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Information for Cyprus Expats on UK tax rules when leaving the UK to reside in Cyprus
If you emigrate from the UK you will stop being resident here. This would
mean that you leave, set up home elsewhere, and substantially cut your ties to the UK. If you leave for shorter periods, for occasional residence abroad, or with no settled purpose abroad, it is likely that you will remain resident in the UK – even if you become resident in another country under that country’s rules.
Leaving the UK permanently or indefinitely
If you are leaving the UK permanently or indefinitely, either to work or for
another reason, you must tell us by contacting your tax office. We will give you form P85 to complete so that you can get any tax refund you are owed. We will also tell you if you will need to complete a UK tax return after you have left the country.
Leaving the UK ‘permanently’ means that you are leaving the country to live abroad and will not return here to live. Leaving ‘indefinitely’ means that you are leaving to live abroad for a long time (at least three years) but you think that you might eventually return to live here, although you do not currently have plans to do so.
The act of leaving the UK does not necessarily make you not resident and not ordinarily resident. You must also make a definite break from the UK and any remaining ties you have with the UK must be consistent with not being resident here. If you say that you are no longer resident and ordinarily resident in the UK, we might ask you to give some evidence to show that you have left the UK permanently or indefinitely and that there has been a clear change in the pattern of your life.
For example, we would expect you to show that when you left the UK you had acquired accommodation abroad to live in as a permanent home. If you still have property in the UK which you can use after you leave, we might want you to explain how retaining that property is consistent with
leaving the UK.
You will not cease to be resident in the UK simply because you become resident elsewhere. You can become resident in another country and remain resident in the UK. If you are leaving the UK permanently or indefinitely you will become not resident and not ordinarily resident from the day after the day of your departure.
You can also get form P85 at www.hmrc.gov.uk You cannot complete the
form online but you are able to download and print the form which you can then send to your tax office. You will find the address of your tax office and your HMRC reference number on any correspondence you have received from us, including your most recent form P60 and form P45.
If you are unsure you can contact your local HMRC office who will be able to help you. You can find your local tax office in The Phone Book or at www.hmrc.gov.uk
The year you leave
Although the normal rule in law is that you are taxed as a resident for the
whole of the tax year in which you are UK resident, there is an extra-statutory concession (ESC A11) that allows the tax year to be split. The effect of this concession is that you have to pay UK tax as a resident only for the part of the tax year before you finally leave.
ESC A11 has particular conditions; it does not apply in all cases. If you were ordinarily resident in the UK before your date of departure you have to cease to be ordinarily resident here in order to benefit from the concession. Part 3 explains what we mean by ordinarily resident in the UK. ESC A11 will never apply if your date of departure and date of return fall in successive tax years.
You will always need to be not resident for at least a whole tax year for it
to apply. An extra-statutory concession will not be given in any case where an attempt is made to use it for tax avoidance.
Leaving the UK for shorter periods of time
You will still be treated as resident in the UK if any periods of time you spend outside the UK are for occasional residence abroad only.
Occasional residence means you have no settled purpose for a continuing absence from the UK. ‘Occasional’ does not mean that your absence must be isolated or of short duration. A series of business trips abroad is an example of periods of occasional residence abroad.
If you normally live in the UK and go abroad regularly, for example on extended holidays, you will continue to be resident here. This type of absence does not stop you being resident and ordinarily resident in the UK, because you have not made a definite break from the UK.
Evidence of a definite break
If you do not make a definite break and cut your UK ties then you remain
resident in the UK. You could also be dual resident – that is resident in the UK and another country.
You might not have evidence of a definite break from the UK for some time
after you leave the UK. In this situation you will need to review your residence status later to confirm whether you have become not resident, and when this happened. For example, if you have travelled in and out of the UK fairly frequently, the exact timing of the end of your residence here could be difficult to establish.
You should therefore keep evidence relating to your lifestyle before and after the date on which you think you ceased to be resident. If the circumstances of your life change gradually, then you will become not resident only when you have sufficiently reduced your ties to the UK and are more than occasionally resident abroad. The evidence that you will be able to show that you have made a definite break will depend on the extent of your UK ties initially.
If you had few initial connections with the UK you will have less evidence to show you have made a definite break. In those circumstances strong ties to another country, including a home and settled purpose for your presence there throughout a complete tax year, would be more of a factor in deciding if you have left the UK permanently or indefinitely.
Complete absence from the UK
Residence is connected to physical presence. If you live outside the UK for a complete tax year and do not set foot in the UK you will not be resident in the UK for that tax year, unless your absence from the UK is for the purpose of occasional residence abroad only.
