James Mason from accountants Fifth Element talks straight about business

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I have just been promoted and will be working in Australia for a few years. I won’t need to spend all of my net earnings and I am also likely to receive an inheritance in the UK while I’m away which will need investing. Will I still be able to make use of any UK tax-free vehicles such as an ISA and are there any tax issues I should be aware of when saving or investing while overseas.

The first principle is that generally speaking UK income will be subject to UK tax while you are away. However, there are special provisions on UK interest which can be used to reduce your UK tax liability to nil. UK banks are obliged to deduct a 20 per cent tax charge on interest but if you complete and send form R105 to your bank then they should pay you gross interest without the UK tax deduction. Be careful though, not all banks accept form R105; check first, you may want to change bank. Alternatively, claim to recover the tax deduction by submitting a UK tax return or sending a letter to HMRC. You will be allowed to maintain an ISA while you are ‘not resident’ or ‘not ordinarily resident’ as long as the ISA is set-up before you leave but you are not permitted to add to it while you are away. Another option is to consider UK gilts or UK shares which are both free of UK tax for
non-residents.

Assuming you are leaving on a 457 visa you should be within the scope of the Foreign Income Exemption for Temporary Residents (FIETR) regulations which should put your non-Australian income outside the scope of Australian taxation. Your Australian salary will be subject to Australian tax but it should be possible to earn income on your UK savings free of both UK and Australian taxation. Not qualifying for FIETR means you will be treated as a ‘normal’ resident, you will have a basic rate tax threshold similar to that of the UK and will pay tax on any earnings over the threshold.

If you bring back accumulated savings when you permanently return to the UK then they should constitute capital and won’t be subject to income tax. Any income earnings on these capital sums after you return will be subject to UK taxation but that would be the case whether you remit them to the UK or leave them in Australia.

My brother owes me £45k for a loan which I gave to him about five years ago. I have decided to buy his flat from him. He wants £195k for it. Can I pay him £150k for the flat to reduce the stamp duty.

First things first, Stamp Duty Land Tax (SDLT) is charged in relation to certain “land transactions” where there is an acquisition for a “chargeable consideration”. Anyone who has had contact with contract law will know the importance of the word ‘consideration’ here in that it relates not only to the sum of monies paid in a transaction but other things as well. What constitutes a “chargeable consideration” extends beyond simple cash payments alone. Any consideration, whether cash or non-monetary in nature (e.g. the cancellation of a loan), provided directly or indirectly, and provided by the purchaser or any person connected to him, will be included and will potentially attract SDLT. There is no reason why you cannot conduct the transaction as you have suggested but for stamp duty purposes the loan cancellation will need to be included and stamp duty will need to be paid on the £195k.

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