used in a trade carried on by them through a branch or agency. If you are a temporary non-resident (generally abroad for less than five whole tax years) any capital gains which you make on disposals of assets whilst you are abroad may be taxed in the year you return unless those properties were acquired and disposed after you became non-resident and before 5th April before the date you become UK resident again.
If you are not resident in the United Kingdom then from 6th April 2015, gains on residential properties in the UK arising after 5th April 2015 will be taxable in all circumstances.
If you owned the property prior to 6th April 2015 then the default position is:
The gain/loss is the difference between the sale proceeds (less costs) and the market value at 6th April 2015
(plus any enhancement expenditure after this date). If the property was your principal private residence at any time prior to 5th April 2015 then you can claim the last 18 months so effectively there would be no CGT unless the property was sold after 5th October 2016. In these circumstances, you would also be able to claim lettings relief as well as long as the property was let.
You can make an irrevocable election to either:
1. Treat the gain/loss as arising on a time apportioned basis between the period prior to 6th April 2015 (not chargeable) and the period after 5th April 2015 (chargeable).
2. Treat the gain/loss as fully chargeable over the period of ownership. You may want to make this election if there was a loss over the whole period so that the full loss can be carried forward.
There are complex rules if the property was not a dwelling house over the period of ownership.
YOU MUST MAKE A RETURN OF THE DISPOSAL OF THE DWELLING WITHIN 30 DAYS OF THE COMPLETION OF THE SALE. The return has to be made whether you complete a self assessment return or not. If you complete a self assessment return, the tax is due on the normal date of 31st January after the end of the tax year in which the disposal takes place. IF YOU DO NOT COMPLETE A SA RETURN, THE TAX IS DUE 30 DAYS AFTER COMPLETION OF THE SALE.
You may have a liability if you dispose of any other asset and you were to return to the UK within five years of leaving.
You should ascertain the tax reporting requirements in the country where you reside and consult a local tax adviser, if necessary.
© Thandi Nicholls Ltd 2017 All Rights Reserved - The above article is provided for guidance only and may not cover your personal circumstances so you should not rely on it. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, K Nicholls FCA or S Thandi cannot be held responsible for the consequences of any action or the consequences of deciding not to act.