Overseas work

lrhem

I have a client who spent 6 months travelling New Zealand and arrived back January this year. Whilst there he took on self employed work for 3 months and was taxed 20% before being paid. Once back in the UK he registered as Self Employed etc and has been working and been paid less CIS deductions. Am I right in thinking all income from New Zealand and UK should be included in his tax return and the foreign tax paid can be claimed as a foreign tax credit (as its New Zealand). He insists it doesnt need to go on his tax return but class 4 ni is also due on his income which is why its included on the return. Is that correct?

JodieR

Yes, I think you're right. I'm not an expert in overseas tax but I'm sure that the basic rule is that you are taxed on your worldwide income in any year that you're resident in the UK. If you're out of the UK for a complete tax year (with only limited holidays back to the UK) then you're treated as not resident for that tax year and for UK tax purposes will only be taxed on your UK income in that year. If your client was only overseas for 6 months then the dates couldn't possibly have straddled an entire tax year, so he'll be taxed on his worldwide income and then will probably get tax relief for the foreign tax paid but you'll have to look into what rates apply under the double taxation agreement to see what % of New Zealand tax can be treated as a tax credit.

Jan

Yes you are taxed in world income. Slightly different circumstances, but it should answer your query.
My daughter travelled to oz in December 2009 and as she hadn't worked for a full year in the uk we tried to claim a refund of tax. She did intend working whilst away but didn't. Meanshile we received a letter from HMRC here which said-
" Because you have not left permanently or to work full time for a complete tax year you remain resident and ordinarily resident for tax purposes.......Please keep evidence of all income received outside UK and all income tax payments deducted.You will not be taxed twice on this income because I will include a foreign tax credit in my calculations"