Leaving the UK can create tax stress

Published on 22 February 2005

Going overseas for a significant period of time or permanently, requires an individual to disentangle as simply as possible from the Inland Revenue. Being on a low income does not necessarily make the process easier. We consider in this article whether the Revenue make things as simple as they could do.

LITRG has found that many taxpayers have gone overseas inadequately prepared for dealing with their UK tax position whilst abroad. This has led, in a number of those cases, to a significant overpayment of UK tax.

There are many questions that need to be answered and where Revenue guidance and help are needed. We have set out below a small sample of the questions posed to us through our website:

  • Will I pay tax in the UK whilst I am overseas?
  • Will my tax credits continue in payment?
  • Will my child benefit cease on leaving the UK?
  • Can I get my retirement pensions (both state and occupational) paid to me overseas free of UK tax?
  • I have been in employment in the UK for a short period and I am now going back abroad, how do I quickly and easily get my tax repayment?
  • Do I pay UK Capital Gain Tax if I sell my UK house whilst abroad?
  • Am I liable for death duties when overseas?
  • Does the tax I pay overseas get set off against the tax I am due to pay in the UK?
  • Should I be paying National Insurance Contributions whilst overseas?
  • Do I pay tax on the UK property I let whilst I am abroad?
  • Must I have UK tax taken off my interest on bank and building society savings?
  • If I make visits to the UK having retired abroad does this affect my tax status?
  • Do I need to complete a UK tax return once I have retired abroad?
  • If I am a Crown Servant going overseas are the tax rules different for me?
  • Are the answers to my questions different depending upon the country I move to?

Revenue literature invites taxpayers to contact or visit their local tax office or enquiry centre if they wish to discuss these types of issues.

Over the past year or so LITRG has been accumulating examples of how the Revenue, at a local level, have not been able to give adequate support to those individuals on low incomes going overseas, either to work or to retire.

We are not suggesting that to have a single individual answer all those questions is the answer, but there might be better ways than currently exist.

From our experience it seems that the following steps would improve the Revenue service to low income customers, although how precisely this might be done does depend upon the current reorganisation currently underway to create the new HMRC:

  • Have advisers trained in overseas issues embedded within the Revenue's local office structures
  • Make better use of the Revenue's Centre for Non-Residents (CNR) in linking with the local advisers
  • Revise Revenue forms so as to deal with issues of concern to taxpayers going overseas before they leave the UK
  • Take a more holistic Revenue view of the taxpayer's affairs rather than making the taxpayer deal with many different contact points within the Revenue.
  • Update Revenue literature to reflect the expanded range of issues now managed by the Revenue.
  • Have a comprehensive area on the Revenue's website devoted to issues of going overseas to work or to retire
  • Stock literature (or have relevant referral points) for other government departments where similar issues on going overseas are relevant (for example the Department of Work and Pensions for state pension or pension credit).

LITRG always wishes to see the Revenue give priority to helping those individuals who cannot afford to take professional advice. Such people leaving the UK, often rely solely upon the Revenue for ensuring that they only pay the right amount of UK tax and receive their entitlements.

We believe that there are quick, inexpensive, fixes which might solve many of the issues identified and our tentative approaches to the Revenue indicate a willingness to explore these with us.

(22-02-2005)

Contact Name: John Andrews (Tel: 0844 579 6700, Fax: 0844 579 6701)