Can a foreign citizen get a tax and NI rebate?

Can a foreign citizen get a tax and NI rebate?

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A Portuguese citizen was employed by a UK company to work in France. He'd never even set foot in the UK. They got a NI number for him (using their own head office as his address) and put him on their payroll under PAYE. The French tax authorities were never involved as far as I know. He did visit the UK for meetings and training but only spent about 30 days here over 3 years.

He has now left them and moved to the USA. He wants a tax and NI rebate. I'm still waiting for HMRC to process his 64-8 (takes about 2 months apparently) but the "technician" I spoke to on the agents help-line reckons he won't get the NI back as he was on a UK payroll and it's up to him to claim compensation from his ex-employer.

That doesn't sound right to me. If HMRC received the NI contributions illegitimately, surely they should pay them back. Isn't there a principle of unjust enrichment?

His tax code should have been NT (ignoring the fact he shouldn't have been in the UK tax system at all) so we might have more hope of a rebate there.

Anyone else experienced this type of situation?

Replies (19)

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By Steve Kesby
12th Jun 2015 13:23

Surely...

... if you get him a refund of his UK tax he will just have more tax to pay in France?

NI numbers aren't just given away. I suspect that this was done the way it was in order to avoid tax and social security charges in France, which are higher.

One makes one's bed.

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Replying to Cheshire:
By cfield
12th Jun 2015 13:38

Making beds

Hi Steve. Yes I told him that, but he wants his rebate anyway. He did speak to the French tax authorities apparently but they must have got hold of the wrong end of the stick as they just told him it was OK due to double tax agreements, probably thinking he was UK tax resident.

Of course, the employer was obviously trying to avoid French social security charges, but it was they who made the bed, not him. I don't see how that alters the situation. If HMRC issued a NI number when they shouldn't have done, they surely have to refund any NI paid, whether the employer did it in good faith or not. N'est pas?

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By Steve Kesby
12th Jun 2015 13:51

Good luck...

... with that. I personally don't think you've got a hope in hell, but I'd be happy to be proven wrong.

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Replying to fawltybasil2575:
By cfield
23rd Nov 2015 20:20

It worked!

Steve Kesby wrote:

... with that. I personally don't think you've got a hope in hell, but I'd be happy to be proven wrong.

Just thought I'd let you chaps know that my client had a letter from HMRC today saying "Our records show that you are due a refund of National Insurance contributions because there was no liability to pay UK NI contributions. The table below shows details of the National Insurance contributions you have overpaid" ......which came to over £10k

So there you are. It just goes to show. Sometimes it is worth persevering when all around tell you it's a waste of time.

My 10% was well earned, although I have to say the hardest part was arguing with you lot :-)

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By cfield
12th Jun 2015 13:51

I need a bit more than luck!

Yes, I will need some luck, but what I was really hoping for was some piece of legislation or a previous case to bolster our position, rather than just arguing points of principle.

Does anyone know any?

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By godwinsj.hotmail.com
12th Jun 2015 14:36

France

If he wants his UK NI refund I assume he is then going to pay the French social charges and the same would apply for tax as well? To get a refund for the UK he should have to complete form France-Individual in effect proving he paid the tax in France. Otherwise its just plain tax fraud!

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Stepurhan
By stepurhan
12th Jun 2015 14:45

Unjust enrichment

What would have been the tax and NI he personally would have suffered if it had been dealt with under French law?

Because you talk about HMRC being unjustly enriched by getting the NI. Wouldn't your client be unjustly enriched if they got that NI back but didn't pay the amount due to the French authorities? You can't have it both ways and I would be extremely surprised if a case existed that would "bolster" your position that you could.

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By godwinsj.hotmail.com
12th Jun 2015 14:50

Correct Stepurhan

His French social charges would be approximately 23% plus the amount the employer has avoided which is even greater and if he has the nerve to claim he wasn't resident in France he would still be liable to tax on the salary starting at 20% from the first euro!

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By cfield
12th Jun 2015 16:34

We are not his moral guardians

You lot are all making a moral case against him getting a rebate and you're probably right, but you should know by now that as tax advisors we can't let morality sway us, any more than a lawyer can allow it to affect the job he does for his client. Once you take on a client, you act in his/her best interests within the constraints of the law. It's as simple as that.

HMRC is not a collection agent for the French tax authorities, nor they for us, so it doesn't matter whether or not he has paid tax there. That's between him and the French taxman. All we are concerned with is whether HMRC owe him a rebate or not. If he never live or worked in the UK, then it seems to me they do.

