Courtney Gleeson, Principal Lawyer of Sheltons Group Legal, joined the panel for the Australia-United Kingdom Free Trade Agreement seminar organised by the  Australia-United Kingdom Chamber of Commerce in London.

The event, held on 06 September 2023, was an opportunity for insightful discussions, valuable networking and the exploration of key provisions for the benefit of Small and Medium-sized Enterprises (SMEs).

Thank you to Australia-United Kingdom Chamber of Commerce for inviting Sheltons to be a part of such an insightful event.

 

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Sheltons Group Legal – an Australian law firm based in London

Entering the Australian market is a different ballgame – when you compare the corporate requirements of your head office or company location to that of Australia, there are likely to be considerable differences in how a company is required to operate!

Australian company law is an area our clients often have difficulty navigating, usually because they simply don’t have time to become well versed in it when their time is dedicated to running a business. However, corporate compliance is a really important area for company directors and businesses to be aware of. A lack of awareness can lead to liabilities, including personal liabilities, penalties, and generally compromising situations for businesses in the Australian marketplace.

What is corporate compliance?

The Corporations Act 2001 (Cth) (‘the Act’) is the primary Australian legislation that regulates compliance obligations and standards for both Australian companies and foreign companies that are trading in Australia. Among many matters, the Act prescribes the ongoing legal obligations required of all companies registered under it. Some key obligations include: maintenance of corporate registers; documenting various company decisions, and ensuring shareholder approval is obtained; annual declarations of solvency; filing financial reports; and notifying the public record keeper of particular changes to a company.

Many clients don’t realise that company directors have a duty to ensure that the company they are involved with complies with statutory requirements. Sheltons Group has been working with clients to ensure their company compliance for decades now. We’ve developed streamlined operations to help Australian companies easily meet company law requirements, every day. Sheltons Group Legal can take care of your corporate compliance, allowing you to maximise time concentrating on business activities.

Is your Australian company legally compliant?

If you have any questions about how to ensure your Australian company and business operations maintain good standing in Australia – we welcome you to contact us! We are glad to discuss matters which relate to your company specifically, or in general, and will work with you to ensure your company is legally compliant.

Courtney Gleeson
Lawyer
Sheltons Group Legal (London and Sydney)
C.Gleeson@SheltonsGroup.com

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Sheltons Group Legal – an Australian law firm based in London

Under recently introduced legislation, ‘casual’ employees in Australia have been granted a right to request the conversion of their employment to an ‘ongoing’ or permanent position – subject to certain criteria. This enables employees to take advantage of more extensive entitlements that have previously only been provided to ‘ongoing’ or permanent employees.

The difference between ‘casual’ & ‘ongoing’ employment

For the first time, casual employment has been specifically defined in Australian employment legislation as: an employee whose employer makes “no firm advance commitment to continuing and indefinite work according to an agreed pattern”.

In Australia, employment on a ‘casual’ basis carries different legal rights for the employee as compared to ‘ongoing’ employment: a term describing both part-time and full-time workers, i.e. those employed on a permanent basis.

A common example of a ‘casual’ employee might be a warehouse worker whose hours are not consistent or defined by a continued ongoing rota or roster. Conversely, an ‘ongoing’ employee might be administration or payroll staff who work the same agreed pattern of hours or days each week, with an expectation of continued work.

Distinguishing whether someone is a casual or ongoing employee can be blurry in some cases and will often depend on the factual circumstances of the arrangements.

Employers are now legally obliged to offer casual employees conversion to an ongoing position.

The measures introduced essentially focus on job security for employees. Where a casual employee has worked a certain period of time for the same employer, the employer must offer a conversion of their employment from casual to ongoing.

Why is the distinction of employees important?

Failure to classify an employee appropriately can leave employers vulnerable to ‘double-dipping’ claims. For example, where an employee who has already been paid casual loading under an agreement for casual employment later seeks compensation for unpaid leave and other entitlements owed to them as if they were a part-time or full-time employee on the basis that their employer had made an incorrect classification.

Incorrect employee classifications can also lead Australian Government regulators to impose penalties against the employer, and fines to backpay unpaid wages can easily bankrupt small businesses. So, if in doubt, now is a good time to assess the classification of employees in your business.

