Taxation can cause a major headache for expats in Sierra Leone, as I can testify given I’ve finally just completed my annual return.
Throughout our time in Sierra Leone, expats paid only a small administrative charge on their salaries to the Freetown government. In the One With The Common Sense’s case – and, I imagine, those of most others – her employer covered this small cost.
To me at least, it’s bonkers that (relatively) rich foreigners can work in an impoverished country and not pay a proper level of income tax. The World Bank evidently agrees and has told Sierra Leone’s government to sort it out.The response from State House, however, was to declare the intention to slap a 35% flat rate on anyone earning more than the equivalent of £2,500 per year. You might think demanding people give up a third of their salaries (or, more likely, have their employers foot the bill) to be equally daft when most of them are in the business of developing the country.
Unsurprisingly, the announcement was met with outrage from NGO workers, who see themselves and their employers repeatedly put under pressure to pay over the odds or succumb to bribery. Even so, I don’t buy the argument that their income should remain tax-free.
That might sound hypocritical, given we declared ourselves non-resident when we flew out of London and so weren’t obliged to pay any UK tax on earnings thereafter. But the simple fact is that – had tax been due on either continent – we probably wouldn’t have gone. It would have been too expensive to live the way we wanted to (on one salary, while I worked on my writing).
The money has to come from somewhere but hopefully a workable solution will be found.
Even if this is resolved by the time you’re contemplating a move to Sierra Leone, it’s important not to forget about liabilities at home.
We rented out our London flat at a rate that meant we just about covered our monthly mortgage payments, once estate agent fees had been deducted. HMRC charge you on income, rather than profit, and only mortgage interest is tax-deductible.
Even though we’d only collected two months’ rent by the time the tax year ended, we’d spent so much on various fees, insurance, repairs and the like, that we’d made a loss. This meant no tax was due, which I suppose is a comfort of sorts.
The following year will be a different story, with 12 months’ rental income coming into the coffers. I guess the fact that our new boiler – which replaced the one that conked out a couple of weeks into our stay in Sierra Leone – will be tax-deductible represents another silver lining.
One other thing worth bearing in mind if you’re a Brit abroad with property in the UK is that you can’t use HMRC’s online self-assessment tools.
That means filing a paper return by the earlier October 31 deadline, or paying for taxation software from a list of approved suppliers if you want to leave it until the end of the following January. (We used 123 E-Filing and found it both user-friendly and cheap at £12.50 per return)
Wherever you’re from, making sure you squirrel away all relevant invoices and documents in a handy file or e-folder as and when you get them will make your life a whole lot easier when it comes to filling in your return.
Finally, there’s one final sting in the tail for those who – like us – leave the country with the intention of spending a couple of years abroad and then come home earlier than planned.
If I’ve got this right, the quirks of the British tax system mean that – because we were away for only nine or 10 months – we’ll be classed as UK residents even during the time we spent in Freetown. The One With The Common Sense’s earnings from our time in Salone will now be subject to UK tax, and we’ll have to save our pennies to cover the liability next January.
Prior understanding of this unforeseen expense wouldn’t have changed our decision to come home but we would have thought twice about going in the first place. Given that Sierra Leone can be a difficult place to live, even for those with plenty of experience of expat life in Africa, it’s worth looking into the financial consequences of all the eventualities.
This is not intended as a comprehensive guide, only an account based on personal experience. Consult the tax authorities both at home and in Sierra Leone and speak to a tax adviser to get a full picture of what to expect.