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Your residency has a big impact on your UK tax position. Generally residents are taxable on worldwide income and non-residents only on UK income sources. One of the most common situations we come across are people working abroad - perhaps for a secondment, perhaps for many years - who retain a home or family in the UK but are non-resident for tax purposes. This usually means their overseas employment is not subject to UK tax but instead subject to local taxes where they carry out their work.
If HMRC decide to challenge a claim to being non-resident, then the burden of proof initially lies with the tax payer. Keeping good records is therefore very important – and even more so since the introduction of the Statutory Residency Test (SRT) in April 2013.
Prior to the SRT, the rules were much more straightforward – as long as you were employed overseas for more than a full tax year, worked ‘full time’ and didn’t come back to the UK for more than 91 days in the tax year, overseas employment income was not generally subject to UK tax.
The SRT is a much more mechanistic approach. For people working abroad the key test for automatic non-residence requires them to show they have worked ‘sufficient’ hours overseas.
Unlike the previous, rather vague, requirement for ‘full time’ working, a non-resident now needs to keep very detailed records of hours worked. So if you are working overseas and claiming non-residency make sure you keep hold of the following:
However, firstly you need your total hours worked. This will include recording the hours worked each day and also any time travelling where you were working. HMRC recommend noting what sort of work you were doing as well. Also note down any training time your employer pays for.
It may be that some of this is recorded on a timesheet for your employer – but will you still have access to that a few years down the line when HMRC come and check the claim? Do you record all your hours of work on a timesheet or are hours often omitted? For this test all hours worked apply - not just the ones that hit the timesheet. We would recommend noting the hours actually worked, what you were doing and where in your own personal diary each day so you can retain access to this information.
So basically I’m keeping a timesheet for the Government’ sighed one of our non-resident clients last month. Having just explained the above, there was little to do but agree!
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