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HMRC Statutory Residence Test and Split Year tax for Brits


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Note: I have requested for the previous mistake post titled only "HMRC" to be deleted
 
Hi
 
Are there any Brits here who have experience of trying to use the Split Year clause of the SRT to ensure they are not taxed by HMRC for any work carried out in Thailand in the first tax year? 
 
I'm planning on becoming UK non-resident when I arrive in Thailand in the next few weeks. I have studied the Statutory Residence Test and aim to remain UK non-resident for a number of years. I have not finalized the long term plan but I have a number of options lined up. If I cannot achieve zero or very low tax in Thailand I will go for something like UAE company and residence.
 
With regard to the first few months, I plan to continue working as a regular employee of my UK company. As I understand it, I would need to be in Thailand approx half a year to be even qualified to become Thai-tax-resident but even then it sounds hard to achieve it, not that I would want to. I have read of people with the Elite visa only being taxed on funds brought in to Thailand, and digital nomads seemingly paying zero tax but its hard to find good examples of UK company employees.
 
If necessary I will spend less that half a year in Thailand to stay low tax. Im just wondering what people's experience are... and what might be pitfalls of just relying on Thai authorities not being interested in my case. Any constructive input appreciated.
 
Cheers
Edited by brobro2424
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I have just found this documentation which I hope might be useful to anyone else researching these topics

 

1.Taxable Person

Taxpayers are classified into “resident” and “non-resident”. “Resident” means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand. A non-resident is, however, subject to tax only on income from sources in Thailand.

https://www.rd.go.th/english/6045.html

 

so clearly tax is legally due regardless of residence status, its just the authorities fail to collect it

 

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Don't forget that even if you're non-resident you will still be subject to UK income tax on income arising in the UK from your ongoing employment.

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  • 2 weeks later...

 

On 9/16/2021 at 11:19 PM, Oxx said:

Don't forget that even if you're non-resident you will still be subject to UK income tax on income arising in the UK from your ongoing employment.

>>income arising in the UK

 

there is none. I would have to be physically present in the UK for that to "arise" in the UK. That's kinda the whole point 🙂

 

Edited by brobro2424
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9 hours ago, brobro2424 said:

I would have to be physically present in the UK for that to "arise" in the UK.

That is incorrect.  

 

On 9/16/2021 at 8:06 PM, brobro2424 said:

With regard to the first few months, I plan to continue working as a regular employee of my UK company.

And that income will be taxable in the UK.

 

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4 hours ago, Oxx said:

 

That is incorrect.  

 

And that income will be taxable in the UK.

 

I think it depends on the terms of the DTA (Double Taxation Agreement) in place between the 2 countries. 

 

In my 1st year working in Singapore I was working for a UK Bank & was taxed UK PAYE as normal but was also taxed in Singapore on the basis I'd spent > 186 days (might have been as low as 3 months) working there. 

 

Come Tax Return time my accountant claimed the tax back for me on the basis that I'd already been taxed on the income in Singapore (not sure if the fact I'd spent < 30 days in the UK came into it). The >£21,000 I got back more than covered the 12-13% tax I'd paid in Singapore 😄  

 

OP, I doubt you'll get away with paying PAYE tax on your UK earnings but you should be able to claim this back if you can show that you've paid tax on the income in a country with a DTA with the UK, worse case (assuming there is a DTA in place) is you would get back any Tax paid in the 2nd country so would be net neutral

 

 

 

 

 

 

Edited by Mike Teavee
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On 9/26/2021 at 12:30 AM, Oxx said:

 

That is incorrect.  

 

And that income will be taxable in the UK.

 

It won't because the work will have been performed whilst I was physically outside the UK

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3 minutes ago, brobro2424 said:

It won't because the work will have been performed whilst I was physically outside the UK

Sorry.  You're clearly poorly informed.  If you're working for a UK employer and paid by them, then your income is UK-taxable.  The fact that the work was performed elsewhere is immaterial.

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2 minutes ago, Oxx said:

Sorry.  You're clearly poorly informed.  If you're working for a UK employer and paid by them, then your income is UK-taxable.  The fact that the work was performed elsewhere is immaterial.

So on this basis, a German living and working in Germany for a UK company pays income tax to HMRC? 

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14 minutes ago, brobro2424 said:

So on this basis, a German living and working in Germany for a UK company pays income tax to HMRC? 

