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Non-resident when receiving loans

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    Non-resident when receiving loans

    HMRC have finally sent me a letter regarding the loan charge, confirming they know I exist. I'll be calling them in the next week or so to see what years are open and to kick off the process (probably) of declaring my loans. But first I'm wondering about residency.

    I left the UK in 2002 and haven’t been back since, apart from in 2004 and 2005. In those two years I believe I was still non-resident in the UK for tax - well at least as I understand it - by being not in the UK for 183+ days of the tax year. In each of those years I worked for roughly 5 months in the UK at a UK company, employed and paid by an Isle of Man company and I received loans through an EBT.

    Despite reading a lot of posts on the forum, I can’t see a clear answer on what the implications are for me as a (I believe) non-resident when I received the loans. Will they fall under the loan charge? Any others in the same situation? Recommendations?

    Many thanks.

    #2
    Best to speak to a tax expert, but here's my thoughts..

    The "Loan Charge" is a new tax (HMRC's words) which takes effect in April 2019. So that is the only date which is in contention with regards to residency and LC.

    The underlying tax enquiries (if there are any) do not go away. They will be in contention for whichever years they were opened for.

    Comment


      #3
      As I understand it the issue would be domicile not residency wrt LC

      It's harder to change domicile

      Comment


        #4
        If you have UK sourced income then it is probably taxable even if you are not resident. This applies regardless of domicile.

        Tax on your UK income if you live abroad - GOV.UK

        You usually have to pay tax on your UK income even if you’re not a UK resident.
        If the work is carried out in the UK, i.e. not remotely then the income arising from that is usually considered to be UK income.
        I'm alright Jack

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          #5
          The LC is treated as though you earned an income in the UK, in 2018/19, equal to the sum of your outstanding loans.

          No matter where you are in the world, you'll be required to pay UK tax on it.

          Of course, whether HMRC will be able to enforce/collect it is another matter.

          Comment


            #6
            Originally posted by coder View Post
            As I understand it the issue would be domicile not residency wrt LC
            No. That is not right.

            Comment


              #7
              Originally posted by RickG View Post
              The "Loan Charge" is a new tax (HMRC's words) which takes effect in April 2019. So that is the only date which is in contention with regards to residency and LC.
              No. That is not right.

              Comment


                #8
                Originally posted by stonehenge View Post
                The LC is treated as though you earned an income in the UK, in 2018/19, equal to the sum of your outstanding loans.

                No matter where you are in the world, you'll be required to pay UK tax on it.

                Of course, whether HMRC will be able to enforce/collect it is another matter.
                That is right (unless some part of the loans related to work done outside the UK).

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                  #9
                  I am currently obtaining clearer guidance from HMRC about this issue for a couple of clients, because although everything seems to point to non resident status leading to a nil tax rate, this isn’t necessarily the case.

                  Where a non resident is being paid by a U.K. employer and the duties are performed outside the U.K. normal rules will apply, but in the case of loan scheme providers, part of the income generated by contractors is taxed, albeit using the personal tax allowance, with the majority representing a debt which is raised under an agreement between the contractor and scheme provider,
                  There is some guidance on loans paid in lieu of income, but the clearest indicator I think, comes from the fact that by paying a fee to the loan scheme provider for a service, assuming that the fees paid were for providing the contractor with the scheme, then HMRC at RDRM33020 states;

                  ‘A taxable remittance also occurs where a service is provided in the UK for the benefit of the individual or any other relevant person and the consideration for that service is met using the individual’s foreign income or gains.’

                  So, it’s the contract or agreement and fees paid that need to be looked at, with residency a secondary factor.



                  Sent from my iPad using Contractor UK Forum

                  Comment


                    #10
                    Where are you currently based? It could depend on specific treaties, but the chances are if you're outside the EU you can't be touched. The debt remains, but it's a civil not a criminal matter. In the EU (+ a few other countries, like Switzerland) there are mechanisms for debt collection across countries.
                    Down with racism. Long live miscegenation!

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