I have a client who was an employee and received letting income for 13/14 tax year, a SA100 was submitted. In the 14/15 tax year his circumstances changed. He was employed to 01/6/14. On 05/06/14 he started working for an oil firm in Iraq. His salary is paid into a non EU bank account (over £50000) and no funds have been transferred into the UK. A P85 was not submitted. He still receives letting income and is still paying bills etc in the UK. He is in the UK for more than 90 days a year.
My client wants to legally pay the least amount of tax as possible.What is the most tax efficient way for my client?
Replies (5)
Please login or register to join the discussion.
Your client does not get to choose how he is taxed on past events. Choices can only be made with forward planning of his tax affairs. To do this he may wish to appoint a tax adviser who can best structure his ongoing financial position to reduce his tax exposure in future years.
For 14/15 he must just follow the correct procedure by applying the rules to the existing facts of his case, then calculate the tax owing, and pay it. Almost certainly there is nothing he can do after the fact that can change his tax obligations.
Basically, for UK tax purposes, start with the Statutory Residence Test, determine his tax residence, apply the relevant residence rules to both his UK and worldwide income and then complete his tax return accordingly. This will be the starting point for his UK tax position before foreign tax credits have been taken into account.
Depending upon the outcome of his residence test he may well need to follow a similar procedure in the country in which he is resident, possibly taking into account the relevant Double Tax Treaty. There may then be some scope for applying foreign tax credits on his UK tax return to offset his UK tax liability.
Once all that has been be determined and the relevant calculations applied, then he can pay the relevant UK and foreign taxes.
If this is all unfamiliar to you then you may wish to advise your client to seek the aid of a tax adviser who is experienced with foreign matters and who may be able to help with the aforementioned tax planning.
Doubtless he pays tax in Iraq on worldwide income. Ask him for a copy of his Iraqi tax return as a starting point.
If he has been your client all this time then I don't understand why he has not been advised to obtain UK and Iraqi tax advice on his specific situation from the outset since this is clearly not your expertise. In fact is it not provided as part of his employment?