Overseas Earnings, Taxation

Overseas earnings taxation In days gone by if you were resident in the UK but worked abroad for a year you could skip paying income tax to the Inland Revenue. This loophole no longer exists - having been dealt with in the March 1998 Budget.

At that time the Chancellor abolished the "foreign earnings deduction". Previously anybody resident in the UK for tax purposes who worked wholly or partly outside the UK during a qualifying period of at least 365 days had been able to obtain a 100 deduction against their overseas earnings. The only people who will still benefit are "seafarers".

The relief was abolished to catch a few wealthy individuals who had exploited the rules to avoid paying tax altogether. However it also caught a lot of other people as well. Anybody who previously qualified for the relief now needs to make an accurate declaration of their overseas earnings and claim any overseas tax paid as a foreign tax credit .

You may not know the amount of foreign tax payable on some or all of the overseas earnings by the time your UK tax return needs to be filed. The onus is on you to notify the Inland Revenue of any adjustments to the foreign tax paid so that the amount of tax credit claimed can be adjusted. The end result is that you may not pay more overall tax but its likely to cost you more to work out!

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2009-02-17 00:00:00 © Moneyextra.com