Is it permissible to have a pay reduction if you take time off due to illness during the probationary period?

In a nutshell, UK citizens living in the UK are required to declare and pay tax on rental income from properties they own in Dubai, even though the UAE does not tax rental income.

As a UK tax resident, you are subject to paying tax on your worldwide income, including rental income from overseas properties like those in the UAE. Although the UAE does not impose tax on rental income, the UK requires you to include this income on your Self Assessment tax return and pay UK income tax on the net rental profit (rental income minus allowable expenses).

It's essential to convert the income to pounds using the exchange rate when the rent was due for accurate tax calculations. Since the UAE does not tax rental income, the UK-UAE Double Taxation Agreement (DTAA) primarily means you're taxed only once in the UK. There's no tax credit for foreign tax paid because the UAE does not charge tax on rental income.

In summary, UK residents must declare and pay UK tax on Dubai rental income. Since the UAE does not tax rental income, there's no tax credit for foreign tax paid, making it crucial to maintain proper records for reporting rental income and allowable expenses.

While there's no legal method to avoid UK tax on UAE rental income as a UK tax resident, you can minimize your tax bill by claiming all allowable expenses and possibly structuring ownership or residency differently. However, outright avoidance of UK tax on UAE rental income is not possible under the existing tax treaty and UK law. Consulting a tax professional is advisable for personalized planning.

It's worth noting that any income or capital gain earned in a country with income and capital gain taxes will be added to a UK resident's UK earnings and taxed at their marginal rate. HMRC will charge interest on any outstanding tax or penalty payments.

Moreover, income from renting out a property in another country and any gain from selling an asset such as a property must be disclosed to HMRC by a UK resident for tax purposes. BH, a UK citizen and resident, owns an apartment in Dubai and has decided to rent it out, so it's crucial to understand the tax implications.

On a different note, the UAE Labour Law states that workers are not entitled to paid sick leave during the probationary period. Employers can choose to grant sick leave without pay during this period. Failure to disclose UK tax liabilities related to overseas or offshore income and gains can result in penalties.

In the case of illness, it can be difficult to prove whether the illness was caught at work or not. In the UAE, a car owner can allow someone else to drive their car, but some insurance policies are restricted to named drivers only. If you're unsure, it's necessary to check with the insurance company to confirm if the cousin can be added as an authorized driver.

Lastly, anyone leaving the UAE or another Gulf country for a country with income and capital gain taxes should seek advice to minimize future taxation. Ignorance of the law is not considered a reasonable excuse for not disclosing overseas income or gains. The penalty for deliberately failing to notify overseas income or a gain can be up to 200% of the amount due, in addition to the tax payable.

Is it permissible to have a pay reduction if you take time off due to illness during the probationary period?