what is needed? HMRC no help at all

[mutantpoodle]

Hi
I hope some here can help, I have asked (gateway message) HMRC but they tell me they unable to help without authority, which they have but cannot find!!!!

despite letters being written last march!

My daughter has gone to Australia and is working legally...with Visa and is 100% PAYE (their equivalent) no tips bonuses etc
she has rented out her flat here in UK and HMRC have agreed rent received is untaxed at source (they have confirmed in writing)
she also has nominal building society interest here...which is now paid gross...will be far beneath £1000 allowance

I have asked HMRC what documents she will have to produce from her Australian earnings in order to submit her 17/18 tax return here
she will probably be back in the spring...
they will not help

ALL her australian earnings are being taxed at the rate prevailing over there

I am unable to understand why HMRC consider that any authority is required in asking such a simple (??) question
and yes, I will try and telephone...
meanwhile..
does anyone have ideas on what australian documents will be needed??

TIA

[BBLSP1]

Will she be 'non-resident' in the UK for the tax year? You say 'back in the spring' - be careful, you need a full tax year out to be considered non-resident, so timing is everything.

If she is non-resident, she does not need to declare anything with regards to her overseas income, she just has to state her residency (Australia) for the year on the appropriate page of the Non-Residents section of the Self Assessment return.

If she does not achieve UK non-residency, then simply state the salary earned in Australia and look into the double taxation situation to avoid paying twice. Back-up documents are only needed should there be an investigation - that is the whole point of self assessment - I would have though the contract of employment and salary slips would be sufficient if this were to happen.

It may well be worth also asking on the LF expats board.

[Lootman]

Will she be 'non-resident' in the UK for the tax year? You say 'back in the spring' - be careful, you need a full tax year out to be considered non-resident, so timing is everything.

If she is non-resident, she does not need to declare anything with regards to her overseas income, she just has to state her residency (Australia) for the year on the appropriate page of the Non-Residents section of the Self Assessment return.

I would have thought that she would get a full credit for the Australian taxes paid, and so may end up owing no UK tax on the Australian income anyway. If that is the case then there would be no real benefit for electing to be considered non-resident. And there may be some disadvantages, e.g. losing some allowances or not being able to take out an ISA.

I've usually taken the view that being non-resident is only worthwhile if you are living in a country with lower taxes than the UK. Not sure whether Australia counts as that or not.

[BBLSP1]

RDR3 is the go to document on UK residency. You can’t really ‘elect’ to be one or the other – depending on your circumstances, it is determined.
However, you can of course arrange your circumstances so as to fall one way or the other to suit.

So, as you note, it is worth deciding if under the double taxation rules, Australian or UK tax is most favourable, and then, if possible, arrange your dates accordingly. Regardless, in general a full UK tax year out is needed to be considered non-resident for that year. (The so called split year treatment only applies if you also have an adjacent full tax year out.)

Lots of caveats and conditions to the above of course and so best to look at RDR3.

[Lootman]

RDR3 is the go to document on UK residency. You can’t really ‘elect’ to be one or the other – depending on your circumstances, it is determined. However, you can of course arrange your circumstances so as to fall one way or the other to suit.

The rules around this have changed, probably more than once, since I looked into it. But at least at one time it was in fact an election. In other words in addition to actually being non-resident, you also had to apply to HMRC to be considered that way.

In a sense it has to be like that, since HMRC only know you are non-resident if you tell them that you are. If you don't do so then your situation will default to resident anyway. And since being resident usually means that HMRC collect more tax from you, I suspect they are more than happy if you don't make such a claim.

Of course, as you say, you can always finesse it. I believe staying a month and a day in any one tax year makes you UK resident even if you are also resident elsewhere. It's also possible to be resident nowhere, which is very beneficial but tricky to pull off.

[Lootman]

does anyone have ideas on what australian documents will be needed??

My first thought is that perhaps no documents are needed. Simply enter the earnings and foreign tax paid numbers into the self-assessment form, and submit no supporting documents. If HMRC want to question that or ask for evidence, let them, and then you'll know what to provide. I'd imagine that HMRC are always happy when a taxpayer voluntarily declares income that HMRC would otherwise never have known about.

Secondly, I'd imagine that the Australian tax authorities produce an annual statement of earnings and taxes. The problem will be that the Australian tax year is different from the UK tax year - theirs goes from July 1st to June 30th. So it's not that helpful by itself - you still have to compute the amounts for the UK tax year.

So if it were me, I'd declare the actual numbers and have the annual statement and individual payslips available if they are requested.

[JonE]

I believe staying a month and a day in any one tax year makes you UK resident even if you are also resident elsewhere.

Nowadays we have the Statutory Residence Test so refer to previously-mentioned RDR3 for the facts (or, at least, how HMRC interprets the legislation). The document may be downloaded from here:
https://www.gov.uk/government/publicati ... e-test-srt


Cheers!