Yes.

 

However, usually the UK company would set up a German subsidiary, so the employee is paid by the German subsidiary.

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26 minutes ago, Oxx said:

Yes.

 

However, usually the UK company would set up a German subsidiary, so the employee is paid by the German subsidiary.

Sorry but I think perhaps its you who is poorly informed. Where tax is due is determined by the residence country of the taxpayer, not the company. 

Edited by brobro2424
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On 9/26/2021 at 4:33 AM, Mike Teavee said:

I think it depends on the terms of the DTA (Double Taxation Agreement) in place between the 2 countries. 

 

In my 1st year working in Singapore I was working for a UK Bank & was taxed UK PAYE as normal but was also taxed in Singapore on the basis I'd spent > 186 days (might have been as low as 3 months) working there. 

 

Come Tax Return time my accountant claimed the tax back for me on the basis that I'd already been taxed on the income in Singapore (not sure if the fact I'd spent < 30 days in the UK came into it). The >£21,000 I got back more than covered the 12-13% tax I'd paid in Singapore 😄  

 

OP, I doubt you'll get away with paying PAYE tax on your UK earnings but you should be able to claim this back if you can show that you've paid tax on the income in a country with a DTA with the UK, worse case (assuming there is a DTA in place) is you would get back any Tax paid in the 2nd country so would be net neutral

 

 

Thanks, this is a good example showing that even though you were working for a UK company, the income tax was not payable to HMRC because you became UK non-resident. I will become non-resident as soon as I leave UK and at that point not be taxable for the work I do. In practical terms this will be a matter of me claiming tax back at the end of the tax year in the same way that you did. 

 

I will not become tax resident in Thailand until I've been there half a year (180 or 183 days, cant recall right now) so my salary up until then will be tax free. I understand that I cannot legally work without a work permit but this seems to be overlooked by the Thai govt. as long as Thai jobs are not being taken and some of the income is being plowed back into the Thai economy, eg digital nomads.

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11 hours ago, brobro2424 said:

Thanks, this is a good example showing that even though you were working for a UK company, the income tax was not payable to HMRC because you became UK non-resident. I will become non-resident as soon as I leave UK and at that point not be taxable for the work I do. In practical terms this will be a matter of me claiming tax back at the end of the tax year in the same way that you did. 

 

I will not become tax resident in Thailand until I've been there half a year (180 or 183 days, cant recall right now) so my salary up until then will be tax free. I understand that I cannot legally work without a work permit but this seems to be overlooked by the Thai govt. as long as Thai jobs are not being taken and some of the income is being plowed back into the Thai economy, eg digital nomads.

To be clear, you have to pay the tax somewhere that has a DTA with the UK or you won't be able to claim it back (As I posted, I'd paid tax on those earnings in Singapore so was able to claim it back on the basis I'd been taxed twice on the same income). 

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On 9/16/2021 at 11:21 PM, brobro2424 said:

I have just found this documentation which I hope might be useful to anyone else researching these topics

 

1.Taxable Person

Taxpayers are classified into “resident” and “non-resident”. “Resident” means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand. A non-resident is, however, subject to tax only on income from sources in Thailand.

https://www.rd.go.th/english/6045.html

 

so clearly tax is legally due regardless of residence status, its just the authorities fail to collect it

 

The Thai RD does not require tax to be collected on foreign earnings brought into Thailand, as long as the remittances happen in a subsequent tax year to that in which the funds were earned. How do they know in what year a particular remittance was earned? Unless a transfer specifically comes from an employer each month for roughly the same amount then it is very hard to know and they don't care [on basis, I suspect, that it's all money flowing into the local economy].

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12 hours ago, brobro2424 said:

 

Sorry but I think perhaps its you who is poorly informed. Where tax is due is determined by the residence country of the taxpayer, not the company. 

Thats in correct

@Oxx is 100% correct, if the company paying you is based UK then its classed as UK, many many companies set up smaller branches in other country's.

so the OP will need to change his employers company or address to be NON UK

I've 26 years overseas and I know things change from time to time, but the company based in or out UK hasn't changed.

 

 I think its tied to the employers declaring who the pay and employ no matter where they are in the world.

