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UK Tax Accountants

Discussion in 'Accounting & Tax' started by tmanski, 21st Mar, 2016.

  1. tmanski

    tmanski Member

    Joined:
    24th Jun, 2015
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    Location:
    London
    Me and my now wife moved to the UK 18mnths ago, and have since become Australian non-tax residents as we both have permanent jobs with no intention to move back to Australian in the near future.

    Since moving to the UK we have purchased a property in QLD and we will be using Paul@PFI for Australian tax affairs however we are wondering if we need to do anything extra with our UK tax return. The property is negativly geared therefore we do not make any income off the property, therefore technically speaking we do not make any additional world wide income. However do we still have to disclose any of this to the UK Tax man, as would wouldn't otherwise be lodging a UK tax return (as done automatically by employers in the UK in ordinary circumstances)?

    Getting more to the point does anyone here have any advice or have any contacts that they refer us to?

    Thanks
     
  2. Rob G

    Rob G Well-Known Member

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    16th Oct, 2015
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    Location:
    Melbourne
    Question the mix of non-residents and negative gearing generally.

    1. Unless you have other Australian source income (not counting dividends and interest) then your surplus deductions are not able to be used for the foreseeable future while a non-resident.

    2. Your property may not be negatively geared in calculating any UK tax if deductions like Div 43 building allowances are not permitted or depreciation rates may be different. Negative gearing may not be permitted anyway meaning lost surplus deductions.

    All subject to override by the Australian-UK tax agreement, but income and capital gains from Australian real property generally has an Australian priority.

    You should retain the services of a UK tax adviser who is also familiar with international issues.
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    In Australia you could end up with accumulating tax losses which may reduce future capital gains if a sale of property occurs.

    Yes as UK tax residents the AU rental income is a matter to include in your UK return/s. In the UK the tax outcomes may be different for this property v's Australia. eg Depreciation and capital allowances may not be deductible and the UK rules on buy to let may affect future interest deductions...Your UK adviser the best person to address that.
     
  4. Luca

    Luca Well-Known Member

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    28th Jan, 2016
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    Location:
    Melbourne
    Hi @Paul@PFI ,

    My "guessing" was that if you own assets in AU but live overseas and you are "non-resident for tax purpose", in your Australian tax return you can still claim tax deductions e.g. depreciation, interests etc. If the result is a debit, this will be accumulated and potentially claimed back if you became "resident for tax purpouse" again. If it's a credit, it will be subject to Australian taxation and potentially double taxation depending on the country you live in.

    If you own few properties in Australia, you want ideally profits / debits to be null so to not pay taxes anywhere. This means restructuring your portfolio if planning to be non-resident for a while.

    I am not an accountant so maybe I have got the whole concept wrong :)
    Could you please clarify if possible? Thanks
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Perhaps. Each individual needs to determine their own position based on circumstance. An accumulated loss must be shown in the relevant return and carries forward and may offset future Australian income (positive gearing, return to AU) or it may be used to reduce a taxable capital gain if the property sells.

    If you are non resident in Australia you need to consider the tax laws of the country you are resident in to determine their specific rules. Don't assume a loss here is a loss elsewhere. They may seek to tax the rental income but use other deduction rules eg no depreciation, repair rules, limits on interest etc The UK is a excellent example.

    If no AU tax is being paid then the full and final tax could be based on foreign rules. Its not uncommon to see a negative geared situation in AU and a positive tax bill in the other. If AU tax is being paid then they may allow a tax credit. This can impose complex timing issues and conversion to a different currency.

    Of course secondary tax impacts must also be explored. eg land tax,

    A good example of a tax problem can arise if a former home is rented while overseas. Rented say 5.5 years then sold. Arguably it may be CGT exempt here under the CGT main resident absence rule. But it may be taxed in the foreign country if they adopt the view that the cost base is the market value on the date you arrived in that country. This is common. The DTA contains complex tiebreaker rules. If the gain is exempt here their right to tax may prevail.
     
  6. Luca

    Luca Well-Known Member

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    28th Jan, 2016
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    Location:
    Melbourne
    Thanks Paul, terrific explanation. More complicate than what I thought.
     
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