When should you consider paying for tax advice?

All too often expats fall into the trap of not seeking advice from a qualified accountant, purely because it potentially costs money to do so.

However, as an expat there are scenarios where investing in a tax adviser with experience in expat tax matters could maximise the tax rebates or relief which you may otherwise miss out on.

Below we have highlighted three common scenarios which, with the right advice, could benefit from a significantly reduced tax bill.

The British expat permanently living abroad looking to minimise UK tax

If you have decided to move abroad but to also keep some assets (such as a residential property) in the UK, it is important to understand your tax residency status and how any UK source income continues to be taxed.

In 2013, the UK government introduced the Statutory Residence Test which clarified the rules which determine whether you are a tax resident in the UK.

For some expats who never return to the UK and have no remaining UK based assets or connections, this is a relatively straightforward scenario which could be resolved with a free consultation.

However, there are a number of circumstances where it is not so clear, such as the following:

• You retain strong connections to the UK through your family
• You regularly return to the UK
• You receive an income from a UK based company
• You have a residential property in the UK, which you may rent or use for your visits ‘home’

A tax adviser would be able to offer assistance to help ensure that you maintain non-resident status. . This level of advice, due to the complexity and uniqueness of each individual case, is unlikely to be free and may incur a charge.

However, seeking tax advice could minimise unnecessary tax by:

• Carefully structuring your time and travel to avoid becoming a UK tax resident
• Help clarify any tax relief available via the split year treatment and providing guidance to ensure you meet the strict criteria for split year treatment
• Ensuring you meet your ongoing UK tax obligations correctly i.e. filing a tax return as a non-resident landlord
• Help you plan the sale of a residential property or assets to minimise your UK capital gains tax liability, especially in light of the new rules introduced in April 2015
• Ensure you benefit from tax reliefs derived from an existing tax treaty between the UK and your country of residence, ensuring you are not double taxed

The British national seconded overseas

If you have been seconded abroad by your employer you would need to consider a number of factors in relation to your tax commitments, both in the UK and also in your temporary country of residence.

Firstly, it is important to understand your tax residence status in both countries as you may be required to pay tax in one, if not both. However, if you are dual resident and there is a double tax treaty, you may only be required to pay tax in one of the countries.

If you are deemed a non-resident of the UK for tax purposes, depending on your particular circumstances, it may also be possible that you are eligible for split year treatment in the year of departure and/or return, which could mean that for part of a tax year you would be considered a non-resident and not subject to UK tax.  This is especially important if your country of residence has a lower income tax regime than the UK!

As a non-resident, in most cases you will only have UK tax exposure on UK source income gains. However, you may still be subject to tax in your country of residence.

Requesting tax advice would ensure that you minimise your tax bill by:

• Establishing a plan for managing your time in the UK to ensure you remain non-resident and qualify for split year treatment
• Understand your ongoing UK tax exposure on your UK source income
• Reclaim any overpaid tax Ensure you understand your ongoing UK tax commitments to avoid receiving an unexpected tax bill or penalty

The foreign national seconded to the UK

A very common scenario for foreign residents living in the UK is that they are often seconded to work in the UK on a temporary basis. Often this may be for periods fewer of 24 months or fewer, and spread across several tax years.

In such scenarios, the employee is likely to receive a salary, home leave travel expenses, insurance, and accommodation.

Due to the time spent in the UK, any foreign national would be considered a tax resident in the UK and therefore their full income would be subject to UK tax. This would include the expenses, insurance and accommodation, plus any other financial benefits received from the company as it is all classed as income.

It’s also quite common for a significant proportion of the employment to be conducted outside of the UK in other offices around the world.  Where this is the case, very valuable UK tax reliefs are available which exempt the time spent working overseas from UK tax.

These reliefs come with prescribed conditions which must be met in order to gain the tax exemptions – something which a qualified tax adviser would be able to assist with.

For example, it may be possible to claim tax relief on:

• Income received while working outside of the UK, as explained above.  This is known as ‘overseas workday’s relief’.
• Accommodation costs, if seconded to work in the UK and ’ detached duty tax relief’ is applicable
• Home leave travel

Seeking advice from a tax adviser would enable you to structure your income and employment situation to ensure that you are able to legitimately claim the maximum tax relief available, and not miss out due to a failure to implement the planning correctly.

The difference between free and paid tax advice

As with any professional service, it is possible to offer an initial free consultation to answer any general questions. At Experts for Expats, we request that all our advisers offer this as standard practice.

However, in the absence of a formal engagement with the adviser this free consultation is provided on an informal and general basis and should not be relied upon other than in the most basic of scenarios.

To be able to offer advice which is both personalised and covered the tax adviser would need to spend time investigating your circumstances, history and likely activity in the future. They would then be able to provide clear advice specific to your personal circumstances, allowing you to manage your tax affairs efficiently.

This takes both time and significant expertise to ensure that all bases are explored. Ultimately, the more complex the situation, the more time is required to investigate and present the full range of options.

Advisers in our network therefore offer both a free service to answer general questions, and also a paid for service which will enable you to minimise your tax bill. Before any paid activity is undertaken, the service will always be explained in full complete with a free, no obligation quote for the work to be carried out.