See the world but make sure everything is safe at home: A job abroad is an exciting prospect but what happens about income tax? And what will you do with

MICHAEL Sharon, a health service manager, is about to become a tax exile.

He is being sent in October on a year's secondment to a hospital in Chicago. St Thomas's hospital in London, his employer, will continue to pay his salary but he will pay no UK income tax if he is careful to follow the rules.

Those who work full-time abroad for at least a complete tax year (6 April in one year to 5 April in the following year) and carry out all their duties abroad are not treated as resident for tax purposes, provided they do not visit the UK for more than 91 days during that time. This means they will not be liable for UK tax on those earnings.

For people like Michael who will not be out of the country for a complete tax year, there is an alternative known as 365-day tax relief. This is available to those who remain resident in the UK for tax purposes but are out of the country for a qualifying period of 365 days.

Within this period, people can spend up to a sixth of their time in the UK, subject to a maximum of 62 days.

If they return permanently before the 365-day qualifying period is over, the relief is lost and income tax will be payable.

Tax is still payable on earnings from other sources such as share dividends or building society interest earned in the UK, or on any capital gains.

However, unlike those who are treated as being non-resident, taxpayers on 365-day relief can set their personal allowances against such tax.

Michael may have an additional advantage. The UK has entered into double-tax treaties with many countries, including the United States. Under these arrangements, each country agrees to give up or reduce its tax in certain circumstances to avoid individuals paying taxes on the same earnings in two different countries.

Individuals who are sent to the US by a UK employer with no permanent presence over there are exempt from paying US federal taxes, provided they do not stay for more than 183 days in the relevant US tax year (1 January to 31 December).

Toni Dyson, a tax specialist with the accountants Arthur Andersen, points out: 'This exemption extends only to federal taxes. The employee may still be liable for US state taxes.'

In order to claim 365-day tax relief, employees should write to their tax office supplying details of their National Insurance number, employer's name and address, date of departure from the UK, expected date of final return and the expected dates of any visits to the UK. This should be done before leaving the country.

The tax office will contact the employer to check the details and assess whether the applicant is eligible for relief.

The Inland Revenue leaflet 'Going to Work Abroad' cautions: 'Remember that if you are given the relief provisionally and it turns out not to be due, you may have to pay back a large amount of tax.'

The payment of tax is not the only area of international agreement. Many countries, including members of the EC and the US, have entered into reciprocal agreements on social security contributions and benefits.

In the EC, the general rule is that employees will pay contributions only in the country where they are employed. There is an exception: people who normally work in one country and are posted to another can continue to pay contributions in their own country for up to 12 months, and in certain circumstances this period can be extended.

Applications for this arrangement must be made to the Department of Social Security Contributions Agency, Overseas Contributions, Longbenton, Newcastle upon Tyne NE98 1YX.

The UK-US social security treaty provides that staff working in the US for a UK employer continue to pay only UK contributions, provided the stay does not exceed five years.

Toni Dyson advises those going to work abroad to consult a professional adviser. CAROLINE HORSFIELD has accepted a job as a lawyer in Nice. She has a flat in the Balham area of London which, because of the depressed state of the housing market, she has decided to rent out rather than try to sell.

Caroline has a mortgage with Cheltenham & Gloucester Building Society. One of the conditions is: 'The borrower shall keep the property always in his possession and available for disposal with vacant possession (subject to any lease or tenancy authorised under the terms of these conditions).'

If she were to rent the flat out without the building society's permission it could, under the terms of the mortgage deed, cancel the loan and sell the flat to recover its money.

Ms Horsfield has asked C & G for permission to let her flat. Most building societies charge an administration fee for considering these applications.

Abbey National, for instance, charges pounds 45, Halifax and Cheltenham & Gloucester charge pounds 50. Nationwide's fee is only pounds 25, while Alliance & Leicester's is a hefty pounds 75, but only if consent is granted.

The society will usually want to satisfy itself that the tenancy will not affect its ability to get possession of the property if the borrower defaults on the mortgage payments.

Building societies normally want the tenancy agreement to record their right to possession if the borrower defaults.

These agreements are usually in the form of assured shorthold tenancies, which give the tenant a minimum of six months' security of tenure.

However, at any time after the first three months of the tenancy agreement, the tenant can be evicted on three months' notice.

There are tax consequences involved in renting out any property. Rental income is liable to tax, and those working abroad normally lose their Miras tax relief on mortgage interest payments.

But there is an Inland Revenue concession which allows the relief to continue for temporary absences of up to a year, or up to four years where a taxpayer required by an employer to work away from home, whether abroad or elsewhere in the UK.

The advantage with Miras relief is that it may be set against income from any source. Those with large mortgages may be better off setting the rental income against mortgage interest payments, rather than claiming Miras relief.

Caroline Horsfield may set the interest payments on the entire property loan (not just the first pounds 30,000) against the tax payable on rental income received, as long as the flat is rented for at least 26 weeks in each year.

It is also possible to set expenses such as gas, electricity, insurance premiums, maintenance and repair costs against tax, although not the cost of improvements.

Any unused tax relief may be carried forward to the following tax year.

The Inland Revenue guide called Rooms to Let advises landlords to 'keep a careful note of the rents received and where possible the receipts for expenses'.

Tenants in the UK who pay rent directly to non-resident landlords must, by law, withhold basic-rate tax on the rent paid. The landlord may then claim repayments to cover allowable expenses.

The alternative is to appoint a rental agent - Ms Horsfield has appointed her father - to whom rent can be paid without any deduction.

The agent will be accountable for the payment of tax on rent received on behalf of the landlord. A professional agent is likely to ask for an indemnity from the landlord.

Anyone renting a flat out should prepare an inventory of the property's contents before it is rented. The tenant should be asked to sign it.

A deposit should also be asked for as a form of insurance against any damage or loss.

One experienced landlord's advice was blunt: 'Don't leave anything you want to get back.'

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