Overseas earnings taxable in the UK

Overseas earnings taxable in the UK

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I left the UK in July 2016 for a 2 year posting abroad. My earnings are tax-free locally. Unfortunately I now have to return to the UK. Date of arrival will be early 2017, before the end of tax year 2016/2017. This means that my earnings abroad will be subject to UK .  My contract is split into 3 components - salary, housing allowance and transportation allowance. Question: will HMRC consider all 3 components taxable? Or (says he hopefully) just the salatry portion?

 

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By Tim Vane
19th Nov 2016 16:40

Whoa! Wind back. Start at the beginning. What does the SRT indicate for your circumstances in 2017? If UK resident, you are eligible to claim split year treatment. If not, then your foreign earnings are probably not taxable anyway.

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By Portia Nina Levin
21st Nov 2016 11:17

EDITED: I see that Tim has subsequently realised the error of his ways.

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By Accountant A
19th Nov 2016 18:34

Interesting stuff! Not looked at residence etc in years.

Have a look here:

https://www.gov.uk/tax-foreign-income/residence

"You don’t need to claim split-year treatment - it’s applied automatically.

You won’t get it if you live abroad for less than a full tax year before returning to the UK"

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Replying to Accountant A:
By Tim Vane
19th Nov 2016 20:04

Good point - sorry - I read the 2 years part in the OP but had not taken on board the actual date of departure, so not in fact a 2 year posting! Teach me not to skim read.

So yes, all fully taxable in the UK including the imputed value of the allowances. Relief can usually be sought for any foreign tax paid, but in this case there won't be any.

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By mullbear
20th Nov 2016 11:46

Thanks Tim ands Accountant A.
My original plan was to come back after April 2018. I'd done an SRT test and all looked good. But I'm now certain that coming back in February will make me liable for 2016/2017 on my foreign earnings.
On the point of the salary/accommodation/transportation allowance split I will prepare for the worst!
As my contract is being terminated early ,I will however try to incorporate a redundancy figure into my final settlement . This is I think tax-free up to £30,000.

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By Adam12345
21st Nov 2016 09:54

You should engage an accountant, you will need to look at the double tax treaty, and tax the income accordingly.

As for the £30,000 genuine ex-gratia exemption, this will not apply to your earning as they were contractual.

The £30,000 limit only applies to genuine ex-gratia payments, paid on the termination of employment, you do not qualify just because your employment was short.

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By Portia Nina Levin
21st Nov 2016 11:17

You appear to be talking out of your [***].

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By Adam12345
21st Nov 2016 12:40

please enlighten me?

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By Portia Nina Levin
21st Nov 2016 14:10

Well just because somebody is contractually entitled to be paid, does not mean that if the employer terminates the employment and in recognition of that breach makes a payment representing liquidated damages, that the payment is contractual.

It is not. And in such circumstances the payment is usually taxable under ITEPA 2003, section 401 et seq, with the effect that only the excess above £30K is taxable.

There is no basis for your "not a chance" approach. There may or may not be a chance; we do not have sufficient information to say.

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By Portia Nina Levin
21st Nov 2016 11:21

I do think that professional advice should be sought. You are not getting correct advice here.

It is possible that the housing allowance and transportation allowance may not be taxable as a result of ITEPA 2003, section 370.

Whether or not any termination payment will fall under section 401, such that the frst £30K is exempt, will depend on the precise facts.

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