Isle of Man: UK Expatriate Self-Assessment Guide

Last Updated: 9 October 2000

Arthur Lancaster, Director of Tax, Ernst & Young Isle of Man

If you live, work or have retired overseas, or are intending to do so, there are many considerations to take into account. Research has revealed that many expatriates fail to plan properly and have not capitalised on their special tax position. This simple Self-Assessment Guide has been designed to assist expatriates in understanding the relevant issues.

What To Do Before You Go:

Tick appropriate

box:

Tax

Yes

No

1. Have you completed an Inland Revenue P85 and requested a repayment of any UK tax due or a no tax (NT) PAYE code where appropriate?

For your convenience we can arrange for a P85 form to be sent to you.

 

 

2. Have you considered the dates you will be outside the UK to confirm whether you will be non-UK resident or not?

Remember it is normally necessary for your absences from the UK to cover a complete tax year to be regarded as non-UK resident. This is particularly important, as from March 1998 the 100% earnings deduction for foreign earnings of UK residents is no longer available. Accordingly, you may wish to consider accelerating your departure if applicable.

 

 

3. Have you considered the tax and social security position in the countries you will be going to and the effects of any double taxation and social security agreements?

If not you should consult your employer or seek professional advice.

 

 

4. Will you be employed by a non-UK company?

This could be advantageous for tax and social security reasons. If in doubt seek professional advice.

 

 

5. If you are going abroad for more than five years have you considered delaying the disposal of any capital assets until you have left the UK?

Beware - new rules mean that from March 1998 you must be non-resident for five years to avoid UK capital gains tax on assets acquired whilst you were a UK resident.

 

 

6. Have you checked that any capital gains tax reliefs, e.g. reinvestment relief or on assets gifted to you, will not be clawed back when you leave the UK?

If in doubt, seek professional advice.

 

 

7. Have you considered the UK tax status of your spouse and children?

There may be opportunities for tax planning for assets held by your spouse or children. In addition, the allocation of your married person's allowance should be considered.

 

 

Property in the UK

 

 

8. Have you submitted a claim under the Non-Resident Landlord's Scheme to the Inland Revenue to receive rental income gross?

You must submit this form otherwise 22% income tax will be deducted from payments to you. For your convenience we can arrange for a form to be sent to you.

 

 

9. Have you considered making an election in relation to your property that it should be treated as you or your spouse's main residence?

You may need to consider this if the property is jointly owned or if you have more than one property.

 

 

10. Have you considered your liability to Council Tax?

 

 

Will you be reoccupying your property when you return?

This may be necessary to ensure you are eligible for the maximum Principal Private Residence exemption from tax when you sell the property.

 

 

11. Have you ensured all property expenses are incurred whilst the property is still let?

If you do not, tax relief for the expenses may not be available.

 

 

Health

12. Do you have health cover?

Making sure you have adequate health cover before going overseas is essential as it will protect you against financial risk and, more importantly, ensure you and your family receive the necessary level of medical attention. This is particularly valuable in countries where hospitals require assurance regarding payment or where English is not spoken.

 

 

Contract of Employment

 

 

13. Before accepting a job overseas it is important to establish the details of your contract. Areas that should be evaluated are salary and the currency you wish to be paid in, accommodation, removal expenses, flights home, school fees, leave, insurance and pension. We would advise that you discuss these issues with your employer.

 

 

Pension

 

 

14. Is there an impact on your pension?

If unsure contact your employer or seek professional advice.

 

 

Education

 

 

15. Are your children going with you overseas?

If yes, we can provide you wish a list of English speaking schools in the country you are going to live in.

 

 

Estate Planning

16. Have you made a will?

When overseas you will want to ensure that your wishes are carried out especially if your savings and investments are held offshore or you acquire property overseas.

 

 

Offshore Investment Products and Services

 

 

17. Have you opened an offshore bank account?

This may well have UK tax advantages. We can provide independent financial advice on offshore bank accounts and other investment products if required.

 

 

What To Do Before You Come Back

 

 

18. Have you kept a detailed record of your visits to the UK to ensure you qualify for non-UK residence status?

The Inland Revenue may ask for proof to support any claim to non-UK residence. In addition, you may wish to consider delaying your return to the UK until after 5th April to ensure your departure has been for a complete tax year.

