Hi All,
Been reading the forum and lots of interesting scenarios but wanted to open the discussion for any insights related to the following scenario:
1. An individual has been resident in the UK for over 10 years (also naturalised citizen), and been tax resident paying tax mostly via employment PAYE and Self Assessment for rental property income etc. He is also a citizen of European country.
2. Since COVID he started spending more time in the EU country and now is pretty much living in both the UK and the European country - but not counting exactly how many days where.
3. Last year he has opened a company in EU country, registered for CIT and Social Security Contributions ( didn't have to pay CIT and personal tax as the EU business is not yet turning profit)
4. He decided to leave UK employment contract as he will be focusing mostly on the EU based business however he will also be doing some contracting work for UK client with occasional travel to the UK - for this purpose he set up another company (sole trader with rather low tax) in the same EU country as his other business and will be invoicing the UK client. He will need to be in the UK around 90 days in the coming tax year.
5. With all the above he is effectively a tax resident in both EU Country and UK.
the options:
A. He can declare he will stop being UK tax resident from the coming tax year and will have to be super careful about not breaching number of days in the UK due to his 'UK ties' - at least 2 or 3 giving him between 45 and 90days in the UK max. EU country rules are simple - if he is there 183 days out of 365 he is tax resident and that is fine - he will pay tax due from hie business income in the EU country. He will continue to pay UK tax on rental property as non resident landlord.
The drawback is that when he decides to sell his only UK home at some point - he will have to pay CGI (Capital Gains Tax) on the years he owned his UK home but not been tax resident. Secondly he will almost certainly be asked by HMRC to prove he stopped being tax resident where he might be close to or crossing the threshold of 45/90 days or HMRC rejecting the proof/ making things difficult.
B. He continues to declare EU country tax residence (not a problem as he has a passport, place to live tax number etc) and continue to declare tax residency in the UK (as per the last many years). However without each of the country knowing about another. He pays what is due in EU country and what is due in UK in effecting hoping there is no CRS indica in either to be reporting his accounts across to another country. The risk is that if he continues as UK tax resident and HMRC somehow gets his account balances from EU country they will penalise him for not paying tax on foreign income. Also his total income in UK visible to HMRC will drop considerably and thus prompting investigation...
What are your views re above scenarios?
Some other questions - What is the bulletproof/easiest way to show you have been out of UK ? If i retain my home - this counts as a 'tie' and continue paying bills for it (council tax etc. )would HMRC claim i lived there therefore I am tax resident? If I put it on AirBnB occasionally to brake the contiunous access to home for 90 days - would this work. I don't want to put it on lettings as I need a place I can stay for the weeks I will have to be back.
Thanks in advance!
Been reading the forum and lots of interesting scenarios but wanted to open the discussion for any insights related to the following scenario:
1. An individual has been resident in the UK for over 10 years (also naturalised citizen), and been tax resident paying tax mostly via employment PAYE and Self Assessment for rental property income etc. He is also a citizen of European country.
2. Since COVID he started spending more time in the EU country and now is pretty much living in both the UK and the European country - but not counting exactly how many days where.
3. Last year he has opened a company in EU country, registered for CIT and Social Security Contributions ( didn't have to pay CIT and personal tax as the EU business is not yet turning profit)
4. He decided to leave UK employment contract as he will be focusing mostly on the EU based business however he will also be doing some contracting work for UK client with occasional travel to the UK - for this purpose he set up another company (sole trader with rather low tax) in the same EU country as his other business and will be invoicing the UK client. He will need to be in the UK around 90 days in the coming tax year.
5. With all the above he is effectively a tax resident in both EU Country and UK.
the options:
A. He can declare he will stop being UK tax resident from the coming tax year and will have to be super careful about not breaching number of days in the UK due to his 'UK ties' - at least 2 or 3 giving him between 45 and 90days in the UK max. EU country rules are simple - if he is there 183 days out of 365 he is tax resident and that is fine - he will pay tax due from hie business income in the EU country. He will continue to pay UK tax on rental property as non resident landlord.
The drawback is that when he decides to sell his only UK home at some point - he will have to pay CGI (Capital Gains Tax) on the years he owned his UK home but not been tax resident. Secondly he will almost certainly be asked by HMRC to prove he stopped being tax resident where he might be close to or crossing the threshold of 45/90 days or HMRC rejecting the proof/ making things difficult.
B. He continues to declare EU country tax residence (not a problem as he has a passport, place to live tax number etc) and continue to declare tax residency in the UK (as per the last many years). However without each of the country knowing about another. He pays what is due in EU country and what is due in UK in effecting hoping there is no CRS indica in either to be reporting his accounts across to another country. The risk is that if he continues as UK tax resident and HMRC somehow gets his account balances from EU country they will penalise him for not paying tax on foreign income. Also his total income in UK visible to HMRC will drop considerably and thus prompting investigation...
What are your views re above scenarios?
Some other questions - What is the bulletproof/easiest way to show you have been out of UK ? If i retain my home - this counts as a 'tie' and continue paying bills for it (council tax etc. )would HMRC claim i lived there therefore I am tax resident? If I put it on AirBnB occasionally to brake the contiunous access to home for 90 days - would this work. I don't want to put it on lettings as I need a place I can stay for the weeks I will have to be back.
Thanks in advance!
