Split Year Taxation

[Wilmslow]

I have a question about Split Year taxation and IOM – Been contracting in UK for around 6 years and taken on a 12 month fixed term role with payroll through IOM tax, so the IOM funds hitting my personal bank account are after tax and NI. Have run through with my accountant and associated tax advisor, but, they have been useless. Two parts to my query.

Firstly, despite discussing with my accountant in good time before I started, they acquiesced and were useless. My tax advisor now tells me that as a Manx resident cannot take dividend out of my rather substantial Ltd Co bank account through UK as it will be through IOM tax which is a complexity I don’t really want – I am intending to keep the IOM tax aspects clean. So I am thinking I just need to leave the funds in place until the first tax year I am back as a UK resident – Any other thoughts on this?

Secondly, with regards to the Split Year – How would I go about this with the tax form? I will be start to end over the required 12 months, and less than 90 days in the UK, so I will be having two split years – one per tax year. Has anyone got experience of going through this? (Reviewed the residency test and comfortable with the position). Mid Jan to Mid Jan.

Thanks.

[TheFaQQer]

Firstly, despite discussing with my accountant in good time before I started, they acquiesced and were useless. My tax advisor now tells me that as a Manx resident cannot take dividend out of my rather substantial Ltd Co bank account through UK as it will be through IOM tax which is a complexity I don’t really want – I am intending to keep the IOM tax aspects clean. So I am thinking I just need to leave the funds in place until the first tax year I am back as a UK resident – Any other thoughts on this?

Sounds sensible to me as long as you don't need the money - keep the company open and trading, whack the money in a high(er) interest account locked away for the next year and pay corporation tax on the profits. Or stick it in a pension and get a rebate from previous corporation tax paid.

[Fred Bloggs]

I have a question about Split Year taxation and IOM – Been contracting in UK for around 6 years and taken on a 12 month fixed term role with payroll through IOM tax, so the IOM funds hitting my personal bank account are after tax and NI. Have run through with my accountant and associated tax advisor, but, they have been useless. Two parts to my query.

Firstly, despite discussing with my accountant in good time before I started, they acquiesced and were useless. My tax advisor now tells me that as a Manx resident cannot take dividend out of my rather substantial Ltd Co bank account through UK as it will be through IOM tax which is a complexity I don’t really want – I am intending to keep the IOM tax aspects clean. So I am thinking I just need to leave the funds in place until the first tax year I am back as a UK resident – Any other thoughts on this?

Secondly, with regards to the Split Year – How would I go about this with the tax form? I will be start to end over the required 12 months, and less than 90 days in the UK, so I will be having two split years – one per tax year. Has anyone got experience of going through this? (Reviewed the residency test and comfortable with the position). Mid Jan to Mid Jan.

Thanks.

If I understand you correctly, you want two consecutive split years? You cannot do this. Take my own example - I left the UK in July 16 and applied for split year treatment for 16/17. A precondition is that you must remain expat for the entire following tax year. I am fully expat for 17/18 so my claim for 16/17 split year is valid. If I return after April 6th 2018 I will apply again for split year treatment for 18/19, the year of my return. You must study RDR3, SA109 and SA109 guide notes as it is very clear on this kind of stuff. HTH.

[Wilmslow]

If I understand you correctly, you want two consecutive split years? You cannot do this. Take my own example - I left the UK in July 16 and applied for split year treatment for 16/17. A precondition is that you must remain expat for the entire following tax year. I am fully expat for 17/18 so my claim for 16/17 split year is valid. If I return after April 6th 2018 I will apply again for split year treatment for 18/19, the year of my return. You must study RDR3, SA109 and SA109 guide notes as it is very clear on this kind of stuff. HTH.

Thanks for the heads up. My contract is January 2018 to January 2019, so how does this impact me? Would my split year be January to January, or two splits of January to April, and April to January? My understanding from my admittedly hopeless tax adviser is to spent longer than the full year, which I am doing with a couple of weeks either side, and using the Table E for the sliding days.

[Fred Bloggs]

Thanks for the heads up. My contract is January 2018 to January 2019, so how does this impact me? Would my split year be January to January, or two splits of January to April, and April to January? My understanding from my admittedly hopeless tax adviser is to spent longer than the full year, which I am doing with a couple of weeks either side, and using the Table E for the sliding days.

Sorry, you cannot claim split year. You would have to return after April 6th 2019 for a claim for split year to be accepted. When you fill in your self assessment with SA109 you claim split year for 17/18 and for 19/20. You must be expat for the whole of 18/19 tax year to qualify for split year treatment. If you refer to the documents I mentioned above, it is very clearly set out.

Also check in RDR3 where it has tables clearly explaining how many days in year you can be in the UK and still qualify for split year treatment. I'd say on the dates you provided you do not qualify anyway due to not being expat for a full tax year 18/19.

[Wilmslow]

Sorry, you cannot claim split year. You would have to return after April 6th 2019 for a claim for split year to be accepted. When you fill in your self assessment with SA109 you claim split year for 17/18 and for 19/20. You must be expat for the whole of 18/19 tax year to qualify for split year treatment. If you refer to the documents I mentioned above, it is very clearly set out.

Thanks, that helps and is a lot clearer than my accountants have been. Question on the back of this - Do I need to be in contract working from the end of January 2019 to 5th April 2019, or just not on UK soil? Or look for another role over here, or extension for the three months to ride out?

[Fred Bloggs]

Thanks, that helps and is a lot clearer than my accountants have been. Question on the back of this - Do I need to be in contract working from the end of January 2019 to 5th April 2019, or just not on UK soil? Or look for another role over here, or extension for the three months to ride out?

If you have a 30 day break without employment that has implications to answering your question. However, someone might point out that unless you tell a third party what you did exactly then how would anyone know the exact day you ended the contract? In your shoes, I would try very hard to get the last day of contract as April 6th 2019. Then you would claim a 1 day/364 day split year for 19/20 tax year, leaving you fully expat for the whole of 18/19.

[Wilmslow]

If you have a 30 day break without employment that has implications to answering your question. However, someone might point out that unless you tell a third party what you did exactly then how would anyone know the exact day you ended the contract? In your shoes, I would try very hard to get the last day of contract as April 6th 2019. Then you would claim a 1 day/364 day split year for 19/20 tax year, leaving you fully expat for the whole of 18/19.

Thank you Fred, Very informative and useful, appreciated.

[Fred Bloggs]

Thank you Fred, Very informative and useful, appreciated.

You are welcome, however, I strongly recommend looking up the HMRC documents I mentioned. They will help you understand exactly where you are with split year taxation.