UK Double Tax Agreements

The UK offers several double tax agreements.

Double tax treaties exist in order to protect the individual from being taxed twice on the same income. The UK has generous and many so-called double taxation treaties. Individuals with UK residence or citizenship who work for (and pay taxes to) a foreign entity within The UK, or are working abroad and paying taxes to the country in which they work will need to familiarize themselves with these treaties and agreements.

How to Determine Whether You Qualify for a Double Taxation Exemption

If you work for a foreign embassy or entity that lies within, but outside the jurisdiction of, the UK, you may be liable for taxation in the country of jurisdiction. In this instance, you will benefit from understanding and researching your rights to invoke one of the treaties the UK has with more than 100 countries, as documented on HM Tax website.

In addition to the aforementioned conditions, most UK citizens working or living in another European Union (EU) or European Economic Community (EEC) country, as well as the USA, are entitled to the benefits of exemption under one of the double tax treaties.

How Do You Determine Which Countries UK Has Tax Treaties With?

Since the UK has one of the world's most extensive double tax treaty laws, your first stop involves determining where you are and visiting the HM Tax website. (See the the link in the References section.)

Simply open the link and go to the letter of the country you work in. As illustrated by the extensive list, few countries lack a double tax treaty or some form of double tax exemption with UK.

Once you have determined eligibility, simply follow the instructions on the HM tax website for double taxation; this will exempt you from the taxation per your country's specific agreement.

What if You are Not a UK Resident?

Well lo and behold, your company has sent you on assignment to work at your UK office for the year. The UK extends the same courtesy as that described in Section 2 to foreign workers who do not have resident status in the UK. This status often applies to intra-office temporary positions, whether for training purposes or for the purpose of opening a new office, filling in for a colleague who has gone abroad for training or taken a leave of absence, etc.

Likewise in such situations, visit the HM Tax page via the link found in the References section, and read through the link that best describes your situation.

American citizens, please note: Despite dual nationality and any agreements, you must always declare your taxes in the USA, even if you are not liable for any payments. Many U.S. tax firms, including many well-known American companies, have offices in Europe (London, particularly) that will help you---most importantly in advising you if you have failed to file taxes and have only recently learned that you had that obligation. This mistake is rectifiable.

What if You are British Working Abroad, Must You Declare?

The short answer is yes. Like the United States, the United Kingdom expects you to declare all your income. Look for applicable forms on the HM Tax site, linked in the References section.

Unfortunately, some countries will not only take your taxes from your paycheck but also have no treaty with the UK. As such, mainly for the purpose of benefits, such as pension, the so-called "dole" and other benefits, you must declare and pay the double taxation. Choosing not to pay can catch up to you, though if you choose you may simply claim yourself as on "holiday" for the time you were or are working abroad.

What to Do if You Double Pay?

UK double tax agreements provide an invaluable way for expatriated workers to ensure they get all the money they deserve and have earned. That said---especially if you work outside the EU---take the time to ensure that you receive credit for any monies you want to pay into a government pension system, or you may choose to pay for a private pension. Contact the British Embassy in the country in which you work, and ask to hear your options and whether your UK pension is receiving credit in conjunction with the specific treaty for the country where you work. While the treaty may give you more money to burn now, you may find---most notably if you have expatriated for much or most of your working life---that you are not entitled to the same benefits at retirement as your fellow countrymen who lived and worked in the UK their whole lives.

References

• Her Majesty's Tax Site