Where do astronauts pay tax?
[Estimated time to read: 2.5 minutes]
Tim Peake landed safely in Kazakhstan on Saturday 18th June.
After a mind-bending mission 250 miles above us on the $150,000,000,000 International Space Station, we all welcome him back to Earth with much admiration.
Now with an extra 71 million miles under his belt, Tim is undoubtedly a global expat…
Interestingly, Tim orbited the Earth 16 times per ‘day’, but technically visited no specific country for the most part of his journey, given that sovereign airspace doesn’t extend into space.
This begs the question…
One which I am sure has been on Tim’s mind.
More than any other whilst also figuring out how best to capture the Aurora Borealis on his iPhone and wow his HUGE Twitter following.
“Is this a tax-free environment?”
Tim still hasn’t returned to the UK, in fact he’s undergoing tests in Germany (we can only assume his residency status will be among the first).
So will he pay tax on his ‘overseas earnings’?
This depends very much on how his work and living arrangements this tax year sit in regard to the UK’s Statutory Residency Test (SRT) updated in late 2015.
Much like any prudent expat, Tim very likely had one eye on the HMRC website as he made final preparations for blast off.
Having worked outside of the UK for 186 days, there may be an upside for Tim as he won’t be caught by the ‘183 day’ residency test (although perilously close).
So what questions will the diligent taxman be asking?
Has Tim worked a ‘full-time contract of employment abroad’?
Has he been occupied in a ‘relevant job on board a vehicle, aircraft or ship' making 'cross-border' trips?
This depends on your definition of whether the ISS is a ‘structure’ or a ‘vessel’.
But ‘cross-border’ – not according to his passport we assume.
Rather like a houseboat (with rocket boosters), we give Tim the benefit of the doubt and make the reasonable assumption that the ISS is a structure – the ‘benefit of the doubt’ in this case being greatly helped by the fact that Tim is a heroic British astronaut.
So is the ISS his ‘home overseas’?
Has Tim worked in a tax efficient environment and does he owe income tax on his earnings?
Yes, and certainly not*.
Well played Major Peake.
*We think. Probably. Quite likely really. Errm… This does not constitute actual advice!
For other expats out there, there are lessons to learn from Tim’s particular situation.
First, there's no point now in anyone bragging about their beach villa in the Caribbean or rustic town house in Monaco.
Everyone has been trumped by Tim in any one-upmanship stakes.
Secondly, it’s very important to have a clear idea of where exactly you wish to be resident – and plan appropriately.
In all seriousness, if you wish to retire back to the UK, this will make a significant difference to your pension plans.
Perhaps you wish to buy property abroad and become resident in a country other than your own.
In either case you should know what you are likely to be taxed.
We have put together some fairly comprehensive information about what constitutes residency, which taxes expats might be liable to pay and where expat pensions might fit in.
We are still working on the extra-terrestrial jurisdictions but ‘watch this space’.
Let us meet in the comments. Where are you resident and where do you plan to retire?