I have a few questions about self-assessment in my particular case.
My wife and 14 years old daughter arrived in the UK in May 2022 under the Homes for Ukraine scheme and stayed with their hosts till the beginning of January 2023. Then they were able to rent the apartment together with another co-tenant and move there.
I left Ukraine later in November 2022. At first I stayed in Poland till January 7 2023. Then I moved to the UK (also under the Homes for Ukraine program) and I’m still staying with my host here. Since then till now I also have spent some time outside the UK (about 2 weeks in March, about 4 weeks in April-May, about 4 weeks in July-August).
In Ukraine I am registered as self-employed and I’m working as an independent contractor in web-development. My customers are foreign companies (neither from Ukraine nor from the UK).
After leaving Ukraine I wasn’t sure about my further location but I needed to keep working, so I set up a Revolut account in Poland to withdraw my earnings, which I receive to my Payoneer account in USD only. And I keep working this way now.
I didn’t open and still don't have any UK bank account due to several reasons:
1) it was a tough situation in general and I wasn’t sure about any further plans and possibilities for me and my family in the UK
2) I keep working with the same clients since before leaving Ukraine as Ukrainian self-employed contractor
3) I wasn’t (and I’m still not) sure about my residency
4) I don’t use all my earned money myself in the UK and send some of it to Ukraine for my elderly parents and other relatives and friends I need to support.
So I used my Revolut (EU) account and card to pay for the goods everywhere I went (including the UK) and to support some of my close people outside the UK.
In the UK the tax year finishes on the 5th of April.
In Ukraine the tax period starts on January 1st and ends on December 31st. I should have reported quarterly in Ukraine but I didn’t do it during this year yet as I’m still not sure about my residence. I’m going to do it for the whole year if I figure out that I need to. But as a self-employed I make my regular required social insurance payment every 3 months in Ukraine.
Recently (before October 5th) I’ve registered for self-assessment as a sole trader in the UK just in case I need to send a tax return for 2022-2023. And now I need to figure out a few things to make everything properly. And the first of these things is what my residence is.
On the one hand according to my SRT I should be a UK resident in 2022-2023 (if I understand it correctly) as I have worked as self-employed from the UK since I’ve moved here for almost 3 month.
On the other hand Ukraine may still be considering me as its resident due to several factors:
1) I’m still registered as self-employed in Ukraine
2) I have a permanent abode in Ukraine
3) I have other personal and economic relations with Ukraine:
- my parents and other relatives live there and I financially support them
- I’ve been paying off a mortgage for my permanent abode in Ukraine since 2009
As I understand in this case my residence status should be defined according to the UK/Ukraine Double Taxation Convention. Article 4 of this conventions states:
“(1) For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income or capital gains from sources in that State.
(3) Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);
(b) if the State in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;
(c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;
(d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. …”
Here in the UK I live at the host’s house and don’t have any other home available for me at the moment. I’m not sure if this place might be considered as my permanent home or not (it seems to me that not). But even if yes, I also have a permanent home in Ukraine, as I wrote previously.
If it’s defined that I do have permanent homes in both States, then we should consider my personal and economic relations with them. And again it’s not too clear. I have my wife and my daughter here in the UK and I’m working from the UK. But I also have my active self-employment in Ukraine and I regularly send financial support to my parents, brother and other relatives to Ukraine, and also have a mortgage there. And even though I haven’t paid income taxes in Ukraine yet for this year, as a self-employed I’m making my required social insurance payment every 3 months during this year.
I understand that probably the perfect solution for me would be to unregister my self-employment in Ukraine and start reporting only in the UK if I’m going to stay here. And this is definitely my plan for the near future. But I anyway have to resolve the existing situation for 2022/2023 and later for 2023/2024, which is not clear for me.
Taking everything above into account, could you please help me to choose the correct approach to my tax reporting? Should I report my incomes and pay taxes as self-employed in Ukraine and also report these earnings here in the UK as my foreign incomes and reduce the amount of UK taxes by the amount I paid in Ukraine?
Or should I report my income here as only a UK resident?
Or is there another way I should do it?
Thank you very much in advance for your help.