Tax residency nightmare for self-assessment :(

[Audiojack999]

Hi everybody, I need your help, please! So there is the deadline for self-assessment coming soon for the year 2020/2021 and I don't know what to do.

IN SUMMARY:

"Where do I pay my taxes?"

-I spent ZERO days in the 2020/2021 tax year in the UK (just 65 days from the calendar year, January 2020 till 5th March 2020)
-I received UK employment income (furlough) during the tax year while overseas
-I spent less than 6 months in any other country to qualify as a tax resident (Italy, Slovakia, Czech
Republic)
-I don't have any "strong ties" in any other country other than my Italian passport,
and my family in Italy where I haven't lived for 10 yrs and where my residency
there has been officially canceled through the embassy a long time ago
-All this time I had a self-employed online business, already registered in the UK as a sole trader, in the second year of business, which I kept operating while moving around during the pandemic.
-Personally, I would like to pay my taxes for this tax year in the UK as it's a system I'm familiar with as I already did a self-assessment and lived here for 7+ years, I took furlough and also used the NHS card during the year and it's where my online business was operating before Covid got in the way. But I don't know how to deal with the self-assessment as the residency test seems to indicate that I'm not a tax resident for this tax year.

More detail:

From January 2020 until the 5th of March 2020 ( 2 months and 5 days), I was in the UK both employed (in a bar) and self-employed (working online doing media). Due to lockdown and no furlough Scheme at the time (super beginning of the pandemic), my employer made me redundant so I left the UK feeling the borders would close shut and leave me stranded with no job and high rent in London.

Anyway, I went to visit my family in Italy, my UK employer eventually offered me to join the coronavirus furlough scheme which had been created after March, and be on furlough (employment income), while waiting to see when they can call us back. So I waited, hoping to terminate my temporary stay in Italy and take the first flight back to London.

Eventually, when the terms of furlough changed (employer had to pay more) they made us all redundant again and the employer never opened its doors (it's a 1000 capacity venue and restrictions were still ongoing).

Anyway, after that, I left Italy and move to Slovakia to reunite with my girlfriend which also fled the country through her embassy in London.
After Slovakia, we moved to the Czech Republic in the spring of 2021.

So, it's time to pay my taxes. What do I do? HMRC says on their forum that they "don't determine" your tax residency, you have to self-declare by following their tests. I kept operating my online business as usual with my UK bank account, and UK sole trader address throughout 2020 as I didn't anticipate we would be stuck abroad for so long.

And what about the furlough income I received and got taxed during the summer of 2020 while waiting for my employer to open its doors and call us back?

Any help is appreciated.

 

[WaveJumper]

Well I think I will leave most of these points to others but will be interested to know how you were made redundant then taken back on and then received furlough payments

 

[jimbof]

Well I think I will leave most of these points to others but will be interested to know how you were made redundant then taken back on and then received furlough payments

That was actually encouraged by govt that businesses could do that for the purpose of getting furlough payments to people who needed then. The OP just squeaked in on the revised dates:
https://commonslibrary.parliament.uk/research-briefings/cbp-8880/
"Under the initial CJRS, only employees who were employed on 19 March 2020 on a PAYE payroll notified to HMRC through an RTI submission on or before that date were eligible. Employees who were on a payroll on or before 28 February or 19 March but who stopped working after those dates could be re-employed and furloughed."

 

[WaveJumper]

That was actually encouraged by govt that businesses could do that for the purpose of getting furlough payments to people who needed then. The OP just squeaked in on the revised dates:
https://commonslibrary.parliament.uk/research-briefings/cbp-8880/
"Under the initial CJRS, only employees who were employed on 19 March 2020 on a PAYE payroll notified to HMRC through an RTI submission on or before that date were eligible. Employees who were on a payroll on or before 28 February or 19 March but who stopped working after those dates could be re-employed and furloughed."

I was not aware that a company could make you redundant then take you back on within a couple of weeks?

 

[jimbof]

I was not aware that a company could make you redundant then take you back on within a couple of weeks?

In danger of not helping the OP and nuking their thread, but this was all sanctioned at the time. Some businesses had done the (corporately correct) thing of starting to make layoffs when they appeared no longer viable / to defend viability, and so it was done to avoid those employees being unfairly disadvantaged vs others whose employers had been able to cling on a little longer. After some initial outcry over this, they opened up the dates as far as they felt they ccould to 28th Feb (google 28th february CJRS re-employ if you want to read more). Even so, there were some people this couldn't help - for one, your employer had to be willing to re-employ you, and many didn't want the hassle of having people on the books and processing the clams. And the date of 28th Feb was also controversial, as some had been let go earlier than that, but I think that wasn't opened up due to potential for abuse.

 

[WaveJumper]

In danger of not helping the OP and nuking their thread, but this was all sanctioned at the time. Some businesses had done the (corporately correct) thing of starting to make layoffs when they appeared no longer viable / to defend viability, and so it was done to avoid those employees being unfairly disadvantaged vs others whose employers had been able to cling on a little longer. After some initial outcry over this, they opened up the dates as far as they felt they ccould to 28th Feb (google 28th february CJRS re-employ if you want to read more). Even so, there were some people this couldn't help - for one, your employer had to be willing to re-employ you, and many didn't want the hassle of having people on the books and processing the clams. And the date of 28th Feb was also controversial, as some had been let go earlier than that, but I think that wasn't opened up due to potential for abuse.

