Overseas income for ILR, tax question

[Lantenac06]

Hello all,

I have just seen several posts about tax issues causing ILR applications to be rejected. I am applying for ILR this week, and this has suddenly made me worried; any advice would be much appreciated.

For ILR, as with my previous two Tier-1 General visas, I am submitting a combination of salaried UK income paid via PAYE and overseas income earned in the U.S. The majority is from the UK (£30,000); the U.S. income is around an additional £5,000.

My U.S. income comes from a family company which has employed me part time for many years when things are busy. I make a few conference calls and do a little research while in the UK, and typically finalise everything when I am home in the U.S. in December at the end of the year around Christmas. This is when I approve my work with my employer, and submit my request for payment.

As with previous Tier-1 applications, I have a letter from my U.S. accountant stipulating that the U.S. income has been declared for the relevant U.S. tax (though falls below the income threshold necessary to pay anything), and confirming the tax forms provided by my employer certifying the earnings to the IRS.

I was always given to understand that this income, given I am not yet domiciled in the UK and the income is generated overseas in the U.S. where there is a double tax treaty with the U.K., does not need to be declared in the UK where I am resident for most of the year and have my salaried employment. I was advised that it was sufficient for the US income to be declared to the IRS, and I have not had any issues with my previous Tier-1 applications. I showed my previous Tier-1 applications to a U.K. solicitor who did not raise this as a possible issue, and said it was fine since I could show from my accountant that the income had been declared in the U.S.

However, some of the posts I have read on this forum have suddenly made me nervous. My accountant listed the income in his letter as for 'consultancy fees', given that the work is done part time and only as needed. I don't have my own business or do any work outside my family company, but I worry this makes it sound as though I am veering toward the self-employed spectrum.

I know this is getting quite technical, and would not expect anyone on here to be able to tell me exactly what to do. But I could really use any advice as to whether it will be all right to proceed with my application given I have my accountant's letter confirming the tax has been declared in the U.S., and that I have never had any difficulty with either of my previous Tier-1 General applications.

Many thanks for your advice.

[Wanderer]

I was always given to understand that this income, given I am not yet domiciled in the UK and the income is generated overseas in the U.S. where there is a double tax treaty with the U.K., does not need to be declared in the UK where I am resident for most of the year and have my salaried employment. I was advised that it was sufficient for the US income to be declared to the IRS, and I have not had any issues with my previous Tier-1 applications. I showed my previous Tier-1 applications to a U.K. solicitor who did not raise this as a possible issue, and said it was fine since I could show from my accountant that the income had been declared in the U.S.

You are domiciled in UK for tax purposes, and you need to declare all income to HMRC. Subject to DTA and tax rates re: USA/UK you'll either get a rebate or pay the difference to HMRC.

Tax is due where the work is done....

[Lantenac06]

Thank you for your reply. I was always given to understand that I wasn't domiciled in the UK yet, as I still have a U.S. address and get contracted periodically to do work there for my old company. As far as the location of the work, I don't finalise the work in the UK, if that makes a difference; I sometimes take conference calls or do a little research here, but the actual work is always reviewed and finalised in the U.S., when I am then paid.

It should have occurred to me to look into this in more detail sooner, but as my last two Tier-1 applications have gone off without any queries or issues, it never occurred to me that ILR might be different.

Assuming this is an issue that could derail my application, what are my options? I will need to send in my application via post this week as my tier 1 visa is expiring. Should I speak to an accountant/tax adviser about this to get some advice? Has anyone used an adviser who is good for issues like this?

Then assuming I am able to retrospectively declare any income from 2013, would I be able to submit any paperwork to the Home office after submitting my application? Or could I apply via post, amass the necessary paperwork, and write to UKBA to request a PEO appointment with a solicitor and have them make the case? At least my postal application will buy me a few months, as it sounds as though replies to these are not very quickly forthcoming at the moment.

Or does it not work that way, and will HMRC not be able to review any self-assessment in time for me to add it to my ILR application? I have never dealt with any accountants in the U.K.--all my income here has always been salaried and paid via PAYE--and don't have any idea how this type of thing would work.

On a different note, is there anyone who has been in a similar position and managed to secure their ILR anyway? If so, any advice would be tremendously appreciated.

Finally, my partner is British. We are unmarried, though have been together for almost five years and have talked about getting married if it would help my application. If my ILR application is rejected, would it be possible to get married and transition to some sort of partner/spouse visa?

