How would my UK tax be affected if I worked in the UAE?

I am currently working in the UK, where I am a resident. My employer suggests that I work from the UAE, under a contract with the UAE, for a few years – my organization has an office there. I own a house in the UK and can choose to rent it out if I move to the UAE. What should I be aware of to ensure that I am not considered a UK resident for personal tax purposes while working in the UAE?

Stephanie Mooney, Senior Partner at Kingsley Napley

Stephanie Mooney, senior partner in the private client team at law firm Kingsley Napley, indicates that your exposure to UK income tax and capital gains tax (CGT) is determined by your residency status. Once you are not a UK resident, you will only be liable to UK income tax on any UK sourced income and CGT on UK sourced earnings. residential property in the UK. Your UAE income will not be covered by UK income tax.

Your residency status is dictated by the Statutory Residency Test (SRT). It’s complicated, but in summary, you need to be aware of how many days you spend in the UK as well as how many links you maintain with the UK. The higher the number of links, the fewer days you can spend in the UK before you are considered a UK resident.

If you have family and residential ties, you will be resident in the UK during a tax year if you spend more than 90 days in the UK. Your home in the UK, even when rented, can still be considered a tie, depending on how many days in the year it is vacant and available for your use.

If you don’t want to let go of your UK property ties, it may be a good idea to consider minimizing the number of days you spend in the UK (eg meeting friends and family in outside the UK, if possible).

If you move to the UAE and start working there full-time during the UK tax year, you may be able to claim split-year treatment on your UK tax return, rather than being treated as resident for the entire fiscal year. You should seek advice on this from a tax professional.

Your UK Inheritance Tax (IHT) treatment, which will be determined by your domicile status, is also something to consider. If you are currently domiciled in the UK, a few years in the UAE are unlikely to change your general domicile status. As a UK domiciled person, your worldwide assets will fall within the scope of UK IHT on your death.

You should also watch out for tax traps, including the “formerly domiciled resident” rules. Assuming you were born in the UK, with an original domicile in the UK, you will be deemed to be domiciled for UK tax purposes when you resume your UK residence (with a small delay of thanks for the IHT).

There are also the “temporary non-resident” rules to watch out for. If you return to the UK within five years and fall under these rules, any winnings made while in the UAE will be treated as winnings made while resident in the UK.

How much tax would we pay on “excess” farmland payments?

My wife and I are about to sell a small plot of farmland and would like to know the CGT rates and allowances. We own the land in co-ownership, there are no structures on the land and it has always been pasture land. There will be a “surplus” with the sale [an arrangement to allow the seller potentially to benefit from a subsequent rise in land value] if the new owner obtains planning permission. What tax is paid on overpayments that could be made in a few years?

Portrait of David Chismon, Partner at Saffery Champness
David Chismon, partner at Saffery Champness accounting firm

David Chismon, partner at accounting firm Saffery Champness, says the starting point will be to calculate the capital gains tax (CGT) that may arise from the sale of the land. This will essentially be the difference between the selling price and the acquisition price.

The acquisition price, known as the CGT base cost, would be the price you paid for the land if you bought it, or it could be the probate value if you inherited the original land. From the sale price you will be allowed to deduct costs involved in the sale process, for example legal fees and estate agent fees, so records of these should be kept.

The basic cost of the CGT can be increased by all the costs related only to the cost of acquisition. Again, this can include legal fees and the like, but also stamp duty property tax if this was paid upon purchase.

Since you are co-owner of the land, the capital gain will be shared equally. If the capital gain is greater than your annual CGT exemption and it is not used against other capital gains in the year (for 2022-23 the CGT exemption is £12,300) , tax will then be due, unless capital losses are available to reduce the gain further.

The tax rate, assuming your other income exhausts your basic tax bracket, will be 20%. If any of the capital gains fall into your basic rate tax bracket, then they would only be subject to tax at 10%.

In certain circumstances, if the land has been used in a commercial context and the business ceases, relief for disposal of commercial assets could be available, making the 10% capital gains tax rate eligible up to a lifetime limit of £1m. . The exemption has complex rules, so an accounting opinion would be required.

As for overspending, he may be liable to CGT and could also be liable for income tax, but this will depend on the terms of the overspending agreement. If you will potentially benefit from a share of the profits from any development, then some or all of the excess could be subject to income tax at the rate of 45% (even if you are not not an additional rate taxpayer).

If, however, the excess is limited to an increase in the underlying value due to a building permit, this should be indebted to the CGT. It will be important to get specialist advice to determine the position. Depending on the likelihood of obtaining planning permission, there may be intrinsic value today and this must be assessed when the land is sold. When the final excess is paid, the tax paid now will be compared to the actual excess receipt.

Finally, since the land does not include any residential property or dwellings, the tax payment date will be January 31 following the end of the tax year in which there is an exchange of unconditional contracts. Thus, if the contract is exchanged on or before April 5, 2023, the CGT will be due on January 31, 2024. If the contract date was April 6, 2023, the CGT due date would be January 31, 2025.

The reviews in this column are intended for general informational purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect results arising from any reliance placed on the answers, including any losses, and exclude all liability to the fullest extent.

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Maria D. Ervin