[mutantpoodle]

many thanks for all the replies
it is certainly not an easy situation
(would be easier if it were me....but its my daughter!!)
everything is great....until it goes wrong...then guess who is at fault!!

she has been told to keep all documents re pay/tax etc
she is being taxed on PAYE basis...no idea if as local or foreigner...but she is a 'foreigner' so no downside there

when earnings are submitted they should be in £stg...would hmrc expect me to do a month by month exchange or can i take roe at end of tax year?

and am reading comments correctly
just complete earnings and tax paid on SAE pages no need to say it was paid in Aus?

apologies if I am making a meal of this but ideas here show it as fairly straightforward....yet HMRC decline to discuss etc etc????????

[Alaric]

yet HMRC decline to discuss etc etc????????

Is that not because it's your daughter who is the taxpayer not you? Perhaps you need a formal authority as her tax adviser before they will talk to you?

[PinkDalek]

... and am reading comments correctly
just complete earnings and tax paid on SAE pages no need to say it was paid in Aus? ...

If and only if the earnings are to be put on her UK Tax Return then you need to read the instructions.

Employment notes Tax year 6 April 2016 to 5 April 2017 (2016–17) https://www.gov.uk/government/uploads/s ... s-2017.pdf include:

Fill in the ‘Employment’ page if you: ... received foreign income from a job, directorship or office

Later you'll see Box 2 UK tax taken off pay in box 1 ...Don’t include any foreign tax in box 2 .

No UK tax has been deducted so you don't put the tax figures on there.

Instead you need to look at the Foreign Pages, the notes for which are here:

Foreign notes Tax year 6 April 2016 to 5 April 2017 (2016–17)
https://www.gov.uk/government/uploads/s ... s-2017.pdf and include:

Use the ‘Foreign’ pages if you want to claim Foreign Tax Credit Relief ... Don’t use the ‘Foreign’ pages for: ... foreign employment income – use the ‘Employment’ pages which is somewhat confusing but later on Page FN 10 it states:

Foreign tax paid on employment, self-employment and other income

Fill in this section if you’re claiming Foreign Tax Credit Relief on income or gains that you’ve put elsewhere on your tax return, including income from furnished holiday lettings in an EEA country. If you paid foreign tax on your employment income, you must fill in the ‘Employment’ page. For example, if you work for a British company abroad.


"This section" appears to be the top section headed Foreign tax paid on employment, self-employment and other income on Page F6 here https://www.gov.uk/government/uploads/s ... 6-2017.pdf

As for the exchange rates to be used, I'm not up to speed on this but, for income, the Foreign notes state convert the income into UK pounds using the exchange rate at the time the income arose. If you’re not sure, ask your tax adviser. HMRC do publish monthly exchange rates here https://www.gov.uk/government/publicati ... 17-monthly

[Lootman]

Nowadays we have the Statutory Residence Test so refer to previously-mentioned RDR3 for the facts (or, at least, how HMRC interprets the legislation). The document may be downloaded from here:
https://www.gov.uk/government/publicati ... e-test-srt

Yes, it was my original reading of that which led to the view that one month had significance for determining if you qualify to be considered non-resident. But obviously every personal situation is different and a taxpayer should consult the source at the time that it arises. What BBSLP and I were discussing was more to do with whether you can qualify to be treated as non-resident but choose not to, in those cases where there is no advantage to being deemed non-resident. I'm not aware of any situation where being resident means that you'd owe less tax than being non-resident, so perhaps that is moot.

The question of how to do the FX conversions isn't related to the resident/nonresident issue. It comes up for any UK resident who has foreign income, which could be as simple as holding a fund that is denominated in US dollars or Euros, like a some ETFs. In my view there is only one exact method and it's what PinkDalek suggested. You take each foreign payment and apply the FX rate for that transaction date. Anything that instead uses averages and totals is probably close, but won't be exact, especially if currencies have been volatile.

[JonE]

Nowadays we have the Statutory Residence Test so refer to previously-mentioned RDR3 for the facts (or, at least, how HMRC interprets the legislation). The document may be downloaded from here:
https://www.gov.uk/government/publicati ... e-test-srt

Yes, it was my original reading of that which led to the view that one month had significance for determining if you qualify to be considered non-resident. But obviously every personal situation is different and a taxpayer should consult the source at the time that it arises.

That's why an unconditional statement that "staying a month and a day in any one tax year makes you UK resident even if you are also resident elsewhere" is unhelpful: there are many factors which could come into play. As a counter-example, I know non-residents who now make a point of spending over 90 days in their UK 'second-home' each summer so as to qualify it for Private Residence Relief for that year for the purposes of the UK's non-resident CGT (NRCGT) and do so without any effect on their NR status because of the combined effects of their other circumstances which are considered in the SRT.

What BBSLP and I were discussing was more to do with whether you can qualify to be treated as non-resident but choose not to, in those cases where there is no advantage to being deemed non-resident.

