'Will I receive end-of-service benefits if I quit my limited contract early?'

If an employee breaches the terms of a limited contract they are liable to pay a penalty to the employer

According to the UAE labour law, an employee will have to pay a penalty to their employer if they quit their limited contract early. Photo: The National Archives

On December 23, I handed in my resignation with the 30-day notice period that is required by law. I am on a limited contract and started work in July 2020. I have 15 days of leave owing and my full salary is Dh10,000, with a basic salary of Dh6,000

How much will my gratuity be and do I have to work the full 30-day notice period? CE, Abu Dhabi

As CE has already handed in his resignation letter, the current labour laws apply – not the new rules that are due to come into effect on February 2.

When someone breaches the terms of a limited contract by resigning before it is completed, they are liable to pay a penalty to the employer.

Article 116 of the UAE Labour Law states: “Should the contract be rescinded by the worker … the worker shall be bound to compensate the employer for the loss incurred thereto by reason of the rescission of the contract, provided that the amount of compensation does not exceed the wage of half a month for the period of three months, or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.”

CE is not entitled to any end-of-service gratuity payment in accordance with Article 138 of the Labour Law, which says: “Should the worker bound by an employment contract with determined term leave his work by his own choice prior to the expiry of the contract, he shall not be entitled to an end-of-service gratuity unless the duration of the service period exceeds five years.”

A notice period is still part of the employment period and employees are expected to work during this time in accordance with the contract terms.

There are situations in which an employer does not want an employee to work but that is a management decision and they must still pay the worker's salary in full.

Only an employer can agree to a shorter notice period, while there is also no entitlement to take annual leave during this time.

The final salary should include payment in lieu for any days of annual leave that have been accrued but not taken.

I own a house in the UK, which I am planning to sell. I haven’t lived in the UK for 10 years and have a Ras Al Khaimah residency visa. There will be a profit on the house sale. Will I need to pay any tax on the sale if I haven’t lived in the UK for more than five years? If I have to pay anything, how much would it be? BC, Ras Al Khaimah

BC is not a UK tax resident, but that does not mean he is exempt from paying any taxes in the UK. If a person is registered as a “UK non-resident for tax purposes”, it applies only to non-UK income. This means that any income or profit arising in the UK is still liable for tax.

The tax rules in relation to second properties, investment properties and property owned by non-residents changed on April 6, 2015. Before this, there were some tax exemptions for people who had been out of the UK for five tax years or more.

When BC's property is sold, he will be subject to UK capital gains tax on any profit he has made since April 6, 2015. Each person, whether a resident or not, has an annual capital gains tax allowance.

This is has been set at £12,300 (Dh61,108) per person for the 2021/22 tax year and only gains above this amount are taxable. If a property is jointly owned, two allowances will apply.

The rate of capital gains tax payable depends on the individual’s marginal rate, essentially the highest rate of income tax that they would pay in the UK.

Capital gains tax on property is either 18 per cent or 28 per cent. It is dependent on the amount of the gain and takes into account other UK income, such as a pension. Note that this is higher than the rates chargeable on other UK gains.

Since April 6, 2015, the value is usually calculated with reference to figures held by Her Majesty's Revenue and Customs Land Registry for England and Wales or by Land Registry Scotland.

In this particular case, the profit is the sale price, less the value as of April 6, 2015. Legitimate costs involved with selling, such as broker fees, legal fees and certain allowable improvements to the property, can be deducted, but these do not include decoration and maintenance costs, or mortgage payments.

For non-UK residents, the sale of the property must be reported and the relevant tax paid within 30 days.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 years’ experience. Contact her at [e-mail]. Follow her on Twitter at @FinancialUAE

The advice provided in our columns does not constitute legal advice and is provided for information only