7 Tips For Non-EU Residents on Tax Preparation Services – UK VAT and E-Commerce Accountancy Services

Posted by: Jay Redman
Category: Tax & Accounting
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Introduction

As a general rule, expats will be expected to pay into the United Kingdom’s (UK) National Insurance system once they begin working in the country. This is necessary to fund the costs of health insurance and welfare as well as other social programs.

Even if you no longer reside in the U.K., you may be required to file a tax return with HMRC. The tax regulations for UK citizens and non-residents are considerably different, and determining your tax residency status in the UK is one of your first tasks. It’s crucial to keep in mind that even if you live in another country, you could still be a UK tax resident. This article looks at ten tips for non-EU residents on tax preparation services. 

Establish your tax residence status

  1. To assess whether you are a tax resident, HMRC uses the Statutory Residence Test. Non-residents make one of the most common and often costly blunders of reading about it on the Internet and making their judgment about their residency status.

It can be difficult to determine your tax residency status, therefore you should always obtain assistance from an experienced accountant. Making a mistake might result in penalties and unexpected tax bills.

Do the Statutory Residence Test (SRT)

The SRT took effect on April 6, 2013. Read RDRM11000 onwards for further details on the entire test. You can use the exam to determine your residency status for a given tax year, sincere each tax year is considered independently.

Three automatic overseas tests to consider if you are a non-UK resident.

  1. First Automatic Test: If you lived in the UK for one or more of the three tax years before the current tax year and spent fewer than 16 days in the UK during that year, you will be a non-UK resident for the tax year.
  1. Second Automatic Tax Year: If you didn’t live in the UK for any of the previous three tax years and spent less than 46 days in the UK during the tax year, you’ll be a non-UK resident for the tax year.
  1. Third Automatic Test: You’ll be a non-UK resident for the tax year if you work full-time outside the UK during that time and: 
  • You spend fewer than 91 days in the UK throughout the tax year; 
  • You work for more than 3 hours in the UK on less than 31 days; 
  •  There is no significant break from your overseas work.

When are you considered a UK resident?

If you have or have had a house in the UK for all or part of the year and the following conditions apply, you will be a UK resident for the tax year:

  • There was or was at least one 91-day period when you had a residence in the UK.
  • You have been present in that home for at least 30 days at any time during the year.
  • You didn’t have an overseas house at the time and spent less than 30 days in it. 

What is your domicile?

When it comes to calculating your international income for UK tax reasons, your domicile is crucial. Domicile is determined by UK law and refers to a person’s long-term, permanent residence. At the moment of your birth, your domicile of origin was the same as your father’s.

Foreign Income could be subject to tax

The amount of tax you pay on your international earnings is determined by your resident and domicile status in the UK. If you are a UK resident, you will be taxed on all of your investment income, regardless of where it is earned. 

What is the sufficient ties test?

If you’re still confused about your residency status after studying the preceding tests, you should consider the sufficient ties exam. It determines if you have sufficient ties to the UK to be considered a resident. The following are examples of ties:

  • Family members in the UK (for example, a spouse or children)
  • Accommodation, defined as a place to stay that is available to you for 91 days, excluding hotels.
  • In the UK, 40 working days of 3+ hours a day or more are required.
  • In at least one of the preceding two tax years, you spent more than 90 days in the UK.
  • During the tax year, you spent more days in the UK than in any other country.

You can split your time between two countries

You may be entitled to apply split-year treatment to reduce your tax burden if you left or arrived in the UK during the tax year and meet specified conditions about your unique case.

Conclusion

If you do not live in the UK full time, you should ensure that that you pay taxes for the number of days you reside in the UK. This article explains ten things to help you effectively prepare for UK taxation as a foreign entrepreneur or expat.

FAQs

Can your UK day count be reduced?

There are scenarios where HMRC could decide to reduce your day count. For example, due to unusual circumstances, your UK day count may be decreased to account for days spent in the UK that did not generate economic activity. 

What are split years?

You’ll be a UK resident for the entire tax year, although it may be split between the UK and an overseas portion. If there is an actual or deemed departure from the UK during a year in which you are a UK resident, you must evaluate whether any of the split years cases 1-3 applies.

What are the penalties for filing my tax return late?

If your tax return is up to three months late, you will be charged a £100 late filing penalty. If you pay your tax bill late or later, you’ll have to pay more and late payments will incur interest charges.

Author: Jay Redman