 

So it doesnt really matter where you are, its where the Employer is

Edited by bolt
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On 9/25/2021 at 9:06 PM, brobro2424 said:

I would have to be physically present in the UK for that to "arise" in the UK. That's kinda the whole point

I think the crux to this is how you earn your income, if UK payroll PAYE then asking your employer to pay you as an invoiced consultant or whatever directly offshore without tax deducted would negate the need for the future UK tax bill (obviously dont exceed the UK allowed working days if you are using test 1 of non-resident test). Obviously Thailand is very lax on checks at this end, which makes tax avoidance very "easy" esp if you are over 50 or take the elite option if you are willing to fund that. I would say a large portion of Brits do this already. I have no experience with the split year.

 

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9 hours ago, Mike Teavee said:

To be clear, you have to pay the tax somewhere that has a DTA with the UK or you won't be able to claim it back (As I posted, I'd paid tax on those earnings in Singapore so was able to claim it back on the basis I'd been taxed twice on the same income). 

There is no need to prove you are being taxed in another country to claim tax back from HMRC. You only need to show you are non-resident and should have done this with a P85 at the time you left https://www.gov.uk/government/publications/income-tax-leaving-the-uk-getting-your-tax-right-p85

 

Once you are not a resident of the UK, why would you be paying tax there? The statutory residence test is made specifically to address the issue of whether you are UK tax resident or not. If you have a source stating otherwise, I'd love to have a look.

 

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14 hours ago, bolt said:

Thats in correct

@Oxx is 100% correct, if the company paying you is based UK then its classed as UK, many many companies set up smaller branches in other country's.

so the OP will need to change his employers company or address to be NON UK

I've 26 years overseas and I know things change from time to time, but the company based in or out UK hasn't changed.

 

 I think its tied to the employers declaring who the pay and employ no matter where they are in the world.

 

So it doesnt really matter where you are, its where the Employer is

A company may well set up a branch offshore for tax reasons, but there is no requirement for the UK company to do this to continue to employee a british citizen working remotely. Here's a case for the time being but I will get back with some specific accountancy advise soon

 

https://www.justanswer.com/uk-tax/dfy8s-sam-dutch-national-currently-living-uk.html

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14 hours ago, MRToMRT said:

 

I think the crux to this is how you earn your income, if UK payroll PAYE then asking your employer to pay you as an invoiced consultant or whatever directly offshore without tax deducted would negate the need for the future UK tax bill (obviously dont exceed the UK allowed working days if you are using test 1 of non-resident test). Obviously Thailand is very lax on checks at this end, which makes tax avoidance very "easy" esp if you are over 50 or take the elite option if you are willing to fund that. I would say a large portion of Brits do this already. I have no experience with the split year.

 

This looks like it might be a very good idea but would I need to set up a company or could I just invoice by my own name?

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14 hours ago, Will B Good said:

Serious question....where have you got that from?

The more serious question should be "Why would you be paying tax to a government if you are not living there to reap the benefits of those taxes?"

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14 hours ago, Will B Good said:

Serious question....where have you got that from?

The longer answer is....

 

If I pass the SRT test https://home.kpmg/content/dam/kpmg/pdf/2016/01/statutory-residence-test-flowchart.pdf
then I am not taxable in UK for that tax year. Since this is my first year working outside the UK, I can apply "split year treatment" and be non-uk-taxable for the second part of the tax year (date i arrive in thailand until end of tax year)

Generally speaking, I need to remain uk-non-resident for about 5 tax years for HMRC to not come for the tax later by saying that I was only temporarily non-resident.

 

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5 hours ago, brobro2424 said:

There is no need to prove you are being taxed in another country to claim tax back from HMRC. You only need to show you are non-resident and should have done this with a P85 at the time you left https://www.gov.uk/government/publications/income-tax-leaving-the-uk-getting-your-tax-right-p85

 

Once you are not a resident of the UK, why would you be paying tax there? The statutory residence test is made specifically to address the issue of whether you are UK tax resident or not. If you have a source stating otherwise, I'd love to have a look.

 

Overview

You usually have to pay tax on your UK income even if you’re not a UK resident. Income includes things like:

  • pension
  • rental income
  • savings interest
  • wages

If you’re eligible for a Personal Allowance you pay Income Tax on your income above that amount. Otherwise, you pay tax on all your income.

 

The country where you live might tax you on your UK income. If it has a ‘double-taxation agreement’ with the UK, you can claim tax relief in the UK to avoid being taxed twice.

