We have a client (CIS subcontractor) who is domiciled and resident in Ireland. Latterly he has (without losing Irish resident status) become UK resident by reason of coming to the UK to undertake CIS work and being in the UK for more than 183 days in the tax year. He has been served with a UK tax return notice to file. He has no permanent address in the UK (moves from B&B to B&B around the country where the work takes him) and his family, roots and permanent home are in Ireland where he regularly returns and which is the only permanent base of business establishment. The income from UK sources is reported on his Irish tax return. He also receives rental income from UK and Irish immovable property.
My reading of article 8(1) of the double taxation agreement is that he is exempt from entering the self employment profits on his UK tax return. My reading of article 21 is that the UK CIS tax deducted at source can be claimed as a non-repayable credit on his Irish tax return. HMRC helpdesk disagrees with me and says that the trading income must be entered on the UK tax return, but would not give me an authority. Tell me I am not being stupid, here? Whether it might be in his interests to claim (were it sustainable) that he has a UK permanent establishment is a separate issue, of course.
With kind regards
Clint Westwood
Replies (7)
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Clint,
Does article 8 not come at this from the point of view that the taxpayer is non resident in one country. You have admitted that your guy is UK resident. Then surely that will trump everything else. The DTT is useful if your guy was not dual resident, but I think your guy is dual resident so I would have thought you would have to jump through the hoops?
Odd...
... but I was looking at this yesterday:
Article 4 states that where an individual is a [tax] resident of both Contracting States then [......] he shall be deemed to be a resdient of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests).
I agree that this makes all his income taxable in Ireland and not in the UK but, as with the case that I was looking at, I think it is going to be difficult persuading HMRC that this is the case.
Interesting
The (potential) client that I was researching for wasn't a subcontractor so it's a different situation and he will almost certainly be retaining Irish tax residence. I am much more inclined to your interpretation of a permanent establishment than the Revenue one given in their instructions. Presumably anyone working here at any one else's permanent or semi-permanent site would fall fowl of that instruction, say a computer contractor undertaking a project at a client's business premises. The instruction does say however that a claim to exemption from UK tax can be accepted if the Irish tax authorities confirm that Irish tax residence applies which takes us back to article 4.
Irish Residency
It is actually quite straightforward
Your client is, for Irish Revenue purposes, classed as "Non-Resident, Ordinarily-Resident" for three years after moving to the UK - thereafter he becomes "Non-Resident, Non-Ordinarily-Resident" for Irish tax purposes
For the three years as "Non-Resident, Ordinarily-Resident" he is liable to:
1) Irish Income Tax on Worldwide income > €3,810
2) Irish Capital Gains Tax on Worldwide disposals
3) Capital Acquisitions Tax on: a) Irish assets, and, b) non-irish assets disposed of while being "Ordinarily-Resident" - non-Irish assets disposed of after becoming "Non-Resident" are subject to local taxes accordingly
While being "Ordinarily-Resident" he will get double tax relief as a credit for some UK taxes paid, to reduce some of the above Irish Taxes
Also, during the above three years he is UK resident for UK income tax purposes but as he is still domiciled in Ireland his primary tax jurisdiction remains as Ireland so it would seem that UK Capital Taxes should not apply other than on a remittance basis?
Hope this helps