HM Revenue & Customs (HMRC) is actively campaigning to ensure that workers from abroad, who are registered in the UK, comply with the appropriate tax rates. If you have foreign assets or income, you might still be required to pay UK taxes, depending on specific conditions.
Determining your tax status
The initial action HMRC takes to assess your tax liabilities is to establish your residence and domicile status. Your tax responsibilities vary depending on whether you are a UK resident, non-resident, or domiciled in the UK.
Understanding double taxation agreements
The UK has established double taxation agreements (DTAs) with numerous countries to prevent you from being taxed twice on the same income. However, it falls on you to claim these reliefs, and neglecting to do so could lead to avoidable tax liabilities.
Who qualifies for exemptions?
Certain individuals working abroad may not be subject to UK taxes. Here are some conditions under which you might be exempt:
- Non-resident status – If you stay in the UK for less than 16 days (or 46 days if you haven’t been a UK resident for the past three tax years), you could be classified as a non-resident and thus not liable for UK tax on your foreign income.
- Split-year concession – In the tax year you relocate abroad, you might qualify for split-year treatment, meaning you’ll only be taxed in the UK for the portion of the year you reside here.
- Exemption on foreign income – If you’ve already paid taxes on income in another country and have claimed double taxation relief, you may be exempt from UK taxes on that income.
Consequences of non-compliance
Non-compliance with HMRC rules can lead to strong penalties:
- Penalties for late payments – Starting at 5 per cent of the unpaid tax at 30 days, escalating to 10 per cent at six months and 15 per cent at one year.
- Fines for late filing – An immediate £100 fine is imposed for late submissions, with additional penalties accumulating over time.
- Legal actions – In extreme cases, HMRC may initiate an investigation that could result in prosecution or even jail time.
- Asset confiscation – HMRC has the power to seize properties to settle unpaid taxes.
Working abroad can be rewarding but comes with challenging tax responsibilities. Being aware of your tax obligations and following HMRC guidelines is essential to sidestep unnecessary financial strain and legal issues. Ignorance of the law is not a valid defence, and the repercussions for non-compliance can be harsh.
For expert advice on staying informed and compliant, please consult one of our tax specialists.