I have a client who is an actress in a theatre production which toured overseas during 2007/2008. She is self employed and is paid gross with NI deducted. She also has deductions for travel, subsistence and per diems on her payslips - and in some countries she has toured - witholding tax.
As far as I was aware, the witholding tax deducted could be off-set against the UK tax she would be liable to pay in this country, but any tax "left over" was not recoverable.
However, she is insistent that many of her colleagues on the same tour have been receiving repayments from the Revenue for the extra witholding tax which had not been off-set against their UK tax liability for the year.
Could anybody enlighten me as to what - if anything - I have missed?!
Any advice would be gratefully received.
Replies (4)
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You're right
...and they're wrong. It's quite possible that the people preparing Returns for the other actors have simply included the whole of the foreign tax without regard to either the rules that restrict it to the UK tax that would have been suffered on that chunk of their earnings, or how much their UK liability should be. I've seen some tax software that will let you do this.
So - profits £10K, UK tax liability = £10,000 - £6.035 = £3,965 x 20% = £793 - £1,000 withholding tax. Go ahead and punch it through some software and it will say that you can have a £207 rebate coming and if the Revenue's computer is dozy it will simply pay it out. Wrongly. Hard to say who to blame if that's what's happened, the software, the Revenue's software or the tax professional dealing with your clients' friends.
'Marion' is right
Absolutely agree. HMRC can only process the return as it is submitted. If the tax isn't shown as foreign tax or the amount of income specified, relief will be given in full and a refund made of the 'foreign tax' - until there is an enquiry and the pigeons come home to roost. Of course, there are some countries with whom the UK has a DTA which might specify a lower rate of withholding tax for UK residents than has been deducted - in which case the individual may be able to apply to the authorities of the country in which the tax was deducted to get a refund.
Cathy
Send them a link
Link 'em to this conversation. The analogy I sometimes give in similar circs is that just because a friend drives up the motorway at 90mph and doesn't get caught, doesn't make it legal.