I have recently retired and intend to live in both the UK and Ireland. I am British but have worked for the last 30 years in Ireland. I have full UK and Irish state pensions and small private pensions in Ireland and the UK. I have sold my house in Ireland and will buy an apartment in Scotland.
Ms I.F.
This cannot be that unusual a situation, especially with people working across the Border, but it is not one that has crossed the radar of this column until now.
Countries have a series of criteria that help determine tax residence. In general, though, it will be determined by where you are working, where you are living and whether you have permanent presence – such as a home – in a particular jurisdiction.
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In Ireland, your tax residence status depends on the number of days you are present in Ireland during a tax year.
To be clear, you are resident in Ireland for tax purposes if you are present in the State for 183 days or more in any one year, or 280 days across the current year and the previous year. You need to have been here at least 31 days in each of the two years if you want to use the two-year measure.
And, for the purposes of making this calculation, being present in the State for any part of the day counts as a day in the State. That is a change from the previous regime, which ran up to the end of 2008, where a day in the State was only counted if you were here at midnight.
There is also a concept here of “ordinary residence”. This states that once you have been tax resident in Ireland for three years, you become ordinarily resident here from the start of year four.
The practical impact is that the Irish Revenue Commissioners will consider you liable to Irish tax on your worldwide income for three years after you leave the State. The only exclusions relate to income on work conducted outside the State or other income – say from investments – as long as that income is less than €3,810.
Of course, it is perfectly possible that this will bump up against the UK’s own rules on tax residence – its statutory residence test – details of which you can find here.
It has three sequential elements. First, if you meet one of a series of “automatic overseas tests”, you will be considered not to be UK tax resident for a particular tax year.
If you meet none of those criteria and one on a separate list of “automatic UK tests”, you will be considered UK tax resident.
If nothing from either of those criteria lists apply, there is another list – of “sufficient ties” – measuring the strength of your ties to the UK.
But before any of that, there is an overarching rule, identical to Ireland’s. If you have been in the UK for 183 or more days in a year, you’ll be a UK resident. Once that is the case, you don’t even need to look at the other tests.
As you cannot be 183 days in two countries outside a leap year, that measure should be fairly cut and dried.
Looking at the tests, it seems to me that you certainly do not meet the criteria for automatically being considered non-resident. And, presuming you purchase an apartment or otherwise rent a home in Scotland shortly, you appear to be someone who is considered tax resident in the UK.
On that basis, you could find that both jurisdictions consider you tax resident. This is where the double taxation agreement between the Republic and the UK comes into play. It is designed, sensibly, to ensure that someone like you is not taxed in both jurisdictions on the same income, or is not left to their own devices to argue the merits with two tax authorities.
Your income going forward is from pensions – both occupational and state. Article 17 of the agreement covers this, noting that “pensions and other similar remuneration paid in consideration of past employment to a resident of a contracting state and any annuity paid to such a resident shall be taxable only in that state”.
In this case, “a contracting state” means Ireland and the UK. Under that rule, if you are resident in the UK, you should be taxed in the UK, rather than in Ireland.
However, the subsequent section of the agreement notes that, if any pension is related to work carried out for government or local authority service, it generally will be taxed in the country where that service was undertaken. But this does not apply unless you are an Irish citizen as well as being a UK citizen.
So, the bottom line is that it certainly can be complicated. You will need to read the rules carefully and possibly take specialist advice, but I believe you will be liable to tax in the UK, not Ireland, as that seems to be where you will be spending the most time and where your home will be.
You may have to fill in specific forms to square this away with both the Irish Revenue Commissioners and the UK’s HM Revenue and Customs.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com, with a contact phone number. This column is a reader service and is not intended to replace professional advice.
