Working Abroad and Tax Residence

If you move abroad to work, you pay your tax where you now live and that is the end of the matter. Or is it?

Regrettably not. The UK tax system is a ‘world tax’ system, which seeks to tax the worldwide income of its residents. In order to avoid paying tax in the UK on income earned outside the UK, it is normally necessary to establish that you were not tax resident in the UK during the period of assessment.

Establishing foreign tax residence is difficult. The following will normally prevent you from claiming foreign tax residence:

• Being physically present in the UK for more than 182 days in any tax year or for an average of 91 days over a four-year period (6 April to 5 April);
• Continuing to have accommodation available in the UK during your period of absence;
• Leaving your family in the UK when you work abroad;
• Working under an employment contract for a period that is insufficiently long to require foreign residence; or
• Maintaining only ‘occasional residence abroad’ – this is a vague concept which can catch those who maintain links to the UK and pay frequent visits here.

It should also be remembered that the assessment of liability to UK Inheritance Tax involves the application of completely different sets of rules.