For example, if your absence was for a one-off year long holiday after which your residence in the UK resumed its previous pattern, you would remain UK resident during your absence. If you became not resident simply because of a complete absence from the UK, it is unlikely that your presence in the UK on your return is for a temporary purpose only if any of your UK ties remained throughout your period of
absence. You would most likely become resident again on your return.
Even when you are absent for a whole tax year and so become not resident, you might remain ordinarily resident in the UK. You will need to consider the pattern of your residence over a number of years and the purpose and pattern of any ordinary residence abroad.
Special rules for certain employees and offices
There are special rules for some employees who work abroad or hold certain offices. These are explained in brief below with links to further guidance where applicable. Some groups of employees are dealt with in specialist tax offices. Where no specialist office is shown individuals should contact their own tax office.
Crown employees
A Crown employee is someone who holds an office or employment under the Crown such as a member of the UK armed forces, a civil servant or a diplomat. It does not include all public servants such as doctors and nurses, who work for their local NHS Trust, or teachers who work for the Local Education Authority. Nor does it include employees of government agencies and non-departmental public bodies.
Crown employees are always taxed in the UK in full on their Crown employment income whether the duties of the employment are carried out
in the UK or overseas. As a result residence is irrelevant in determining their tax liability on their Crown employment income.
UK merchant navy seafarers
Seafarers working on UK ships, who usually live in the UK when they are not at sea, are resident in the UK. But while they are working as seafarers wholly or partly outside the UK, they may be entitled to the ‘Seafarer’s Earnings Deduction’ which can reduce the tax they have to pay. Full details can be found at www.hmrc.gov.uk/cnr/seafarerstax.htm
Certain oil and gas workers
Where an individual works in the oil or gas exploration/extraction industry
within the UK’s territorial waters, or other designated areas, they are taxed in full in the UK on those earnings irrespective of their residence status. Different rules can apply for those working outside the designated areas or those working for non-UK employers. Further guidance can be found at www.hmrc.gov.uk/manuals/eimanual/EIM40208.htm
Entertainers and sportspeople
Entertainers or sports people who are not resident in the UK but perform or compete in the UK are still taxable in the UK on any payments received in connection with that UK work. Normally the person paying the entertainer or sportsperson will withhold tax from the payments.
Students
The UK has entered into Double Taxation Agreements with many countries that provide special rules for students who come to the UK to study, or go from the UK to study abroad. Under these rules certain income is not taxable in the country of study if it is used only for the maintenance and education of the student. Further general guidance for students can be found at www.hmrc.gov.uk/students/
People seconded to work in the UK by their employer
If you are seconded to work in the UK by your employer, and continue to
undertake duties abroad, you should keep records of work done in the UK and abroad, covering both the nature of the work and its extent. In recording working days, part days are included for these purposes, not just those days where you are in the UK at midnight.
Employees of the European Union
If someone from one Member State goes to live in another Member State to work for the European Union their residence status does not change and they will retain the residence status of the last state they were resident in.
So if Mr Adams was resident and ordinarily resident in the UK and went to
Luxembourg to work for the European Union he would remain resident and
ordinarily resident in the UK.
Members of the UK Parliament and House of Lords
Members of the House of Commons (‘MPs’) and House of Lords (‘Peers’) are resident, ordinarily resident and domiciled in the UK for Income Tax,
Inheritance Tax and Capital Gains Tax. This will apply to the whole of each
tax year in which a person is a member of either House, starting in 2010–11. This applies even if that person is a member for only part of the tax year and regardless of whether or not they are on a leave of absence. It does not apply to the Lords Spiritual or Peers who are disqualified from sitting and voting as a result of becoming a Member of the European Parliament or a judge.
Specialist tax rules for entertainers and sportspeople are administered by the Foreign Entertainers Unit (FEU). More details about the rules can be found at www.hmrc.gov.uk/feu/ feu.htm
A member of the House of Lords is someone who is entitled to receive a
writ of summons. An MP is a person who has been elected to the UK Parliament and taken the oath upon taking their seat.
Leaving the UK to work abroad as an employee
If you are leaving the UK to work abroad full-time, you will only become not resident and not ordinarily resident from the day after the day of your
departure, as long as:
• you are leaving to work abroad under a contract of employment for at least a whole tax year
• you have actually physically left the UK to begin your employment abroad and not, for example, to have a holiday until you begin your employment
• you will be absent from the UK for at least a whole tax year
• your visits to the UK after you have left to begin your overseas
employment will
– total less than 183 days in any tax year, and
– average less than 91 days a tax year. This average is taken over the periodof absence up to a maximum of four years.