 

 

19. Have you reviewed your investments to ensure you are minimising your UK tax liabilities?

As a basic step you should ensure you are not suffering withholding tax on UK bank accounts. You may also be able to claim reduced rates of tax on UK dividends under a double tax treaty.

 

 

20. Have you considered disposing of investments, or closing bank accounts to ensure interest has been received whilst you are still non-UK resident? (Known as "bed and breakfasting").

Any such action needs to be carefully planned as the rules regarding "bed and breakfasting" shares have changed and in addition you may be subject to UK capital gains if you have been non-resident for less than five years. Remember to delay disposals of assets standing at a loss until you are UK resident again to obtain a UK tax loss.

 

 

21. Have you considered the tax implications of any share options or bonuses granted to you abroad?

Such benefits may be subject to tax in the UK if received after your return.

 

 

22. Have you submitted your UK tax return?

If you have taxable income in the UK and have not completed a tax return there are automatic penalties. We can prepare and submit your UK tax return for you. Please forward the information requested on the personal tax return aide memoire attached to this document.

 

 

23. Are you coming to the UK for the first time?

You should seek professional advice as there are a large number of tax planning opportunities available, in particular in relation to non-UK source income and investments.

 

 

UK Personal Tax Return Information

Aide Memoire

Married Couples

Please only provide information in respect of your own affairs, we will write separately to your spouse if we act on their behalf. Where assets are owned jointly with your spouse, please show your share of the income only, this will be a half share, unless a declaration to the contrary has been made.

Income

Earned income from employment: Certificate P60

Benefits-in-kind arising from employment: Form P11D

Self employed and freelance earnings: Invoices and vouchers

Pensions: Certificates P60 or annuity vouchers

Deposit account interest, e.g. from banks, building societies, National Savings Bank, stockbroker, including closed accounts with a note of the interest at date of closure.

Please indicate whether received net or gross.

Dividend and interest tax vouchers or stockbrokers annual tax report.

Any income from abroad. Please indicate whether any local taxes have been deducted.

Receipts from the estate of a deceased person or as a beneficiary or a trust.

Receipts from insurance bond and other annuity arrangements.

Property income, e.g. furnished or unfurnished lettings, including details of all expenses.

Commissions, gains on surrender of life assurance policies, alimony or maintenance.

Outgoings

Expenses attributable to earned income, including professional subscriptions.

Expenses attributable to self employed and freelance earnings.

Expenses relating to Lloyd's activities, including copies of any stop-loss insurance or estate protection policies, fees for bank guarantees, ALM expenses, interest payments.

Certificates of interest paid for all loans on which relief is claimed.

Forms MIRAS 5 or 38E-2.

Retirement annuity premiums, personal pension premiums and additional voluntary contributions.

Forms SEPC, PPC & VCC

Investments in Venture Capital Trusts and Enterprise Investment Schemes.

Tax Certificates

Gift aid donations, net payments under deeds of covenant and duration of covenant. Payments of maintenance or alimony.

Capital Gains

Stockbrokers' contract notes for purchase and sale of quoted stocks and shares. New offers and issues, e.g. privatisation, rights issues, new offers to the public. Purchases, sales and gifts of other assets, e.g. houses, land, unquoted stocks and shares, etc. or chattels with a value over £6,800.

Residence Status

Principal place of residence.

Days spent in UK during the tax year.

Important

If you are an employee or in receipt of an occupational pension please sent to us for immediate attention all PAYE notices of coding so that we may ensure that your tax payments throughout the year are calculated correctly.

FEES

Our fee for preparing and submitting your UK tax return for the information provided to us is £250. In more complex cases we will advise you if the fee will be in excess of this and agree an alternative fixed fee with you in advance.

If you would like any further information on the above, please contact

Arthur Lancaster, Director of Tax

Ernst & Young, Jubilee Buildings, Victoria Street, Douglas, Isle of Man, IM1 2SH

Telephone: 01625 699000 Fax: 01624 699001 e-mail: alancaster@ey.co.im.

Website: www.ey.co.im

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