Now that there is a statutory test one's status is decided on the facts according to that test and by no other means afaiaa (unless you start a legal challenge to HMRC)- and it's possible for it to change from year to year even as a result of seemingly minor variations in one's circumstances. One is asked questions on various HMRC forms, gives truthful replies and, inter alia, an 'answer' is generated by the SRT algorithm with respect to one's residency status. This is where one may benefit from studying the situation in advance and pre-arranging one's affairs to best advantage rather than leaving such matters to be addressed 'after the fact'.

As an aside, NR returns can't be made on-line so the paper deadline applies.

Cheers!

[mutantpoodle]

FAO ...Alaric

yes of course that is their excuse for not actually answering my question

question being

what documents are needed??

hardly an invasion of privacy nor a DATA protection issue

simply a request to help someone..an un named someone!!

so totally unhelpful

on this basis they wuold never help anyone to help anyone!!

i suppose it keeps them in a job!!!

[PinkDalek]

...

question being

what documents are needed??

...

Answer previously provided by BBLSP1:

Back-up documents are only needed should there be an investigation - that is the whole point of self assessment - I would have though the contract of employment and salary slips would be sufficient if this were to happen.

From the first page of the Tax Return Notes https://www.gov.uk/government/uploads/s ... 0-2017.pdf

Don’t send any receipts, accounts or other paperwork with your tax return, unless we ask for them. If you do, it will take longer to deal with your tax return and will delay any repayment.

Did you read the other replies?

[Lootman]

Now that there is a statutory test one's status is decided on the facts according to that test and by no other means afaiaa (unless you start a legal challenge to HMRC)- and it's possible for it to change from year to year even as a result of seemingly minor variations in one's circumstances. One is asked questions on various HMRC forms, gives truthful replies and, inter alia, an 'answer' is generated by the SRT algorithm with respect to one's residency status.

Even so, there remains the question about whether HMRC cares if you qualify as non-resident but do not inform HMRC, thereby continuing to be taxed as if you were resident. The purpose of the statutory test is to ensure that taxpayers do not claim non-residency when in fact they do not qualify. That makes sense because being non-resident carries significant tax benefits to the individual.

I would imagine that their energy is devoted to finding people who claim non-residency but are not entitled to. I doubt that they devote much if any energy to investigating a claim to be resident because there is no tax situation (that I am aware of) where being resident results in less tax owed than being non-resident.

My accountant likes to say that it's important to know which rules HMRC cares about and enforces, and which they do not. I recall once mentioning to him that I had failed to provide some piece of information and his reply was "oh, don't worry about it, HMRC never looks at that anyway"!

[mutantpoodle]

fao Pink dalek

yes I had seen the answer already given

I was simply responding to Alaric by showing what my question to HMRC had been...and as such showing that it was in no way imposing on any personal info

I just hope my daughter keeps all slips etc, because we know fro m past experience that once a place of work/bank acct etc has been left or closed then getting info becomes hard work
quite apart from it being the other side of the world!!

[JonE]

Even so, there remains the question about whether HMRC cares if you qualify as non-resident but do not inform HMRC, thereby continuing to be taxed as if you were resident. The purpose of the statutory test is to ensure that taxpayers do not claim non-residency when in fact they do not qualify. That makes sense because being non-resident carries significant tax benefits to the individual.

Surely the purpose of the test is far more balanced and is actually to establish whether the individual is, or is not, resident for the purposes of IT and, of course, for CGT/NRCGT.

Let's not forget that being resident can also carry tax benefits - for example, subscribing to an ISA. Some pension-related transactions can also be linked to residency in various ways. These don't strike me as "HMRC doesn't care" matters and there are very probably others which don't immediately spring to mind.

Q8 on page TR2 of SA100 asks "Were you, for all or part of the year to 5 April 2017, [...] not resident" - a direct question! If having to complete this form then it wouldn't merely be a matter of omitting or overlooking making mention to HMRC that one may actually be not resident.

Further discussion of this seems unlikely to be relevant to the situation described by OP so I'll drop this sub-thread.

Cheers!

[Lootman]

Even so, there remains the question about whether HMRC cares if you qualify as non-resident but do not inform HMRC, thereby continuing to be taxed as if you were resident. The purpose of the statutory test is to ensure that taxpayers do not claim non-residency when in fact they do not qualify. That makes sense because being non-resident carries significant tax benefits to the individual.

Surely the purpose of the test is far more balanced and is actually to establish whether the individual is, or is not, resident for the purposes of IT and, of course, for CGT/NRCGT.

Let's not forget that being resident can also carry tax benefits - for example, subscribing to an ISA.

The original reason I raised this issue was precisely because there might be a situation where electing to be treated as a resident would maintain an ability to subscribe to an ISA! But of course that does not lower the tax owed in the current year, hence my observation that it is doubtful that HMRC cares much either way.

It's possible that HMRC matches up ISA subscriptions to a list of taxpayers who declared themselves to be non-resident. But personally I doubt it. I suspect the main checks are that you don't over-subscribe in any given year.

As you say, this may not apply in the OP's case although we don't have enough facts to determine that.