Non-Resident Tax Returns

International tax issues can often be one of the most difficult to understand. Half the issue is caused by an understandable lack of knowledge about when a return is required in the UK if you are not resident here.

Added to this, tax jargon differs from country to country. Do you need a “non-resident alien tax return”, a “non-resident company tax return” a “non-resident UK tax return”?

The first thing to know is that companies and individuals are treated separately for tax purposes. 

Here we are focusing on individuals rather than businesses. It’s worth thinking about what “non-resident” actually means. 

What we are referring to here is tax residence. 
Tax residence in the UK is generally not connected to which country you are a National or passport holder of, where you were born, or what your domicile is. 

Tax residence is a variable concept which is determined by a set of rules and can change year by year.  Those rules can be complex. 

Certainly, anyone who spends more than half of the year in the UK will be considered UK tax resident. For less than this, you will need to consider your position and potentially take advice.

The phrase non-resident alien tax return is really a US tax concept and not one that applies in the UK. 

In the UK, we generally refer to a non-UK resident tax return, although in fact, the same form is completed in nearly all occasions as would be for a UK tax resident individual.

So why would a non-resident need to complete a tax return? 
When would a HMRC non-resident tax return really be required? The most common reason is because you own assets in the UK that produce an income. Commonly this is a UK property. 

If you own a UK rental property it is necessary to report the income and expenses on tax return on an annual basis.

Most non-residents use a tax agent or the HMRC online service to file the return. Tax may be due, depending on the circumstances of course. 

There are a number of other requirements that affect non-residents besides the need to complete a non-resident UK tax return. 

This includes registering with HMRC as a non-resident landlord at the time you begin letting the property, if you want to avoid a withholding tax charge on the rental income you receive each month.

There are other investments that will also require a return to be prepared. 
A return may also be needed if you have an employment or self employment in the UK or with a UK employer, you are part of a UK resident partnership or LLP, you are a director of a UK company or you have realised a gain on the sale of property investments.

The key advice here is always to consult a professional. They will quickly be able to understand exactly whether a non-resident tax return is required or not.

Wisteria prepare tax return for many non-resident taxpayers and specifically landlords following the merger with Lawrence Hurst & co early in 2018.  For more information please contact us.