Sheltons Group Legal can assist you in ensuring your business has the ‘casual’ v ‘ongoing’ employment distinction correct and we would be glad to hear from you!

Courtney Gleeson
Lawyer
Sheltons Group Legal (London and Sydney)
C.Gleeson@SheltonsGroup.com

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Sheltons Group Legal – an Australian law firm based in London

The Australian Fair Work Commission has determined there will be Australia-wide increases to the national minimum wage as well as to Modern Award minimum wages. The increases take effect from 1 July 2023.

Each year, the Fair Work Commission (‘FWC’) makes an order that covers subjects including the national minimum wage after considering factors relevant to the economy, employers and employees.

In the face of persistent high inflation, the Government’s federal budget earlier this year urged the FWC to ensure the Australian workforce to which the minimum wage applies does not suffer a wage-price spiral backwards.

Accordingly, the FWC’s Annual Wage Review 2022-23 announced that the national minimum wage would be increased by 8.6% and Modern Award minimum wages increased by 5.75%.

As a result, the national minimum wage has increased from AUD 812.60 to AUD 882.80 per week for full time employees (i.e. employees who work an average of 38 hours each week) – meaning the hourly minimum wage is now AUD 23.23. The Modern Award minimum wage increase means that pay rates above AUD 882.80 per week will increase by 5.75% per week.

Modern Awards are industry or occupation specific and apply to those performing work covered by the Award. As such, it is important to be aware that different minimum wage rates apply across different Modern Awards. 

Approximately 2.6 million employees across Australia are expected to receive the minimum wage increases. It is therefore essential that all employers take note of the increases to ensure each employee is being paid at or above the new minimum rates. Annualised salaries must be sufficient to absorb all statutory entitlements. 

If you would like further information about the Australian wage increases, or assistance in determining which Modern Award applies to your employees – please contact us.

Courtney Gleeson
Lawyer
Sheltons Group Legal (London and Sydney)
C.Gleeson@SheltonsGroup.com

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Sheltons Group Legal – an Australian law firm based in London

Is your business about to enter into an agreement or contract governed by Australian law?

It is really imperative that you are aware of the key terms and obligations that you’re committing to – and that you understand if what you are agreeing to is standard practice.

It is often the case that laws governing certain commercial arrangements in Australia are significantly different from those ordinary in the jurisdiction you are familiar with. Standard agreements that you may regularly adapt and use for business in other countries may not be suitable or enforceable in Australia.

Australian shareholder agreements, business acquisition or sale documentation, commercial property leases and agreements relating to the supply of products or services with others may be governed by national legislation, or by state-based laws and regulations depending on where the contracting parties might physically be located or where services are generated.

Sheltons Group Legal can review and advise on agreement terms before you proceed with any commitments.

Typically, most commercial contracts and agreements are favourable to the party that has prepared the governing document. It is important not to simply assume the terms and obligations have been included in a fair and equal manner.

Businesses caught in a litigious event usually find themselves in such situations by failing to record the terms of an agreement correctly or because of a laid back approach to entering into an agreement. Having a clear and concise written agreement in place should not just be a business consideration – it’s a must!

Sheltons Group Legal is able to assist with the preparation or review of any commercial agreements or contracts that your business might require. Having a written agreement in place documents the arrangements between the parties and ensures clarity for all. Clear articulation of the terms and obligations is crucial to avoid ambiguity and disagreements at a later date.

Courtney Gleeson
Lawyer
Sheltons Group Legal (London and Sydney)
C.Gleeson@SheltonsGroup.com

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Sheltons Group Legal – an Australian law firm based in London

Until recent legislative changes to the Corporations Act 2001 (Cth), a director’s resignation was taken to be effective from the date confirmed in a relevant resolution, or simply when the director provided written notice of their resignation.

The ‘date of effect’ might not be what the individual director OR company understands it to be

Previously, the date included on a notice of resignation automatically meant the end of liability, the end of director duties being owed to the company by that individual, and the end of that individual having authority to represent the company. However, a change in the legislation means that carrying out the correct steps with respect to a resignation are now more important than ever. Not following the necessary steps can cause burdensome complications for both the company and the individual seeking to resign from their director post.