To calculate your annual average visits to the UK:
Total days visiting UK x 365 = annual average visits
Tax years you have visited (in days)
Example
This is for illustrative purposes and any calculation you make would be based upon your own circumstances – the day that you actually left the UK and the days that you have visited the UK in the period.
If you were to leave the UK on 20 May 2008 to work full-time abroad and you visit the UK for:
79 days in the tax year 2008–09 (320 days in the remainder of the tax year)
91 days in the tax year 2009–10 (365 days in the tax year)
98 days in the tax year 2010–11 (365 days in the tax year)
79 days in the tax year 2011–12 (366 days in the tax year)
The average of your visits would be:
2008–09 — 79÷320 x 365 = 90.1 therefore treated as not resident from 21 May 2008
(subject to split year treatment applying)
2009–10 — (79+91)÷(320+365) x 365 = 90.6 therefore not resident
2010–11 — (79+91+98)÷(320+365+365) x 365 = 93.2 therefore resident
2011–12 — (79+91+98+79)÷(320+365+365+366) x 365 = 89.4 therefore not resident
The calculation of average visits for the year 2012–13 will not include the visits or relevant days for the year of departure. The rolling period of four years is maintained by excluding the oldest year at each annual review.
Any days you spend in the UK because of exceptional circumstances beyond your control, for example an illness which prevents you from travelling, are not normally counted for this purpose.
If you do not meet all of these conditions, you will remain resident and ordinarily resident in the UK.
If your employment comes to an end and you do not return to the UK it will be necessary to consider if you continue to be not resident and not ordinarily resident in the UK.
What we mean by full-time employment:
UK tax law does not give a definition of full time employment. The decision
on whether or not you are employed abroad full-time will depend on the particular circumstances of your case.
If you say that you are working abroad full-time, we would expect you to
be able to show that your employment:
• has a standard pattern of hours which can be compared to a typical UK working week or
• if your employment does not have a formal structure or fixed number of working days, it can, by looking at the local conditions and practices of the particular occupation, be compared to similar full-time employment in the country where you are working.
Returning to the UK after working abroad
If you were not resident and not ordinarily resident when you were working
abroad and you return to the UK when your employment ends, you will be not resident and not ordinarily resident in the UK until the day before you return to the UK. You will become resident and ordinarily resident on the day you return to the UK unless you can show that your return was simply a short visit to the UK between two periods of full-time employment abroad.
However, if you have previously been resident in the UK and are returning to become resident here again after a period of residence abroad, you might need to consider whether your absence from the UK was a period of ‘temporary non-residence’. If you were temporarily non-resident in the UK, this may affect your liability to UK tax when you return to become resident in the UK again.
Changes to your employment when abroad
If your circumstances change while you are abroad, for example there is a
break in full-time employment, you might no longer meet the requirements of paragraph 8.5 and so remain resident and ordinarily resident in the UK. You must tell us about such changes by contacting your tax office. You must also tell us when you return to the UK at the end of an overseas
employment, even if you are planning to go abroad again to work under a new contract of employment. You must do this even though you see your return to the UK as temporary and for a very short period. You should tell us this information by contacting your tax office.
Leaving the UK to become self-employed abroad
If you are leaving the UK to work abroad for yourself in a trade, profession or vocation, then as long as your working circumstances are similar to those outlined in paragraph 8.5, you will be taxed in the same way.
Leaving the UK with your spouse or partner
When your husband, wife or civil partner leaves the UK to work abroad within the terms of paragraphs 8.5 or 8.8, you are able to receive the same tax treatment if you accompany or later join them abroad. This treatment is by concession (extra-statutory concession A78) and means that even when you yourself are not in full-time employment abroad, you will also be not resident and not ordinarily resident in the UK from the day after your departure. This treatment will apply as long as:
• you will be absent from the UK for at least a whole tax year, and
• your visits to the UK after you have left
– total less than 183 days in any tax year, and
– average less than 91 days a tax year. This average is taken over the
period of absence up to a maximum of four years – see 8.5 which will
show you how to work out this average. Any days you spend in the UK
because of exceptional circumstances beyond your control, for example
an illness which prevents you from travelling, are not normally counted
for this purpose).
You will remain not resident and not ordinarily resident in the UK until the day before you return to the UK. You become resident and ordinarily resident on the day you return to the UK.
Source HMRC Further information may be found on the HMRC website
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