Reply to: Inside IR35 Contract and Staying out of UK

[Fred Bloggs]

Normally it is where you work that determines where the business is, not where the client or company is. In other words you shouldn't be on UK PAYE if you're working in India. If you only spend a few weeks as a remote worker then obviously no-one will know as the paper trail is in the other country. The problem arises when you are permanently resident and you pay no tax because you're working for a foreign company. Some one at the tax authority might take an interest; they're going to want to know either why you're not submitting a tax return or how come you're employed in the UK when you're living in India. That's why advice is necessary.

Yes, understood. OP was suggesting around 6 months in UK and 6 months in India. Will be resident in both jurisdictions.

Anyway, I'll leave it there.

[BlasterBates]

There is no work that I do in India. I do work for the UK organisation while physically present in India.

I do not do any work in India, as in, I do not do any work for any Indian company. I do work for the UK organisation from India - a bit like, going on holiday and logging for an emergency priority 1 issue.

That is what you need to clarify. Normally it's where you physically are that determines where you pay tax.

If you are resident in India you will be expected to declare your worldwide income, and a tax official might ask that very question as where you physically carry out the work for your UK company. When I declared Swiss income whilst resident in Germany I had to state how many days I spent in Switzerland.

I would take advice from an Indian accountant to be really sure. The wrong time to find out would be in a few years time when the Indian authorities decide to look more closely at your income.

[Divya Chandrakumar]

If you are working partly in the UK and India then it is complicated. Strictly, when you work in India it is an Indian business/employment and when you work in the UK it is a UK business/employment. In my view the correct way to handle this, is to set up as a contractor in India and charge your UK Ltd company for the work you do in India. This is then taxed in India. When you work in the UK charge that exclusively through the UK company. It would be wise to have a UK and an Indian accountant to handle this.

Here is a list of the double taxation treaties between the UK and India

https://www.gov.uk/government/public...a-tax-treaties

In particular this is the most important one:

https://assets.publishing.service.go...-_in_force.pdf

You are only resident in either India or the UK.

from the double taxation treaty:



It is important to establish residency because that is where you pay tax on worldwide income. However even though you are only in resident in one of the two countries, you will still be liable for tax in the other country on income sourced there.

Let us assume that you are resident in India but not the UK. So if you travel to the UK and work there for 3 months you will be liable for tax on income for those three months in the UK. There is a misunderstanding that you only pay tax where you are resident, this is not true, non residents are also liable for tax.

https://www.gov.uk/tax-foreign-income/residence



Let us assume you will be resident in India but not the UK, and let us assume you work 3 months in the UK and 9 months in India.

You are taxed on the three months work in the UK, in the UK as a non-UK resident but you're not taxed on income in India
You are taxed on the nine months work in India in India, and in addition the three months work in the UK is also taxed in India. However the taxation you pay in India on your UK income will depend on the double taxation treaty, and is usually the difference in the tax rates.

The key here is that where you are resident you are liable for tax on worldwide income and when you are not resident you are only liable for tax on local income.

Income from investments usually need to be declared in the country you are resident. Tax may be liable where the investment is located.

I would contact Sue B

https://forums.contractoruk.com/acco...ief-guide.html

Thank you!

I am a little bit confused.

Regarding this,

Strictly, when you work in India it is an Indian business/employment and when you work in the UK it is a UK business/employment. In my view the correct way to handle this, is to set up as a contractor in India and charge your UK Ltd company for the work you do in India.

, I reside in India while I work for a UK organisation. There is no work that I do in India. I do work for the UK organisation while physically present in India.

I do not do any work in India, as in, I do not do any work for any Indian company. I do work for the UK organisation from India - a bit like, going on holiday and logging for an emergency priority 1 issue.

Regarding this,

It is important to establish residency because that is where you pay tax on worldwide income. However even though you are only in resident in one of the two countries, you will still be liable for tax in the other country on income sourced there.

, I have heard back from my accountant and for the year in question, I am resident of UK. Also, there is no income sourced in India. All income is sourced only in the UK.

My husband does have a limited company.

I will message Sue B. Thanks!

[BlasterBates]

Are you sure about that? It's an inside IR35 job, presumably being paid under UK PAYE. It doesn't sound at all like OP has a Ltd Co. (Possible that India will regard a UK Ltd where the principal is sitting in India working is a defacto Indian company. But that is certainly beyond my personal experience).

