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First a brief background: I’m a citizen of an EU country where up to recently I’ve resided and been employed as a PhD student at a state institute. After finishing the PhD, I’ve moved to UK to work at a university as a postdoc (naturally I’m getting payed by the uni). Now, my former institute keeps me formally employed, but “on leave”. During the last year it continued to pay me salary (as a form of a support stipend, which is a science-ministry’s brain-gain policy). This income has been taxed there as a salary would, and the two countries have a usual double-taxation-avoidance agreement.

Now, I should report my world-income in a self-assessment to UK’s tax-office, given that I should be considered a UK resident for taxation purposes (residing more than 168 days a year here, etc.). I’m all for this, as the alternative – of filing world-income in my home country – would mean paying in arms and legs on my UK earnings, due to a much lower threshold where 40% rate starts to apply back there. I have not had any contact with UK tax authorities so far, and I’m not even sure if they are aware of my existence or residence.

My situation is somewhat specific, but I’ll try to make the questions general. I’m looking for answers with prior experience in reporting world income in UK. I have looked at the tax office’s web-pages so I have some basic idea of what to do, but some questions remain.

1) When filing a self-assessment for world-income, what type of evidence would I need to provide in support of my claim of UK residence-for-tax-purposes? (I’m thinking my rent contract should do.) Also do I have to assert my tax-residence prior to self-assessment or in conjunction with it?

2) Again, when filing for foreign income, how should I file this particular item? Their instructions say I should file this under foreign income AND employment (see Employment notes and Foreign income notes). But filing under employment requires providing PAYE numbers and P45/60 forms, which my institute and I don’t have. I do have an end-of-year salary report issued by the institute, but it is in my native language and formed according to the local tax rules. Can I provide this piece of paper with a translation? Should the translation be authorised? I suspect my situation here is not unique, as any person whose tax-residence is determined by the 168 days rule may find himself with two differently accounted income reports.

3) Say I provide this foreign salary statement, listing monthly payments. How do I convert the income into UK currency? Do I convert each monthly income at the contemporary conversion rate, or do I make a batch conversion at some other date (which?)? Also, what is the official authority that determines the conversion rates for UK?

4) Am I grossly missing on something here, which makes my intended course of action misguided or unwise?

  • Go here gov.uk/tax-foreign-income/overview – DumbCoder Apr 14 '16 at 13:57
  • May not be important here, but when I moved from Germany to Italy for a similar position, the German tax office decided that my tax residency stayed in Germany: the 18x days/year rule is only one indicator, short fixed-term research employment contracts (3 x 1 year) were considered an indicator of the usual "gain some foreign work experience" rather than indicating a permant move. Thus, I still filed German income tax declarations (declaring Italian wage subject to Italian taxation). – cbeleites supports Monica Aug 3 at 13:29
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I have not had any contact with UK tax authorities so far, and I’m not even sure if they are aware of my existence or residence.

If you're employed as a postdoc with a university, the university HR will have informed HMRC (the UK tax authority) of this fact. They will likely have put you on Pay-as-you-earn (PAYE), meaning that tax for your UK income gets automatically deducted from your salary. You will receive a letter from HMRC with your tax code eventually, however, this can sometimes take a while.

1) When filing a self-assessment for world-income, what type of evidence would I need to provide in support of my claim of UK residence-for-tax-purposes?

It's likely that you will not have to supply any evidence, as the fact that you have a National Insurance number and previous tax code will be enough for HMRC to consider you a resident by default; they would probably ask for evidence if you claimed that you were not a resident.

2) Again, when filing for foreign income, how should I file this particular item? Their instructions say I should file this under foreign income AND employment (see Employment notes and Foreign income notes). But filing under employment requires providing PAYE numbers and P45/60 forms, which my institute and I don’t have.

They will not require UK-specific forms for foreign employment; if you're unsure how to fill in the self-assessment form, the best solution is (unfortunately) to call them. The Foreign section of the self-assessment is for non-employment types of income, so you shouldn't have to fill it in.

Say I provide this foreign salary statement, listing monthly payments. How do I convert the income into UK currency? Do I convert each monthly income at the contemporary conversion rate, or do I make a batch conversion at some other date (which?)? Also, what is the official authority that determines the conversion rates for UK?

You will have to use the conversion rate at the time the income was received (i.e. monthly). You can easily look up historic conversion rates online; they will not care about minor variations as long as you can show how you worked it out if you get audited.

Am I grossly missing on something here, which makes my intended course of action misguided or unwise?

I am a not a tax lawyer, just a EU resident in the UK. In the above, I've taken your statement that this is a foreign income at face value. It may be that this is in fact a stipend, and not a salary. PhD stipends in the UK are not taxed, but I don't know how this translates to foreign stipends. If the tax will be significant, I would say that hiring a tax advisor might not be an unwise investment.

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    Great Answer! Additions I would make are with regard to the "double taxation", since you are in the EU, the EU has a way to sort out double taxation and you will end up paying the maximum of the two countries. you need to have a similar conversation with your previous country about world wide income. I am in this situation but with Australia/UK, but have a friendly accountant who advises. Often the key is what country do you spend > 186 days in (or >183 in some countries) – Marcus D Jul 19 '16 at 12:33
  • Since posting the question I have inquired with one tax advisory service about this, but they managed to confuse the issue further. According to them, foreign income is not subject to UK tax before the money is transfered to a UK bank account. They were not interested (or skilled) to help further. This seems to be a UK specific legal loop-hole, one that, unfortunatelly, does not help me at all. Would ignoring this and reporting the full income in a self-assessment to HMRC (with aid of their helpline in filling the forms) still be a smart course of action? – wanderer Jul 20 '16 at 13:45
  • That sounds like being taxed on a 'remittance basis' as a non-dom (non-domiciled) taxpayer, which I believe has some conditions attached to it, such as forfeiting your tax-free allowance. This might be helpful in understanding the intricacies. – FrankD Jul 22 '16 at 12:13
  • I'm accepting your answer, and I will likely add one of my own in future, once I see how this works out. As a small addendum, here is a page with the official HMRC currency exchange rates: link. – wanderer Jul 27 '16 at 21:56

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