I am sorry to ask so many questions but I am really panicking today and don't have anyone to talk to about this. I know this is my own fault, and I am an idiot for not thinking of this sooner. But it was an honest mistake, and I really need some help, as I love my job and my partner and don't know what I would do if I had to leave. The last two Tier-1 applications went off so seamlessly, it didn't occur to me that this one might be different.

Thank you.

[KASHIF830]

HI

How much earnings you have to meet your earnings points in ILR application?..

Thanks
Kashif

[Lantenac06]

Hi Kashif, I need £35,000 to meet the points requirement. My new job pays me £40,000, but unfortunately I have only been in it for three months, so have not amassed enough income yet to meet the requirement. (My last job paid me rather less, around £30,000.) During the last twelve months my U.K. income totalled around £33,000, which is why I tried to bring in U.S. income to make up the difference.

[Lantenac06]

Additionally, if things really are irredeemably bad, is it possible to apply for ILR to extend my visa for now and then look into applying for a spouse/partner visa? I don't even know what that is called, so please apologise for my ignorance, but my partner is British. Would it be possible for us to get married and for me to use that to stay in the country if my ILR application ends up being scuppered?

I understand I will need to speak to a solicitor about all of this (I don't suppose anyone has any recommendations within London?), but thought I would start by asking in case anyone is more knowledgeable about these things than I am.

Thank you again for listening.

[Lantenac06]

This is the final note I will make unbidden. Having thought about the situation a little more and discussed it with my partner, on the note of my above message, I wondered if anyone knows if it would be possible to apply for ILR for now given I have my application ready, and this would allow me to extend my visa for a couple of months while the outcome of my ILR is decided, but then to apply for a family/partner visa with my partner?

Technically, in order to apply for the partner visa, one's current leave can't have expired. Yet if I have applied for ILR, my visa *won't* have expired, as it will be extended until a decision is made. Would it be possible to apply for the temporary visa and then withdraw my ILR application? From the sound of it, the partner/family visa seems a little less onerous as far as burden of proof (though clearly it is only a temporary visa rather than a permanent one).

I understand I would lose the ILR application fee, and this whole thing would be rather complicated, and less than ideal considering I would be giving up on ILR for another string of temporary visas. But the key thing to me is not to have to leave my partner because of stupidity over my ILR application.

Yes, I wish to God I had thought of simply applying this way a couple of months ago instead of trying for ILR. But back then, I didn't foresee any difficulty with my ILR, as I didn't have any trouble with my Tier-1 General visas and everything *seemed* to be in order....

Sorry again for making this so long winded. I intend to start calling solicitors tomorrow, but so many folks on here seem to have such better knowledge than I do, if anyone has any insight or experience to share, I would be forever in your debt.

Thank you.

[tier1_london]

I have done a Tier 1 extension with part overseas income and only filed income tax returns in the country where the money was earned. They were not declared in SAR in UK. I had no problems with my recent (end of April 2016) ILR application as well. I think you will be fine. Just keep your US tax documents for all 5 years with you. Being domiciled or not is not so straightforward. AFAIK upto 7 years of residency it could be either way. But after that there is no escape from being considered domiciled. Then double taxation treaties etc comes in. Anyway this is not an area which Home office seems to bother too much in some of the cases I researched on this forum. Am not too sure how HMRC would treat it though.

[Lantenac06]

Hello there, Thank you for your very welcome reply. That is really good to hear, and you have made me feel better following my sudden intense panic the other day.

I have scheduled an appointment with a solicitor to go through everything just to be safe. if I *do* owe any money, I would like to account for it. Though at this point it is a little difficult, as I worry it could look bad to begin sorting through it only now while I am applying for ILR. I have shown my previous Tier-1 applications to solicitors who read through the materials and no one ever mentioned this might be something to look into. It probably was stupid of me never to think of it, but I have never had an accountant in this country, and always thought of my salaried regular income as being different from the occasional part time work I did at home every few years.

I am hoping the fact that I didn’t claim for that much money might be in my favor. Many on here who have had issues with this seem to have claimed for £20,000 or more of overseas earnings, and the most I ever claimed for was around £7,000. Do you mind if I ask roughly how much overseas income you claimed?

Still, I am going to get some legal advice and see what I can do. With my job and partner here now, I need to do everything I can to make sure my application isn’t rejected. Many thanks for sharing your experience, and congratulations on your ILR.

[Lantenac06]

P.S. I don’t know if this helps anyone, but I was looking back through my records to try to remember why I had ever thought I was completely fine with regard to any income I earned at home. I found a note about a ‘foreign workers exemption’. I have just looked this up on HMRC’s website, and found the below. I believe this applies to me, and as you don’t need to do anything to claim it, I hope I should have a decent case if HMRC raises any issues. Nevertheless, I am keeping my solicitor appointment and will see what they say.