Good info @jimbof thank you. Personally I think our OP might want to sit down with and accountant or tax advisor and get a little guidance sounds like he's got a pretty complicated situation going on and certainly does not want to end up paying anymore than he should

 

[Newchodge]

Are you now living permanently in the Czech Republic or do you intend to return to the UK? Is the UK the country with which you have strong ties?

 

[Spur Support Services]

You really need to speak with someone, about whether you have broken UK residency or are subject to UK tax, whether your remittances to the UK bank account make a difference and the workplace attached to the contract underlying the furlough arrangement.

 

[UK Contractor Accountant]

Its very hard to break UK Residency status these days - so if no other Country is requiring to register as Resident then I suspect you are still UK Resident until such time as you claim you are Resident in another Country by filling in form P85 and filing it with HMRC.

https://www.gov.uk/tax-right-retire-abroad-return-to-uk

 

[Argentum Tax]

Its very hard to break UK Residency status these days - so if no other Country is requiring to register as Resident then I suspect you are still UK Resident until such time as you claim you are Resident in another Country by filling in form P85 and filing it with HMRC.

Agreed. Audiojack999 you need to urgently consult a properly experienced accountant or tax adviser as there could be a lot of ££ at stake.

 

[Audiojack999]

Thanks, everybody for your replies.

As far as I remember the employer fired the whole team when nationwide lockdowns for such venues started to be a thing. And they eventually got everybody back on board on furlough while waiting for things to unfold since the team was quite big and their contribution at the time was small, I guess it was more convenient for them to do so rather than trying to re-hire several departments. I guess I could find the furlough proposal on my e-mail, I remember meeting the conditions of it based on what was written on it and my employment history with them at the time.

Yes, I guess you're right I'll have to get a consultancy on this to be sure because there are many factors at play. From what I've seen from the official HMRC forum there were many people moving countries during the pandemic and questions regarding residency came up very often in these months.

Now I'm living in the Czech Republic and I'll be based here permanently now. I registered myself as a sole trader for my online business and started paying their social security, health insurance, taxes, etc... from the date I received the license for the Czech business, as required. Things are going well, so I won't be moving back to the UK, but I need to clear things with them.

My ties in the UK are: pre-settled status and many years of residence (not all in a row which is why it's not settled-status), bank accounts, stock brokerage account, most of the clients for my online business are from the UK, my last employer was in the UK.

I'd be inclined to contribute my taxes to the UK until the date I started paying them in Czech so that there is no void when no tax is paid.
I believe I can't even do the self-assessment online if I'm no resident, and the first question that comes up is my address for the self-assessment, and I haven't lived in the address they have since March 2020. Should I put my Czech one, or would this confuse things even more?

Yep, it's complicated. If you know of an accountant which is experienced in tax residency matters to close down this whole thing that would be great!
Thanks.

 

[Spur Support Services]

Thanks, everybody for your replies.

As far as I remember the employer fired the whole team when nationwide lockdowns for such venues started to be a thing. And they eventually got everybody back on board on furlough while waiting for things to unfold since the team was quite big and their contribution at the time was small, I guess it was more convenient for them to do so rather than trying to re-hire several departments. I guess I could find the furlough proposal on my e-mail, I remember meeting the conditions of it based on what was written on it and my employment history with them at the time.

Yes, I guess you're right I'll have to get a consultancy on this to be sure because there are many factors at play. From what I've seen from the official HMRC forum there were many people moving countries during the pandemic and questions regarding residency came up very often in these months.

Now I'm living in the Czech Republic and I'll be based here permanently now. I registered myself as a sole trader for my online business and started paying their social security, health insurance, taxes, etc... from the date I received the license for the Czech business, as required. Things are going well, so I won't be moving back to the UK, but I need to clear things with them.

My ties in the UK are: pre-settled status and many years of residence (not all in a row which is why it's not settled-status), bank accounts, stock brokerage account, most of the clients for my online business are from the UK, my last employer was in the UK.

I'd be inclined to contribute my taxes to the UK until the date I started paying them in Czech so that there is no void when no tax is paid.
I believe I can't even do the self-assessment online if I'm no resident, and the first question that comes up is my address for the self-assessment, and I haven't lived in the address they have since March 2020. Should I put my Czech one, or would this confuse things even more?

Yep, it's complicated. If you know of an accountant which is experienced in tax residency matters to close down this whole thing that would be great!
Thanks.

I have had experience with both inbound and outbound residency issues and can assist if you want.

 

[Argentum Tax]

I'd be inclined to contribute my taxes to the UK until the date I started paying them in Czech so that there is no void when no tax is paid.

Unfortunately you don’t have any choice as to where you pay taxes, and your natural inclination means nothing. You are in the position of having to comply with both UK and Czech tax laws, but if they overlap and result in ‘double taxation’ you may be able to claim double taxation relief under the terms of the relevant tax treaty. This is one of the areas where you need to consult an experienced professional adviser for both countries’ legislation. Any failure to comply with UK tax law can result in significant penalties, and I am sure the same would apply to Czech tax laws.