Where will this be taxed?

JodieR

Client (artist) immigrated to australia in January 2008 - she hasn't earned eanything yet since leaving the UK and doesn't plan on returning to the UK, so I had advised her that 2007/08 was her last UK tax return and now all her earnings will just be taxed in australia.
However, someone in the UK has contacted her to ask if they can use some of her designs for something and as she still has a UK bank account open they will be paying her into this account (she's planning on using it as spending money if/when she comes over for a holiday). She also still receives a small amount of royalties into this account on an annual basis.
The amounts involved are very small - I doubt it's over a few hundred pounds.
Does anyone know whether she will be taxed on this income in the UK or in Oz (or both!)?

Dean

I have a feeling the answer is; both! However, I'm willing to be corrected as I haven't got my manuals to hand.

Casting my mind back to the resident's rules etc, the essense of these are to have a tax payers worldwide income tax here in the UK. In this case, your client's income will be predominately taxed in Oz but any income arising here in the UK will be taxed here. The UK taxed income will then be taxed again in Oz and any income tax suffered here will be relieved when completing here Oz tax return (depending on whether or not there are double taxation rules in place for UK & Oz).

Regards

Dean

JodieR

Thanks - am I right in thinking that she'll not be entitled to a personal allowance in the UK?

Dean

It'll depend on her domiciled status?

If her farther has a UK domicile she will attract that automatically. However, she can changed this by 'choice'. That is to say she now wishes to spend her last days in Oz. If the later is the case she will be deemed domiciled in Oz and no personal allowance available. If the former - personal allowance available.

Regards

Dean

deanshepherd

As Dean correctly says, only income arising in the UK will be subject to tax in the UK for a non-resident individual. However, I would suggest that the copyright that your client has over her designs is vested in her and will therefore be deemed to arise where she is resident. It does not necessarily matter where her client is or indeed where payment is sent.

Your client will keep her personal allowance regardless of whether her domicile changes to Australia or not as Australia is a commonwealth country. Although she would have to demonstrably sever her ties to the UK in order to change her domicile for tax purposes and that is easier said than done.

She will have to seek advice from an Australian adviser to confirm whether she would be liable to tax in Australia as their rules will not necessarily follow ours.