Gap Year Students May Be Eligible For Tax Rebate, Says Grant Thornton

by Robert Lee, Tax-News.com, London

20 August 2008

UK students planning international travel should study tax rules as they may be eligible for a tax rebate, according to business and financial adviser Grant Thornton. The announcement came as thousands of UK students received their A Level results last week.

Sheena Hay, senior tax manager at Grant Thornton, commented that:

"Many of those awaiting their A Level results may have started working to save up for a gap year before university and may have been given an emergency tax code, which means that their employment circumstances would not have been taken into consideration."

"For example, a student may have been out of work for the first part of the tax year and may not realise that they still have a large amount of their personal tax allowance available. The overpaid income tax could be claimed back if they have stopped working and do not expect to work again in the tax year by using form P50 - providing a welcome lump sum."

A claim for a repayment can also be submitted at the end of the tax year using form R40.

Hays continued:

"The PAYE code for students working over the summer this year is likely to be incorrect following Alistair Darling's late increase of the personal allowance. Employers do not need to reflect the updated amount until the first pay period ending on or after 7 September 2008, by which time many students may have finished working and returned to their studies."

In most cases, students who work abroad are still treated as UK tax residents and pay UK tax on overseas earnings above their personal allowance.

However, many may be taxed by their overseas employer, Grant Thornton warned, and this can lead to complications. Some individuals may be able to claim the tax back directly from the foreign authorities, while others will have it credited against their tax liability in the UK and will have to apply for a rebate from HM Revenue & Customs (HMRC).

Ms Hay went on to state:

"Tax planning is likely to be low priority for A Level students looking forward to an exciting working holiday or a full gap year abroad. However, by following some simple steps they could be in line for some extra money, either through a rebate or by simply avoiding paying the wrong amount of tax."

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