Where notification of a director resignation is not received by ASIC (Australia’s corporate regulator) within 28 days from the date that the resignation is proposed to have effect from, the legal and actual date of effect will be the date on which ASIC is notified and NOT the date specified in a notice of resignation or company resolution.

Significance of the ‘date of effect’

What is the date of effect? The date of effect refers to the date on which an individual is legally ceased from their role as director.

If ASIC is not correctly notified within the prescribed timeframe, the individual who purports to have resigned from the position of director will legally still be a director of the company until such time as ASIC is notified. Any attempt to significantly back date the date of effect recorded with ASIC is terribly complicated and can also require a Court Order, which will only be granted in exceptional circumstances.

The importance of correct director resignations

If a company is of the view that a director has resigned, or the company has removed a director, but ASIC has not been duly informed within the 28 day time period – that individual is legally still a company director until ASIC is notified. At all times when an individual is a company director, they are not only bound to directors’ duties and may in instances be held personally liable, but they have authority to represent the company, enter into contracts/agreements and make other important decisions representing the company. As you might imagine, this can cause concern and confusion for many parties and doesn’t serve your business’ reputation well from a customer’s perspective.

To avoid unnecessary stress and expense in rectifying a failed director resignation or removal, please contact us to assist whenever there is a change in your company’s directorship.

Courtney Gleeson
Lawyer
Sheltons Group Legal (London and Sydney)
C.Gleeson@SheltonsGroup.com

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It is now more important than ever to carefully consider tax implications when disposing of Australian residential  property (real estate) as a foreign resident. Over the last 6 years Australia has introduced new capital gains tax rules for foreign residents.

In this article, we consider the potential tax consequences of selling Australian residential property as a resident of the UK. The article is split into two segments:

1. Australian tax implications, and

2. UK tax implications.

Please note, the article below is a brief summary of tax legislation in both the UK and Australia. If you are planning to dispose of Australian property as a foreign resident, it is recommended that you seek professional advice specific to your situation and not rely solely on this article.

Australian Capital Gains Tax Implications

In Australia there are two capital gain tax (CGT) reliefs commonly utilised when disposing of residential property.

The first is the ‘main residence exemption’. The main residence exemption means there will generally be no tax liability upon sale of your main residence. Where the dwelling was your main residence for only part of the ownership, the full exemption is proportioned according to the number of days it was not your main residence. Please note, the exemption will remain available where the main residence was vacated and not rented out (and no other main residence election was made).

However, since 30 June 2020 foreign residents who have sold property have no longer been able to benefit from the exemption, unless they have satisfied the requirements of the life events test, covered below.

In order to qualify for the ‘life events test’, both of the following must be true:

  • You were foreign resident for tax purposes for a continuous period of 6 years or less
  • During that period, one of the following occurred:

– you, your spouse or your child under 18 had a terminal medical condition
– your spouse or your child under 18 died
– the CGT event happened because of a formal agreement following the breakdown of your marriage or relationship.

The second frequently utilised capital gains tax relief in Australia is the capital gains tax discount. When you sell or disposes of an asset, you can usually reduce the capital gain by 50% if you owned the asset for at least 12 months.

As with the main residence exemption however, the capital gains discount has now been removed for foreign residents who acquired assets after 8 May 2012.

Where foreign residents either acquired the asset on or before 8 May 2012 or had a period of Australian residency after 8 May 2012, they may apply the discount to part of their capital gain. The discount is then calculated using the ATO worksheet, attached here.

Upon disposing of Australian property and once the capital gains tax calculation has been finalised, foreign residents are liable to tax on their capital gain at a rate of 32.5%.

UK Capital Gains Tax Implications

As a resident of the UK you are normally liable to UK tax on your worldwide income and gains arising in the tax year, this is known as the arising basis of taxation. Therefore, your Australian residential property gain will normally be taxable in the UK.

Until 05 April 2023 the UK capital gains tax allowance is £12,300. However, from 6 April 2023 this is reduced to £6,000 and then again to £3,000 from 6 April 2024. Any taxable gain over the relevant allowance will be liable to residential capital gains tax rates, currently standing at 18% and 28% (depending on the size of the gain and marginal rate of income). Unlike the new rulings for foreign residents in Australia, the proportion of the gain which relates to the period of time where the property was your main residence will be exempt from the UK taxation. This is known as principal private residence relief (PPR relief).

