If you work as a crown servant (a member of HM armed forces, a civil servant or a diplomat) and have been posted overseas, you will need to consider various factors when determining your exposure to UK income tax and capital gains tax.
UK tax residency status
You will need to determine your UK tax residency status. To do this, you will need to look at the following
Keeping a travel diary will prove to be very helpful to you as it's easy to confuse dates especially when moving around. Accurate records could save you time when dealing with HMRC at a later stage.
After considering all in detail, you will either be UK tax resident or non resident. Special rules can apply in the year that you are leaving and returning to the UK allowing you to “split” the year in to an overseas part and UK part.
UK Tax Resident
For as long as you are considered UK tax resident, your worldwide income and gains will be taxable in the UK.
UK Tax Non-Resident
For non-residents, only income earned in the UK and gains from a UK residential property are taxable in the UK. If however, you are non resident for less than 5 consecutive tax years, all gains in the period of non residency will be brought back into charge in the year you become resident again.
The income that you earn in the capacity as a crown servant will be liable to UK tax regardless of your UK tax residency status and where your duties are performed – so even if in a single tax year you’ve spent fewer than 16 nights in the UK, although you will be considered automatically non-UK tax resident, the income earned will still be taxable in the UK. It's important to be aware that this does not follow the ordinary rules for individuals working abroad.
You may be considering letting out your property in the UK whilst you are abroad. If so, you will need to declare the rental income on your personal tax return. You will also need to register with HM Revenue and Customs as a non-resident landlord. This will entitle you to receive your rental income without any taxes withheld. By not registering, your letting agent will be obligated to withhold tax at 20% and forward this to HMRC.
It’s important also to plan for your return to the UK in advance to ensure that you are as tax efficient as possible. If you have worked across multiple jurisdictions, or own property overseas, the situation could be even more complex.
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