I’m working abroad - am I doing my taxes right?

Earning in multiple tax jurisdictions can feel really complicated! How unfair it is that our profession often throws us into these situations without teaching us what our responsibilities are or how to minimise our bills.

Many countries have bespoke double taxation agreements with the UK which makes writing a generic blog difficult. In many cases, the answers depend on the specific circumstances. Having said that, I will outline below some of the general principles, with the caveat that it is probably worth seeking advice as it can get more complex.  

What is tax residency?

Tax residency is important when it comes to determining how to declare your worldwide income. In the UK, non-residents are only assessed for tax on their UK income, whereas residents are assessed on their worldwide income.

Residency is determined by things like the number of days you spend in a country during the tax year, the type of work you have and how much of it there is, where your permanent home is and how long you spent there, whether you have a permanent home at all, where your family is, how long you were in the country in previous tax years, where your social, domestic, political and cultural links are greater, the number of visits you made to a country and, in some cases, your nationality... there can be quite a lot to it.

You can even be considered resident in more than one country, in which case you should look to the double taxation agreement between them to see if there are any special provisions for ‘dual residents’.

It is also possible to apply ‘split year’ treatment in certain cases which means you will be deemed resident in one country for the first part of the tax year and another country for the latter part.

Are there special rules for entertainers?

Generally, where you are non-resident for tax purposes, something called 'withholding tax' should be deducted at source from the fee income of entertainers in the country where the work is performed. In the UK, this is only deducted if the payment is more than the UK personal tax allowance. The onus is on the organisations who you work for to deduct this tax when you make clear to them you are non-resident. You must keep these withholding tax certificates as proof of tax paid abroad when applying for double tax relief in your resident country (see below). 

Do I need to do a UK tax return if I'm working in the UK as a non-resident?

Often, the answer is yes. 

In the UK, entertainer’s withholding tax is treated as a 'payment on account' which means it's an advance payment towards your actual liability in the tax year.

If the amount of withholding tax deducted from your fee income is less than the actual amount you owe in the tax year (which is common if getting multiple fees which are below the UK personal tax allowance) then you should tell HMRC by 5 October following the end of the tax year and should complete a self-assessment tax return. You should fill out the residency section to claim your UK personal allowance which is available to a variety of non-residents.

If you think you have paid too much withholding tax, you can write to HMRC at the end of the tax year for a refund or, in more complex cases, may be asked to complete a self-assessment tax return.

'I didn't realise I could get relief for my tax paid abroad!'

Being taxed twice on your foreign income can lead to a very large bill indeed... the good news is you can apply for 'double tax relief' to ensure this doesn't happen. For entertainer’s income, you are usually taxed in the country where the work was carried out and should apply for tax relief in the country where you are resident. The relief is generally limited to the lower of the tax liability on the same income in each country. This can involve doing a separate calculation which treats your foreign income as the 'top slice' of your worldwide income where you are resident. 

What about social security?

Social security costs are not covered by double taxation agreements and, under EU law, you must only pay your social security contributions in one country. This means that if you are working temporarily in the EU, Norway, Iceland, Switzerland or Lichtenstein, you must complete an A1 form with HMRC to prove to the country where you're working that you pay social security in the UK and are exempt from paying abroad. These forms are job-specific and need to be applied for well in advance of the overseas work beginning.

What about my expenses?

Withholding tax is, unfortunately, taken directly from your fee income at source, whereas when you declare your worldwide trading profits in the country where you are resident, you should include all your relevant worldwide allowable trading expenses to reduce your tax bill, as per the tax laws of that country. 

'I declared my foreign income there and my UK income here, my accountant assures me that's correct'

Just to reiterate - generally, this isn’t correct!

Let's not forget that being an international artist is a really exciting prospect - just make sure you think about these aspects well in advance to avoid headaches and penalties further down the line and seek advice if you are at all unsure.