Reply to: New role in Azerbaijan

[BlasterBates]

Expect to pay tax in Azerbaijan, unless you hear otherwise from an accountant in Azerbaíjan. I had a look and there is a double taxation treaty with Azerbaijan, so even if you remain resident in the UK your earnings in Azerbaijan will probably not be taxed again, so you should be able to take advantage of their tax rates. Worst case would be you pay UK tax rates, if the UK demands the difference between the Azerbaijan rate and the UK rate; this would however be unlikely given there is a DTA between the two countries. One final point, you don´t have a choice, it´s not you who decides where you pay tax, that´s clearly governed in the DTA. So don´t start pondering whether it would be simpler and better to pay in the UK or Azerbaijan, find out where you have to pay tax.

You will need specialist advice

[Clare@InTouch]

Hmmm, bit more thought needed me thinks. I was always going to speak to a specialist, and the man I may replace, but I am starting to think I can utilise the agreement between Azerbaijan and the UK, meaning I can pay less tax than I would here. Lots of interesting points, so thanks.

As an aside, I believed that if I gave my children a house, if I didn't die within 7 years of giving it to them, then there would be no applicable IHT?

It might usually qualify as a potentially exempt transfer (PET) but there are special rules for giving someone a gift when you retain an interest in it. This stops people from giving away assets in order to reduce the value of their estate and avoid IHT.

Inheritance Tax when passing on property

For Inheritance Tax purposes, giving your home away is treated as making a gift. The rules about passing on property are complicated, so it's a good idea to seek legal advice.
There are two things about gifts to be aware of when passing on property:

Seven-year rule. You can make an outright gift of your home to someone, no matter what it's worth, and it will be exempt from Inheritance Tax if you live for seven years after making the gift. This is known as a Potentially Exempt Transfer.

Gifts that you continue to benefit from. If you give your home to your children with conditions attached to it, or if you continue to benefit from the home yourself, this is known as a 'gift with reservation of benefit' and the gift won't be exempt from Inheritance Tax, even if you live for seven years afterwards.

HM Revenue & Customs: Passing on your home to your children

[Zoiderman]

Careful of Inheritance tax issues, take advice before you even seriously consider this.

Also you need to understand the differences between non-resident, not ordinarily resident and non-domiciled. As has been pointed out it's easy enough to lose residence, but it's very hard to lose domicile. Having a house here would make it incredibly hard in fact.

I'd suggest it's a subject for your accountant as there could be wider ranging issues if your aim is to lose tax residence.

Residence and Domicile - an old link, but gives you the jist of the issues.

HM Revenue & Customs: Residence and domicile issues

Hmmm, bit more thought needed me thinks. I was always going to speak to a specialist, and the man I may replace, but I am starting to think I can utilise the agreement between Azerbaijan and the UK, meaning I can pay less tax than I would here. Lots of interesting points, so thanks.

As an aside, I believed that if I gave my children a house, if I didn't die within 7 years of giving it to them, then there would be no applicable IHT?

PET's

[Clare@InTouch]

But non earning. I guess I could give the house to the kids?

Careful of Inheritance tax issues, take advice before you even seriously consider this.

Also you need to understand the differences between non-resident, not ordinarily resident and non-domiciled. As has been pointed out it's easy enough to lose residence, but it's very hard to lose domicile. Having a house here would make it incredibly hard in fact.

I'd suggest it's a subject for your accountant as there could be wider ranging issues if your aim is to lose tax residence.

Residence and Domicile - an old link, but gives you the jist of the issues.

HM Revenue & Customs: Residence and domicile issues

[LisaContractorUmbrella]

But non earning. I guess I could give the house to the kids?

Original story here: British tax exiles under pressure after landmark 'non-dom' case leaves millionaire facing £30m bill | Mail Online but as I said this is a really complicated subject and you should be seeking specialist advice

[eek]

But non earning. I guess I could give the house to the kids?

Don't do anything based on the advice of this forum. Based on what you are trying to do find a specialist accountant and get their advice. I'm sure your agent, end client or other people already out there will be able to help out.

[Zoiderman]

Then you would still have assets in the UK and your children would still be going to school here

But non earning. I guess I could give the house to the kids?

[LisaContractorUmbrella]

I think we'd still own one house, but that it would not be rented out, as we'd use it in term time

Then you would still have assets in the UK and your children would still be going to school here

[Zoiderman]

You need to be really careful Zoiderman - it used to be that if you spent less than 90 days in the UK you would have no tax liability here but there was a huge case quite recently where a chap was successfully pursued by HMR&C because, even though he was not resident in the country for more than 90 days, he still had 'interests' here. If you maintain any kind of financial consideration in the UK you could end up being liable for tax still.

I think we'd still own one house, but that it would not be rented out, as we'd use it in term time.

To clarify this, I would be out of the country as a non dom, the wife and kids would stay all the tiem term time, and I would return here in the 3 week down tiome, in term time, but in France for non term time, if that makes sense.

[LisaContractorUmbrella]

Thanks Lisa, the 4 week in the gite further complicates the issue, as we're actually thinking of relocating there outside of school, so we'd be non dom in all the countries, bar Azerbaijan

You need to be really careful Zoiderman - it used to be that if you spent less than 90 days in the UK you would have no tax liability here but there was a huge case quite recently where a chap was successfully pursued by HMR&C because, even though he was not resident in the country for more than 90 days, he still had 'interests' here. If you maintain any kind of financial consideration in the UK you could end up being liable for tax still.

[Zoiderman]

OK sorry but it was the comment about the 4 weeks on holiday that prompted that response - perhaps just badly worded. It will depend on the duration of the contract - the general rule of thumb is that if you are working overseas for longer than 6 months you will become liable for local taxation, up until that point you will continue to pay tax in the UK. However, tax rules for working overseas are very complicated and for somewhere like Azerbaijan I would be inclined to seek specialist advice

Thanks Lisa, the 4 week in the gite further complicates the issue, as we're actually thinking of relocating there outside of school, so we'd be non dom in all the countries, bar Azerbaijan

[DaveB]

So I could be non domicile down to this?

No, you have to meet all three criteria.

IIRC you cannot simply stop paying tax becuse you are *going* to be out of the country, you have to have been out of the country for the relavent period already, at which point you can claim back tax paid as appropriate and register as a non-dom going forwards.

But I'm not an accountant, you should probably talk to one.

[LisaContractorUmbrella]

That's right Lisa, I simply post fatuous questions for peoples entertainment....

Yes, I am serious. As I understand it, you can claim non domicile for tax purposes if you are here for less than 182 days a year. I am merely asking if this is a good way to go, given I will be out of the country in Baku for 182 days a year

OK sorry but it was the comment about the 4 weeks on holiday that prompted that response - perhaps just badly worded. It will depend on the duration of the contract - the general rule of thumb is that if you are working overseas for longer than 6 months you will become liable for local taxation, up until that point you will continue to pay tax in the UK. However, tax rules for working overseas are very complicated and for somewhere like Azerbaijan I would be inclined to seek specialist advice

[Zoiderman]

•you spend less than 183 days in the UK during the tax year

So I could be non domicile down to this?

[Zoiderman]

To quote a certain famous tennis player - you cannot be serious

That's right Lisa, I simply post fatuous questions for peoples entertainment....

Yes, I am serious. As I understand it, you can claim non domicile for tax purposes if you are here for less than 182 days a year. I am merely asking if this is a good way to go, given I will be out of the country in Baku for 182 days a year