 

https://www.gov.uk/tax-uk-income-live-abroad

 

 

 

Edit: One good thing about being Non-Resident is you can pay AVCs at Class 2 ("Self Employed") rates so approx £160 per year instead of > £750 (Can't remember the numbers, mine is taken out monthly & it's somewhere between £12-£16 pm). 

 

 

 

Edited by Mike Teavee
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7 hours ago, brobro2424 said:

would I need to set up a company or could I just invoice by my own name?

Legally the invoice can be just a person, but I would ask the employer if they are OK with it, its been a few years since I was paid from the UK.

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From my past experiences and working with lads who tried to dodge paying Tax in the UK, it gets harder and harder each year, you would need to be out for a minimum of 3-4 years before everything kicks in.

 

Take a deep breath and consider where you’ll be in 5-10 years, quick fixes sometimes lead to disaster later due to poor planning or listening to advice in pubs or web forums.

 

My mate has been offered a job working offshore Israel, he’ll be paid from a company in Singapore, he thought great tax free and he only needs to stay out of the UK for X number of days.

I told him unless he’s going to stay out of the UK full time for a period of 5 years it aint worth the hassle of trying to hide from the UK tax man, I told him to pay his tax and he can sleep at night and he wont be worrying about a tax bill dropping through his letter box later.

 

My last comments speak to an account, don’t too much listen on here.

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10 hours ago, Mike Teavee said:

Overview

You usually have to pay tax on your UK income even if you’re not a UK resident. Income includes things like:

 

Its not UK income. The work is done outside the UK and thats where residence starts to matter, hence the SRT

 

10 hours ago, Mike Teavee said:

Overview

You usually have to pay tax on your UK income even if you’re not a UK resident. Income includes things like:

  • pension
  • rental income
  • savings interest
  • wages

If you’re eligible for a Personal Allowance you pay Income Tax on your income above that amount. Otherwise, you pay tax on all your income.

 

The country where you live might tax you on your UK income. If it has a ‘double-taxation agreement’ with the UK, you can claim tax relief in the UK to avoid being taxed twice.

 

https://www.gov.uk/tax-uk-income-live-abroad

 

just scroll a little bit further down that exact page it indicates that tax on wages is based on the number of days you work in the UK:

 

When tax is not due or is already deducted

Non-residents do not usually pay UK tax on:

  • the State Pension
  • interest from UK government securities (‘gilts’)

If you live abroad and are employed in the UK, your tax is calculated automatically on the days you work in the UK.

Edited by brobro2424
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6 hours ago, bolt said:

From my past experiences and working with lads who tried to dodge paying Tax in the UK, it gets harder and harder each year, you would need to be out for a minimum of 3-4 years before everything kicks in.

Its more like 5 years now with various factors needing to be taken into account.

 

6 hours ago, bolt said:

 

Take a deep breath and consider where you’ll be in 5-10 years, quick fixes sometimes lead to disaster later due to poor planning or listening to advice in pubs or web forums.

I agree this should not be gone into lightly. For me the £££ benefits are huge. 

 

6 hours ago, bolt said:

 

My mate has been offered a job working offshore Israel, he’ll be paid from a company in Singapore, he thought great tax free and he only needs to stay out of the UK for X number of days.

I told him unless he’s going to stay out of the UK full time for a period of 5 years it aint worth the hassle of trying to hide from the UK tax man, I told him to pay his tax and he can sleep at night and he wont be worrying about a tax bill dropping through his letter box later.

 

My last comments speak to an account, don’t too much listen on here.

Ive spoken with accountants already but will be getting it all in writing too to present to HMRC if there's any issue further down the road.

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1 hour ago, brobro2424 said:

Its not UK income. The work is done outside the UK and thats where residence starts to matter

It’s Referring to Income arising in the UK, doesn’t matter where the work was done or even if (like me) it was for a non-UK subsidiary, There’s a tax man somewhere that wants their pound of flesh.

 

But I can only go off of my own experience & that included paying tax in a 2nd country, hope I’m wrong & you manage to swing it so it works out for you.

 

The 2nd part is for when people do more than 30 days physically working in the UK where you’re liable for tax there irrespective of whether you’re NRT or not, I used to do about 10 days a year (doing exactly the same job, even same hours) as I did in Singapore & never had to pay tax on it.

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