However, where you are resident but non-domiciled in the UK, you can elect to be taxed in the UK on your UK income and gains alone, and pay UK tax on foreign income and gains only if these are remitted (brought) to the UK. This is known as the remittance basis of taxation. Electing to use the remittance basis however, means the loss of your tax-free personal allowances and capital gains tax exempt amount for the year the election is made. In many scenarios, the individual is selling the Australian property in order to purchase property in the UK. In this instance the capital gain would be remitted to the UK and thus UK capital gains tax would apply. Therefore, if you are entitled to use the remittance basis, it is important to calculate the most tax efficient method of taxation.

Where you are taxed on an arising basis (worldwide income) and you’ve paid tax in Australia on your Australian property gain, you may be entitled to a UK foreign tax credit.

Where a ‘UK resident’ has property gain from Australia, the Australia-UK double tax treaty in principle becomes relevant. However, it generally has no impact on the application of domestic law in Australia or the UK.

Contact Us

As evident above, ongoing changes to the rules for foreign residents selling Australian property means it is now crucial to understand the tax implications of disposing Australian property, particularly whilst resident of the UK.

If you require any advice or assistance with UK or Australian capital gains tax, we are here to help. Simply send us an email at the address below or fill in our contact form to arrange a free initial consultation.

For enquiries please contact:
Manny Singh
Senior Manager
Sheltons Accountants
M.Singh@SheltonsGroup.com

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Are you moving to the UK and renting out your property in Australia?

Below we have covered some popular Australian and UK tax issues and questions that arise when becoming a non-resident landlord of Australia.

Will I be taxed on my Australian rental income in Australia?

Non-residents of Australia are generally taxed on income derived directly or indirectly from sources in Australia (subject to the interaction of a double tax agreement). As a result of this, when you are tax resident of the UK you can be subject to Australian tax on rental income derived from an Australian source.

Gross rental income will be included as assessable income in your Australian tax return. You will then be entitled to a deduction for tax-deductible expenses incurred from renting out your Australian property. Where your deductions exceed the rental income, that loss may be offset against your other taxable Australian sourced income, or carried forward to the following tax year. Where you have generated a profit, you will be subject to tax at 32.5 percent on the first $120,000 (AUD) of net income, and then rates ranging from 37 percent to 45 percent for the remaining income.

Will I be taxed on my Australian rental income in the UK?

As a resident of the UK you are normally liable to UK tax on your worldwide income and gains arising in the tax year. Therefore, your Australian rental income will normally be taxable in the UK.

However, where you are resident but non-domiciled in the UK, you can elect to be taxed in the UK on your UK income and gains alone, and pay UK tax on foreign income and gains only if these are remitted (brought) to the UK. This is known as the remittance basis of taxation. Electing to use the remittance basis however, means the loss of your tax-free personal allowances and capital gains tax exempt amount for the year the election is made. Therefore, if you are entitled to use the remittance basis, it is important to calculate the most tax efficient method of taxation.

Where you are taxed on an arising basis (worldwide income) and you’ve paid tax in Australia on your Australian property income, you may be entitled to a UK foreign tax credit.

Where a ‘UK resident’ has property income from Australia, the Australia-UK double tax treaty becomes relevant.

What expenses can I claim on my Australian property income in the UK?

If this is your first experience of being a landlord whilst resident of the UK, you may be unsure about what expenses are tax deductible. HMRC (UK equivalent to the ATO) provide that for an expense to be allowable for tax purposes, it should be incurred wholly and exclusively as a result of renting out your property. Typical expenses include building insurance, estate agent fees and utility bills (only if not reimbursed by tenants).

In some instances, what you assume are revenue expenses may in fact be ‘capital expenses’. For example, improving or upgrading something that was existing. Capital expenses are not allowable and cannot be claimed against rental income, however you might be able to set them against capital gains tax if you sell the property in the future. You should seek professional advice if you’re unsure on the tax treatment of your property expenses.