As ever with this stuff the devil is in the detail and everyone has different circumstances.

Normally it is where you work that determines where the business is, not where the client or company is. In other words you shouldn't be on UK PAYE if you're working in India. If you only spend a few weeks as a remote worker then obviously no-one will know as the paper trail is in the other country. The problem arises when you are permanently resident and you pay no tax because you're working for a foreign company. Some one at the tax authority might take an interest; they're going to want to know either why you're not submitting a tax return or how come you're employed in the UK when you're living in India. That's why advice is necessary.

[Fred Bloggs]

In my view the correct way to handle this, is to set up as a contractor in India and charge your UK Ltd company for the work you do in India. This is then taxed in India. When you work in the UK charge that exclusively through the UK company. It would be wise to have a UK and an Indian accountant to handle this.

Are you sure about that? It's an inside IR35 job, presumably being paid under UK PAYE. It doesn't sound at all like OP has a Ltd Co. (Possible that India will regard a UK Ltd where the principal is sitting in India working is a defacto Indian company. But that is certainly beyond my personal experience).

As ever with this stuff the devil is in the detail and everyone has different circumstances.

[BlasterBates]

If you are working partly in the UK and India then it is complicated. Strictly, when you work in India it is an Indian business/employment and when you work in the UK it is a UK business/employment. In my view the correct way to handle this, is to set up as a contractor in India and charge your UK Ltd company for the work you do in India. This is then taxed in India. When you work in the UK charge that exclusively through the UK company. It would be wise to have a UK and an Indian accountant to handle this.

Here is a list of the double taxation treaties between the UK and India

https://www.gov.uk/government/public...a-tax-treaties

In particular this is the most important one:

https://assets.publishing.service.go...-_in_force.pdf

You are only resident in either India or the UK.

from the double taxation treaty:

he shall be deemed to be a resident of the Contracting State in which he has a
permanent home available to him. If he has a permanent home available to him in
both Contracting States, he shall be deemed to be a resident of the Contracting State
with which his personal and economic relations are closer (centre of vital interests)

It is important to establish residency because that is where you pay tax on worldwide income. However even though you are only in resident in one of the two countries, you will still be liable for tax in the other country on income sourced there.

Let us assume that you are resident in India but not the UK. So if you travel to the UK and work there for 3 months you will be liable for tax on income for those three months in the UK. There is a misunderstanding that you only pay tax where you are resident, this is not true, non residents are also liable for tax.

https://www.gov.uk/tax-foreign-income/residence

Your UK residence status affects whether you need to pay tax in the UK on your foreign income.

Non-residents only pay tax on their UK income - they do not pay UK tax on their foreign income.

Let us assume you will be resident in India but not the UK, and let us assume you work 3 months in the UK and 9 months in India.

You are taxed on the three months work in the UK, in the UK as a non-UK resident but you're not taxed on income in India
You are taxed on the nine months work in India in India, and in addition the three months work in the UK is also taxed in India. However the taxation you pay in India on your UK income will depend on the double taxation treaty, and is usually the difference in the tax rates.

The key here is that where you are resident you are liable for tax on worldwide income and when you are not resident you are only liable for tax on local income.

Income from investments usually need to be declared in the country you are resident. Tax may be liable where the investment is located.

I would contact Sue B

https://forums.contractoruk.com/acco...ief-guide.html

[Fred Bloggs]

That is actually fine. :-)

It makes my life easier as I would just be paying taxes like usual. I am happy being a UK Tax resident and paying taxes.

I will of course, also, need to pay taxes in India (for earnings made in India), but that I can work out with UK accountant - i.e., tell them that I have already paid Income Tax for earnings made in India (from saving bank accounts or fixed deposits).

Indeed your situation is pretty easy really. Devil is in the detail of course. But do your homework and read RDR3. Also study the dual tax treaty between UK and India. I believe what you will discover is that you will be liable for UK tax in UK source income and Indian tax on Indian source income. Dual tax treaty sets this out. If what you say is absolutely correct you have little to worry about beyond keeping scrupulous records and filling in UK and Indian tax returns every year. I was tax resident in multiple countries for several years. India will probably want to tax you on your UK work done whilst sitting in India. The tax treaty will help you not paying double tax on one income.

