Question: My friend has offered me an opportunity to work full-time for his business in France, which could be a long-term appointment if all goes well. I plan on renting out my home whilst out there, rather than selling it. How will this affect my tax position in the UK and what do I need to report to HMRC?
Your tax position in the UK depends on whether you are considered resident in the UK by HM Revenue & Customs (HMRC).
The rules covering the residence of an individual are complex but in basic terms it depends on the number of days in total you spend overseas each tax year.
In determining your residency status, you must first see if you pass the ‘automatic overseas test’, which if unsuccessful, you then apply the ‘automatic UK test’. If neither of these tests are met, the number of significant ties you have to the UK combined with the number of days spent in the UK are used to determine your residency status.
If it is determined that you are non-resident while in France, you will not be taxed on your French employment income in the UK but will be in France. However, if you are considered a UK resident, all income you earn worldwide is taxable in the UK including this French employment income.
As there is a double tax treaty with France, if you are considered resident in the UK, you will only have to pay tax in the UK on the employment income if the UK tax due is higher than that already deducted at source in France.
Whether you are considered resident or non-resident, the income you receive from renting out your home whilst abroad will be taxable in the UK and will need to be declared to HMRC via a Self-Assessment tax return each year.
As a UK citizen, even if you are classed as non-resident, you are entitled to the tax-free Personal Allowance (currently £11,500 for 2017/18), but this would need to be claimed each year rather than being applied automatically. In addition, as you are renting out your home, you would also need to register with HMRC as a non-resident landlord.
One final point to note is that the amount of time spent away from your home can have an impact on the amount of Capital Gains Tax (CGT) that might become due if and when you sell the property.
When moving abroad there are a lot of aspects to consider and plan for accordingly. As such, it is highly recommended that professional advice is sought early.
If you are unsure and would like to discuss your circumstances in greater detail, Ashdown Hurrey can advise on personal tax matters in addition to other tax, accountancy and business matters. Contact Martin Copland on 01424 720222 or email him at firstname.lastname@example.org