I own a foreign property and pay tax there on the income. I am also required to declare this income on my UK tax return. My questions arise because the tax years do not match up:
- UK tax year: April - April
- Australian tax year: 1 July - 30 June
My accountant has suggested using the Australian tax year that approximately matches the UK year on my UK tax return. For example, I would use my Australian tax return for 1 July 2017 - 30 June 2018 on my April 2017 - April 2018 UK tax return.
I can see the rationale for this: the Australian income, expenses, and tax paid are shown on official tax office records and can readily be matched to the numbers used on the UK tax return. Additionally, the Australian input documents (managing agent, interest charges, etc) are annual statements. Even if we split the totals across the tax years (e.g. 3 months from one tax year + 9 months from another), this would not accurately reflect when the income and expenses occurred in the UK tax year. For example, the rental income might have increased, interest paid would change when interest rates change, various expenses would have been incurred at different points during the year (service charges, maintenance, utilities, ...) As all the foreign income is being declared and tax paid on it, and in view of the points above, the approach suggested by my accountant seems to be practical. However, I am a little concerned that it may cause issues if enquiries are raised on my UK return at some point.
Has anyone else considered a similar situation (any mismatched tax year, not necessarily Australia), and if so what approach do you take?
- UK tax year: April - April
- Australian tax year: 1 July - 30 June
My accountant has suggested using the Australian tax year that approximately matches the UK year on my UK tax return. For example, I would use my Australian tax return for 1 July 2017 - 30 June 2018 on my April 2017 - April 2018 UK tax return.
I can see the rationale for this: the Australian income, expenses, and tax paid are shown on official tax office records and can readily be matched to the numbers used on the UK tax return. Additionally, the Australian input documents (managing agent, interest charges, etc) are annual statements. Even if we split the totals across the tax years (e.g. 3 months from one tax year + 9 months from another), this would not accurately reflect when the income and expenses occurred in the UK tax year. For example, the rental income might have increased, interest paid would change when interest rates change, various expenses would have been incurred at different points during the year (service charges, maintenance, utilities, ...) As all the foreign income is being declared and tax paid on it, and in view of the points above, the approach suggested by my accountant seems to be practical. However, I am a little concerned that it may cause issues if enquiries are raised on my UK return at some point.
Has anyone else considered a similar situation (any mismatched tax year, not necessarily Australia), and if so what approach do you take?