[Divya Chandrakumar]

This is very likely true, but it's also something on which the OP will need the advice from someone who understands their situation. I continue to be amused by how many people come on to forums like this one looking for specialist tax advice (and you cannot get much more specialist than tax across multiple jurisdictions), rather than mere general guidance about where to look or an overview (which is perfectly fine, of course, and we've probably provided about all the OP can expect on that front).

Yes, thank you!

I have emailed my husband's Accountant but they are all away on Christmas break and so, was asking the question here hoping someone else was in the same situation. Even though the accountants' do have the qualification, more often than not, they would not have experienced something unique such as this but someone in here would have (or after my experience, someone else in future would benefit from) additional insights.

[Divya Chandrakumar]

You need to do your homework. You simply do not pass any of the statutory residence tests on that basis. Read RDR3 guidelines, they're actually very clear. And on the basis above, you cannot pass them and be non UK tax resident.

That is actually fine. :-)

It makes my life easier as I would just be paying taxes like usual. I am happy being a UK Tax resident and paying taxes.

I will of course, also, need to pay taxes in India (for earnings made in India), but that I can work out with UK accountant - i.e., tell them that I have already paid Income Tax for earnings made in India (from saving bank accounts or fixed deposits).

[jamesbrown]

Reading what the OP has just said. There is no chance at all of passing statutory residence test.

This is very likely true, but it's also something on which the OP will need the advice from someone who understands their situation. I continue to be amused by how many people come on to forums like this one looking for specialist tax advice (and you cannot get much more specialist than tax across multiple jurisdictions), rather than mere general guidance about where to look or an overview (which is perfectly fine, of course, and we've probably provided about all the OP can expect on that front).

[Fred Bloggs]

Sorry, if the question was not clear.

1. Yes, the work is for a charity / non-profit organisation based in UK.
2. OK, so, I am staying in India which means, that I just need to tell India's Tax Authorities that I am already paying tax in UK? Understood.
3. No, no - the work is fully remote and I was living in the UK (as I am a naturalised citizen of UK). I moved back to India for some personal commitments (to take care of family).
4. The Tax Resident Authority? Is it HMRC that needs to be told about the UK Tax Resident Status?

I will inform HMRC, but I do not want to run the risk of informing HMRC and them updating my umbrella company who updates my client and run into problems.

Instead, I would just move back to UK - stay for 181 days and then move back to India for less than 180 days and continue like that.

You need to do your homework. You simply do not pass any of the statutory residence tests on that basis. Read RDR3 guidelines, they're actually very clear. And on the basis above, you cannot pass them and be non UK tax resident.

[Fred Bloggs]

As I said, if you are, in fact, non-UK resident for tax purposes (and you may well be resident under the SRT even if you think you are non-resident), then you will need an NT tax code for your umbrella to apply. But, one way or another, you will be paying tax on your income, whether in the UK or India or both, subject to any dual tax agreement, and your employer will be paying ErNI and the AI, regardless.

Beyond what I've said about the mechanics (an umbrella won't be able to do anything without a correct tax code), our resident expert on these matters may be able to help further: Sue B.

Reading what the OP has just said. There is no chance at all of passing statutory residence test.

[jamesbrown]

As I said, if you are, in fact, non-UK resident for tax purposes (and you may well be resident under the SRT even if you think you are non-resident), then you will need an NT tax code for your umbrella to apply. But, one way or another, you will be paying tax on your income, whether in the UK or India or both, subject to any dual tax agreement, and your employer will be paying ErNI and the AI, regardless.

Beyond what I've said about the mechanics (an umbrella won't be able to do anything without a correct tax code), our resident expert on these matters may be able to help further: Sue B.

[Fred Bloggs]

No, I am perfectly happy paying all the tax, NI contribution, Apprenticeship Levy, Employer Contribution and anything else that is mandated my law.

This is NOT to avoid paying taxes.

Well done. Refer to my last post. You're quite possibly going to be paying UK tax on UK source income anyway. I always did.

[Fred Bloggs]

Of course, bear in mind that it's actually quite hard to become non-resident for tax purposes with the SRT, so you'd better be sure you are first.

Correct. And if you leave UK today then it will be after April 5th 2024 UK tax return before you are actually sure you are not UK tax resident. And it would involve applying for split year treatment after 6th April 2023 for the current tax as of today, if you left today. It's quite likely UK source income remains taxable in the UK anyway. All the time I was outside the UK I paid tax on UK sourced income. I passed the first statutory residence test the day I left too.