'If you work in the UK and abroad
There are special rules if you work both in the UK and abroad.
You don’t have to pay tax on foreign income or gains (even those you bring into the UK) if you get the ‘foreign workers’ exemption’.
You qualify if:
• your income from your overseas job is less than £10,000
• your other foreign income (eg bank interest) is less than £100
• all your foreign income has been subject to foreign tax (even if you didn’t have to pay, eg because of a tax-free allowance)
• your combined UK and foreign income is within the band for basic rate Income Tax
• you don’t need to fill in a tax return for any other reason
If you qualify, you don’t need to do anything to claim.'

[Lantenac06]

P.P.S. Sorry; just to clarify, the above is for those who do not have domicile status in the U.K. I suppose this is the ambiguous issue. I have lived here for six years, and have studied here before that. Yet I also studied in my home country, have family there, and a home address abroad. I also spend a month each year in my home country. I am hoping that will give me a strong case for considering myself a non-dom until I get my ILR and decide to settle here permanently (which I would certainly like to do! But it seems odd to think I could be considered domiciled here when at the moment I have no certainty of staying). In any case, it gives food for thought.

[tier1_london]

It was about £8k. But I only used it for my extension and not for my ILR. But that should not matter really. Also, another thing to note is that when the said money was earned, I was in UK for about 2.5 years. So it could be argued that I wasn't domiciled. I am yet to come across a case here in the forums where the Home Office stated that taxes should be paid for overseas income in the UK and rejected a visa or an ILR. I did research before my ILR as I was in a similar situation as you are and was actively considering ammending SAR. I decided against it, hired a solicitor and had no problems with my PEO application at Croydon.

[noajthan]

P.P.S. Sorry; just to clarify, the above is for those who do not have domicile status in the U.K. I suppose this is the ambiguous issue. I have lived here for six years, and have studied here before that. Yet I also studied in my home country, have family there, and a home address abroad. I also spend a month each year in my home country. I am hoping that will give me a strong case for considering myself a non-dom until I get my ILR and decide to settle here permanently (which I would certainly like to do! But it seems odd to think I could be considered domiciled here when at the moment I have no certainty of staying). In any case, it gives food for thought.

You can dig into the intriguing and challenging question of domicile here:
https://www.gov.uk/government/uploads/s ... ttance.pdf

[Lantenac06]

Thank you for that. It sounds like you were in some ways in a similar boat to me, at least as far as the amount of overseas earnings. I don't think it makes it any easier that you used the overseas income solely for your Tier-1 extension; judging from the threads on here, this seems to be precisely the income the Home Office is going after--after all, if you did have recent overseas income for your actual ILR application, you most likely wouldn't have had to declare it on a self-assessment yet. So it's the earlier income they seem to be targeting, as this is the income one should already have had to declare on a previous self-assessment (if applicable).

I think the non-domicile issue is important. I don't know if you fit into the exemption above, but one would hope a clued up officer would be aware of it. Domicile seems to be a somewhat tenuous thing, but I think if one used overseas income during one's first few years in the UK, does not have permanent settlement in the UK, and still has family/property/strong connections in one's home country, the UKBA would be hard pressed to try to prove your domicile had definitively changed to the UK from your home country. I now am quite keen to settle here, but when I made my Tier-1 and extension application, I really wasn't sure at all what my plans would turn out to be. So based on HMRC guidance, I think it is perfectly reasonable to claim I was not a UK domicile at that point; I expect you would have fit into the same category.

Anyway, thank you again for your message. I saw some rather alarmist things on here, and I think I may have worked myself into an unnecessary panic. Still, better to be safe than sorry.

[Lantenac06]

Thank you! It is rather interesting, and I am actually surprised how user-friendly HMRC makes the guide with the handy flowchart to determine one's status. Very useful.

P.P.S. Sorry; just to clarify, the above is for those who do not have domicile status in the U.K. I suppose this is the ambiguous issue. I have lived here for six years, and have studied here before that. Yet I also studied in my home country, have family there, and a home address abroad. I also spend a month each year in my home country. I am hoping that will give me a strong case for considering myself a non-dom until I get my ILR and decide to settle here permanently (which I would certainly like to do! But it seems odd to think I could be considered domiciled here when at the moment I have no certainty of staying). In any case, it gives food for thought.

You can dig into the intriguing and challenging question of domicile here:
https://www.gov.uk/government/uploads/s ... ttance.pdf