HM Revenue & Customs (HMRC) has continued to run campaigns to ensure that overseas workers, registered in the UK, are paying the correct taxation rates.

Taxpayers that have overseas assets and income may still be obligated to pay UK tax rates under certain circumstances.

The first step HMRC will take to determine your tax obligations is establishing your residence and domicile status.

Your tax obligations differ based on whether you are a resident, non-resident, or domiciled in the UK.

Double taxation agreements (DTAs)

The UK has DTAs with many countries to ensure that you don’t end up paying tax on the same income in two jurisdictions.

However, it is your responsibility to claim these reliefs, and failure to do so could result in unnecessary tax burdens.

Who’s exempt?

Not everyone working overseas is required to pay UK tax. Here are some scenarios where you might be exempt:

• Non-resident status: If you spend fewer than 16 days in the UK (or 46 days if you haven’t been classed as a UK resident for the three previous tax years), you may qualify as a non-resident and be exempt from UK tax on your overseas income.
• Split-year treatment: In the tax year that you move abroad, you might be eligible for split-year treatment. This means you’ll only pay UK tax on the income you earn in the UK for the part of the year you are a UK resident.
• Foreign income exemption: If your income is taxed in another country and you have claimed double taxation relief, you may not have to pay UK tax on that income.

Penalties for non-compliance

Failure to comply with HMRC regulations can result in severe penalties:

• Late payment penalties: These start at five per cent of the tax unpaid at 30 days, rising to ten at six months and fifteen per cent at 12 months.
• Late filing penalties: A £100 fine is immediately levied for late filing, with additional fines accruing over time.
• Investigations and prosecutions: In severe cases, HMRC can launch an investigation, which could lead to prosecution and even imprisonment.
• Asset seizure: HMRC also has the authority to seize assets to cover unpaid taxes.

Working overseas offers a range of opportunities, but it also comes with complex tax obligations.

Understanding your tax liabilities and staying compliant with HMRC regulations is crucial to avoid unnecessary financial burdens and legal complications.

You should always consult with a tax advisor to ensure you are meeting your obligations and taking advantage of any exemptions or reliefs available to you.

Ignorance is not an excuse in the eyes of the law, and the penalties for non-compliance can be severe.

For help staying informed and keeping compliant, please speak to one of our expert tax advisers.