Unlike in Australia where mortgage interest is fully tax-deductible, since April 2020, you have no longer been able to deduct any mortgage expenses from taxable rental income whilst resident in the UK. Instead, mortgage interest is used as a tax reducer, where you receive a tax credit based on 20 percent of mortgage interest payments. For example, if you make mortgage interest payments of £5,000 per year, you will receive a tax credit of £1,000 to deduct from the liability incurred on your property income.

Will I receive my Australian personal allowance as resident of the UK?

If you are a non-resident for the full Australian income year (01 July to 30 June), you can’t claim the tax-free threshold. This means you pay tax on every dollar of taxable income you earn from Australia.

If however, you are an Australian resident for tax purposes during the income year, you will receive a part-year tax-free threshold. This may be relevant in your year of exit from Australia.

How do I file my UK self-assessment tax return?

As resident of the UK, when you are in receipt of overseas income it automatically places you into the UK self-assessment regime. The return will be used to calculate any UK tax liability arising from your Australian property income and any additional relevant income.

The tax return deadline in the UK is 31 January following the tax year end (31 October for paper returns). Automatic late filing penalties will apply after the deadlines have passed.

Ways in which you can file a UK tax return:

  • Send your tax return by post
  • Use commercial software
  • Use HMRC online services
  • Get help from a professional

How do I file my Australian tax return?

As non-resident of Australia, the due date for your tax return remains 31 October following the end of the tax year. Non-residents may obtain an extension to 15 May of the following year if they are registered with a tax agent, i.e. tax-year end 30 June 2022 would be due 15 May 2023.

Ways in which you can file an Australian tax return whilst overseas:

  • Lodge your tax return online with MyTax
  • Lodge your return by post
  • Lodge your tax return with a registered tax agent

Contact Us

If you need advice or assistance with your UK or Australian tax obligations, we are here to help. Simply send us an email to arrange a free initial consultation.

For enquiries please contact:
Manny Singh
Senior Manager
Sheltons Accountants
M.Singh@SheltonsGroup.com

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When moving between the UK and Denmark, it is important to be aware of the differences that each jurisdiction imposes on areas of personal taxation. Failing to comply with the relevant procedures and local tax legislation could leave individuals with a series of penalties.

The table below highlights a list of arguably the most important areas of personal taxation that individuals should be aware of when moving between the UK and Denmark. Whilst both countries tax residents on their worldwide income, this is where similarities cease as from here on, the UK and Danish tax systems function differently in almost every way.

UK Tax System vs Danish Tax System:


UK Tax System Danish Tax System
Tax Year for individuals 6 April to 5 April 1 January to 31 December
Who is required to file a Tax Return In the UK, most individuals who are employed will pay tax on their income through payroll and are not required to file a Tax Return.

Tax Returns are required where:

  • Earnings are over £100,000 in a tax year
  • In receipt of non-UK sourced income
  • In receipt of property income
  • In receipt of taxable savings, investments and dividends
  • Claiming income tax reliefs
  • Need to pay capital gains tax
  • Self-employed or partnership income
  • Liable to high income child benefit charge
  • In receipt of taxable income which has not yet been taxed

In Denmark, most individuals who are employed and pay tax on their income through payroll are not required to file.
Tax Returns are required where:

  • In receipt of non-Danish source income
  • In receipt of property income
  • In receipt of some taxable savings, investments and dividends
  • Income from self-employment
Payroll System In the UK, HMRC operates a Pay As You Earn (PAYE) system where tax is collected by the employer through every payslip. The employer then remits the tax withheld to the tax office (HMRC). In Denmark, if you are an employee, your tax is collected through every payslip and sent to the tax authorities. If you are not an employee, taxes are paid through monthly instalments by the individual.  
Tax Free Allowance UK residents (and in some instances non-residents) receive a tax-free personal allowance each year. In 2022-23, the tax-free personal allowance is £12,750. In certain circumstances this can be reduced or increased. The tax-free personal allowance in Denmark is DKK 46,600 for a full year.
Income Tax The UK operates progressive rates of income tax which include:
  • £0 to £12,570 (personal allowance) – 0%
  • £12,571 to £50,270 (Basic rate) – 20%
  • £50,271 to £150,000 (Higher rate) – 40%
  • Over £150,000 (Additional rate) – 45%
  • Denmark operates progressive rates of tax on personal income. The rates for 2022 are as follows:

    State tax:

    • Labour market (AM-bidrag)* 8%
    • Bottom tax rate 12.1%
    • Top tax rate 15% applies to income more than DKK 552,500 per year **

    Local tax rates:

    • Municipal tax rate (average) 24.983

    In Denmark there is however a tax ceiling, which is the maximum tax rate applicable to personal income. This ceiling is designed to ensure that the total income tax does not exceed 52.07% for personal income. Church tax and labour market contributions are not included in this tax ceiling.

    *Applicable on gross salary before tax
    **Pro rata

    Capital Gains Tax

    In the UK there is a Capital Gains Tax allowance of £12,300 per year (2022-23). After this your tax rate will depend on whether you’re a ‘Basic rate’ tax payer or ‘Higher rate’ tax payer:

    Basic Rate: 18% on residential property and 10% other chargeable assets

    Higher Rate: 28% on residential property and 20% other chargeable assets

    In Denmark, net positive capital gains income is taxed at 37% up to DKK 47,400 (DKK 94,800 for married couples) and 42% thereafter.
    Inheritance Tax In the UK, the standard Inheritance Tax threshold is £325,000 (which can increase to £500,000 where the home is passed to children of the deceased). Where an estate is valued over £325,000 there is a 40% Inheritance Tax rate. In Denmark, there is no Inheritance Tax on the first DKK 312,500 (2022). The inheritance tax for deceased´s children and descendants, stepchildren and their descendants, parents or cohabitants during the last two years of one´s life is 15%, for others the inheritance Tax is 25%.
    Tax Return Deadline 31 January following the end of the tax year (31 October if filing a paper return) 1 May following the end of the tax year. If you have foreign income or are self-employed it is 1 July.
    Tax Payment Deadline 31 January following the end of the tax year. This is the same as the tax return deadline. 31 December in the tax year if you want to avoid interest/surcharges. If you pay after 31 December but before the deadline 1 July 2022, you will avoid the surcharges and only pay the day-to-day interest of 1.7% from the 1 January till the payment date.
    Assessable on Worldwide Income UK residents, for tax purposes are taxed on their worldwide income*. Danish residents, for tax purposes are taxed on their worldwide income.
    National Insurance/ ATP In the UK, both the employee and employer are required to pay national insurance contributions each month. The rates vary from 0% to 13.8%. National Insurance is also due on self-employed income. In Denmark, both the employee and the employer are required to pay labour market supplementary pension (ATP).
    The employee part is DKK 94.65 per month and the employer part is DKK 189.30

    *Assessable on worldwide income (UK) – Individuals resident of the UK with non-domicile status can opt to claim remittance basis and not be taxed on their overseas income as long as it is not remitted to the UK.

    The UK and Danish Tax Systems: An Overall Comparison

    Determining which country has the more competitive tax system is relatively straightforward.

    Whether your income is subject to income tax or capital gains tax, it is evident from the table above, that the UK offers greater tax-free allowances and lower rates of tax. For example, the UK offers a capital gain allowance of £12,300 with a top rate of tax at 28% (residential property), whereas Denmark has no allowance and a 14% higher tax rate standing at 42%.

    As tax systems in the UK and Denmark are extremely different, it requires in-depth analysis to understand how each system operates and the implications which might then present for an individual on a case-by-case basis.

    Contact us

    If you require any advice or assistance with UK or Danish personal tax, we are here to help. Simply send us an email at the address below or fill in our contact form to arrange a free initial consultation.

    Denmark: John Munch, Tax Manager, Sheltons Accountants (Copenhagen), J.Munch@SheltonsGroup.com

    United Kingdom: Ned Shelton, Director, Sheltons Accountants UK (London), N.Shelton@SheltonsGroup.com

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    Are you moving to Denmark and renting out your UK property? If so, you will be classified as a ‘non-resident landlord’ by HM Revenue and Customs (HMRC).

    Below we have covered some of the popular UK and Danish tax issues and questions that arise when becoming a non-resident landlord in Denmark.

