expat network

Tax To Be Paid Twice On Overseas Earnings?

I left the UK for India on 5 March 2017 to work on a two-year contract. My salary is paid into an Indian bank account in rupees and I transfer funds back to the UK. I am thinking of returning to the UK early in December 2017, but I fear I may be taxed in the UK.

Jason Porter, director of expat financial advisers Blevins Franks, answered this question.

“I would suggest even though you left in the previous tax year (2016/17), and are looking at returning in this tax year (2017/18), and will have potentially been absent for more than six months, you will not be regarded as non-resident from the UK’s perspective, in that intervening period. As such, the income you have earned in India will be taxable on your return to the UK. It will also remain taxable in India, as you performed the employment duties there.

“Without looking at the UK-India Double Tax Treaty (they all follow a similar template, and the taxation of earnings, and the set-off of tax paid are all pretty much the same), I would say whatever tax liability results in the UK from the earnings all being taxable in the UK, will be reduced by setting off the Indian tax already paid. You will therefore have to pay any balancing tax liability in the UK (if there is one).

“You will need to calculate if there will be a balancing tax liability from a UK perspective if you do not come back before 5 April 2018, depending upon the sterling value of the Indian tax already paid.

“If you were to remain non-UK resident until after 5 April 2018, then it is likely these earnings would not be taxable in the UK, as you left the UK for a bona-fide contract of employment, and you would have been absent for a complete UK tax year.”