Taxation issues

Closed Thread
  1. #1

    Join Date
    Apr 2006
    Location
    HK physically, England spiritually
    Posts
    237

    Taxation issues

    Hi all,

    First post here so please bear with me.

    I've recently been offered a job in Hong Kong and I've accepted it, however I have one concern about where I'm going to have to pay tax.
    I'm British and live in London currently, but once my visa comes through (application gone in this week) I'll be coming to HK, probably around the start of May. Now I've heard that tax is roughly 15% in HK which is a lot better than the 40% tax bracket I am in in the UK.
    My issue is that the job I have been offered is actually a contract job for approximately 7 months, after that there will probably be more work for me and I intend to stay in HK permanently if there is, but it's not set in stone at the moment. I have got the job through a recruitment agent who are actually putting me on their payrole and paying me a monthly salary, so in effect I will be a permanent employee of their's which they say is standard practice. I've been reading up on the uk inland revenue website that I would have to be non-resident in the UK to avoid paying tax there, with me in effect taking a permanent job in HK I hope I shouldn't have too many problems proving this. However, as I don't leave until may I'm worried that I will be here for part of the uk tax year and get hit up for tax by them, of course if I'm going to have to pay 40% in the UK and also 15% in HK then it's seriously going to dent my wallet.

    I guess I just wanted to know if any other Brits here have gone out to HK and then been hit for tax by the UK government because they couldn't prove they were non-resident, in my case will my 7 month contract make a difference even though I will be a permanent employee of my agency and I intend to stay in HK afterwards at least for the rest of the year?

    Sorry for waffling a bit, but I've started to think about this today and I can't seem to find much useful info (ie. something a normal person can read that hasn't trained to be an accountant or tax lawyer) on the net. I know I need to go and see a professional, just wondering about what other people have done

    Thanks
    JC


  2. #2

    Join Date
    May 2005
    Posts
    4,279

    Wouldn't worry too much as you can always claim your tax back. Other than being non-resident for tax purposes you can be exempt from paying income tax by being away for 11/12 of the year. That is you can return to the UK but only for 30 days (ish). You need to file the relevant form to the IR declaring that you are leaving the UK to stop them issuing you a tax return.


  3. #3

    Join Date
    Jul 2005
    Location
    Mid Levels
    Posts
    113

    You should be OK, is the agency paying you a UK one or HK.

    If UK send the non resident form into IR in UK to get a NT (no tax code), might take a while to process in UK (in HK would be a couple of days as very efficient here).

    When received you will get the pay with no tax deductions BUT will still have a tax return to do.

    As you are leaving in May depending on salary you might get April pay when based in UK tax free as the personal allowance may cover it, or even if you are earning big wonga will probably pay at low rate once you do a tax return for 2006/7 and get refund of the tax deducted under PAYE where they prorate the allowances and bandings of rates.

    If paid by HK agency this will not need to be put on UK return. This would need to be put on a HK return, likewise if you are paid by UK agency for workdone in HK this should be put on HK return, ie emoluments received overseas for duties performed in HK.

    You have benefit of being able to get gross if paid in HK or in UK as long as you get the NT code so cashflow wise should be OK.

    It may also be worth keeping eye on days in UK, if you are close to non resident days limits it can end up costing you a lot of tax by screwing up by one or 2 days even. Keep file of flight tickets, copies of passport stamps etc in case you need to prove to IR in UK days in/out UK

    Last edited by paulmears; 02-04-2006 at 10:38 AM.

  4. #4

    Join Date
    Apr 2006
    Location
    HK physically, England spiritually
    Posts
    237

    Hi guys, thanks for the info, that sounds re-assuring. I thought I'd be ok, but the UK inland revenue website isn't the easiest to read.

    I'll be getting an accountant soon as I'm going to be letting my house while I'm away so will have to do a tax return for that anyway, so I can discuss all this with them too.
    The agent is a HK based recruitment agent, they don't even have an office in the UK, and I'll be getting paid in HK dollars but they will be paying it into my UK bank account. Even though my contract is only for 7 months, I won't be returning to the UK until after April 2007 because when the project I'm going for is finished the agent will hopefully find me more work (at least that is what they've said) and if they don't I will take a few months off and do a little bit of travelling around the se asian region, something I had actually planned to do anyway until I got offered this job. I'll be keeping some money set aside each month to pay my HK tax at the end of the year, I know I'll have to do a tax return there so that's no problem, just wasn't sure whether the UK government would try and get hold of my money too because that seems to be about the only thing they're any good at nowadays. I believe I have to fill in form P85 so I'll discuss with an accountant this week and get on the case. Good to know that being here for only about a month of the year means I won't get hit for tax and may get a rebate on the amount I have to pay in my april salary, I expect to only be in the UK for 30-45 days tops this year which is the time before I leave for HK.

    Cheers

    Last edited by JonnyC; 02-04-2006 at 10:05 PM.

  5. #5

    Join Date
    Jul 2005
    Location
    Mid Levels
    Posts
    113

    Make sure you also ask accountant about rules on not having your UK home as principal private residence, when you rent while away will affect the tax free capital gain when/if you sale the house in UK.

    Not sure of exact rules but think if you rent it for say year and sale after five years will get taxed on 20% of gain which can be meaty if you have been lucky and bought low and will sell high. Not sure of any legit ways around this one.

    If you are already sat on big gain of few hundred grand, the tax cost can even be more than rent you would receive.