    How do I stop my estate agent or tenant from deducting UK tax at source?

    If you have been determined as a non-resident landlord of the UK, your letting agent or tenant will deduct basic rate tax (20%) from your rent. Once the tax year is complete, your estate agent or tenant will provide you with a certificate certifying how much tax they have deducted in the relevant tax year.

    As a landlord, cash flow is important, therefore it’s likely you would prefer to receive your rent in full and pay any tax due through your UK self-assessment tax return.

    The way in which you can receive your rent in full, prior to any taxation, is to file a non-resident landlord form (NRL1). Once the form has been approved, HMRC will inform your letting agent or tenant to stop deducting tax from your rent. From there on, you will receive your rent in full without UK taxation. Any tax deducted earlier in the year will be refunded on your next rental statement.

    However, it is worth noting that HMRC will only approve your NRL1 application if your taxes are up to date. For example, you have no outstanding tax or tax returns due.

    What expenses can I claim on my UK property income?

    If this is your first experience of being a landlord, you may be unsure about what expenses are tax deductible. HMRC iterate that for an expense to be allowable for tax purposes, it should be incurred wholly and exclusively as a result of renting out your property. Typical expenses include buildings insurance, estate agent fees and utility bills (only if not reimbursed by tenants).

    In some instances, what you assume are revenue expenses may in fact be ‘capital expenses’ for example, improving or upgrading something that was existing. Capital expenses are not allowable and cannot be claimed against rental income, however you might be able to set them against capital gains tax if you sell the property in the future. You should seek professional advice if you’re unsure on the tax treatment of your property expense.

    Since April 2020, you have no longer been able to deduct any mortgage expenses from taxable rental income. Instead, mortgage interest is used as a tax reducer, where you receive a tax credit based on 20% of mortgage interest payments. For example, if you make mortgage interest payments of £5,000 per year, you will receive a tax credit of £1,000 to deduct from the liability incurred on your property income.

    Will I be taxed on my UK rental income in Denmark?

    If you’re classified as a tax resident in Denmark, you will need to declare your worldwide income to skat (HMRC equivalent in Denmark). Therefore, as long as you are resident of Denmark, you will need to declare your UK rental income on your Danish tax return.

    Where you have paid tax in the UK on your UK property income, you may be entitled to a Danish foreign income tax offset. As the Danish tax year runs from 1 January to 31 December, the UK property income/expenses along with any UK tax paid will need to be proportioned appropriately.

    In situations where you own a property, but do not receive rental income, or in instances where rental income is below market rates, a tax on the property will apply, no matter where it is located.

    Where a ‘Danish resident’ has property in the UK, the Denmark-UK double tax treaty becomes relevant.

    Will I receive my UK personal allowance as resident of Denmark?

    When non-resident of the UK, it’s only in certain circumstances that you will get a personal allowance of tax free UK income each year. These include the following:

    • you hold a British passport
    • you’re a citizen of a European Economic Area (EEA) country, or
    • you’ve worked for the UK government at any time during that tax year.

    As Denmark is a country in the European Economic Union, it’s likely you will be entitled to your UK personal allowance. Thus, only the rental income over the UK personal allowance will be taxable in the UK.

    How do I file my UK self-assessment tax return from Denmark?

    Regardless of whether you’re a resident of Denmark, renting out a UK property automatically enters you into the UK self-assessment regime. The return will be used to calculate any tax liability arising from your UK property income and any additional UK taxable income.

    The same Tax Return deadlines apply to non-residents as they do to UK residents – 31st January following the tax year end (31st October for paper returns). Automatic late filing penalties will apply after the deadlines have passed.

    As a non-resident you are unable to use HMRC’s online services to file your return. Instead, you need to:

    • Send your tax return by post
    • Use commercial software
    • Get help from a professional

    Contact Us

    If you need advice or assistance with your UK or Danish tax obligations, we are here to help. Simply send us an email at the address below to arrange a free initial consultation.

    Denmark: John Munch, Tax Manager, Sheltons Accountants (Copenhagen), J.Munch@SheltonsGroup.com

    United Kingdom: Ned Shelton, Director, Sheltons Accountants UK (London), N.Shelton@SheltonsGroup.com

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