 

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Replying to Tax Dragon:
paddle steamer
By DJKL
12th Jun 2015 16:23

MLR??????????

cfield wrote:

You lot are all making a moral case against him getting a rebate and you're probably right, but you should know by now that as tax advisors we can't let morality sway us, any more than a lawyer can allow it to affect the job he does for his client. Once you take on a client, you act in his/her best interests within the constraints of the law. It's as simple as that.

HMRC is not a collection agent for the French tax authorities, nor we for them, so it doesn't matter whether or not he has paid tax there. That's between him and the French taxman. All we are concerned with is whether HMRC owe him a rebate or not. If he never live or worked in the UK, then it seems to me they do.

 

MLR stops at that channel, then. Good to know there is one thing Dave will not need to negotiate to get back. 

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Replying to Coops:
By cfield
12th Jun 2015 16:38

MLR territorial limits

DJKL wrote:

MLR stops at that channel, then. Good to know there is one thing Dave will not need to negotiate to get back. 

Well it's got to stop somewhere, hasn't it? Or do we need to look out for the North Korean taxman too?

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Replying to Tax Dragon:
Stepurhan
By stepurhan
12th Jun 2015 17:00

So did you.

cfield wrote:
You lot are all making a moral case against him getting a rebate and you're probably right, but you should know by now that as tax advisors we can't let morality sway us, any more than a lawyer can allow it to affect the job he does for his client. Once you take on a client, you act in his/her best interests within the constraints of the law. It's as simple as that.
We did not make it a moral case. You did when you talked about HMRC getting unjust enrichment.

But, let's look at it purely within the constraints of the law. The income in question is legally taxable in both relevant jurisdictions. The only question is which jurisdiction has primary taxing rights. You are proposing taking action that, if successful, would result in it being taxed in neither. Are you really saying that, because you have only been hired to handle his UK tax affairs that the fact no tax is paid anywhere on this income is not your problem? Because from where I'm standing it looks a lot like you are aiding someone in tax evasion (albeit in another jurisdiction).

cfield wrote:
Well it's got to stop somewhere, hasn't it? Or do we need to look out for the North Korean taxman too?

This is a ridiculous statement to make. Your client did not receive taxable income in North Korea. They did receive taxable income in France.

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Replying to fawltybasil2575:
By cfield
12th Jun 2015 17:30

Half-baked assumptions

stepurhan wrote:

We did not make it a moral case. You did when you talked about HMRC getting unjust enrichment.

Well I meant that in legal terms, rather than as a moral argument, but on reflection I believe it applies only to taxpayers (mainly in respect of output tax charged in error), not to HMRC receiving tax they weren't even owed, so no point in going down that avenue.

stepurhan wrote:

Are you really saying that, because you have only been hired to handle his UK tax affairs that the fact no tax is paid anywhere on this income is not your problem? Because from where I'm standing it looks a lot like you are aiding someone in tax evasion (albeit in another jurisdiction).

I never said that at all. I have no information at all to suggest the client will commit tax evasion. In fact, he's already told the the French taxman. You're making half-baked assumptions based on a few snippets of information.

stephurhan wrote:

This is a ridiculous statement to make. Your client did not receive taxable income in North Korea. They did receive taxable income in France.

It's not ridiculous at all. It was a perfectly valid point to make. DJKL pointed out that MLR rules extend to overseas jurisdictions but what are the territorial limits? The old Spanish bullfighter scenario was a well-known absurdity caused by badly drafted legislation. Might we owe some obligation to Fatty Jong? Who knows?

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Replying to pauljohnston:
Stepurhan
By stepurhan
13th Jun 2015 18:26

Snippets of information

cfield wrote:
I never said that at all. I have no information at all to suggest the client will commit tax evasion. In fact, he's already told the the French taxman. You're making half-baked assumptions based on a few snippets of information.
Do you mean like this snippet of information?

cfield wrote:
He did speak to the French tax authorities apparently but they must have got hold of the wrong end of the stick as they just told him it was OK due to double tax agreements, probably thinking he was UK tax resident.
So when you say "he's already told the French taxman", it would appear you mean that the French are not seeking to tax the income because it has been taxed in the UK. They are happy with this on the basis of the double taxation agreements between France and the UK. Whether that is correct or not, their decision is still based on tax having been paid on the income in the UK.

But if you reclaim the tax and NI here, that will no longer be the case, will it? Are you advising your client that they need to go back to the French authorities and advise them the income has not been taxed in the UK after all? If not, please explain how knowingly leaving the French authorities under the FALSE impression that this income has been taxed in the UK is not fraudulent. Unlike your hypothetical North Korean situation, you KNOW that tax would be due in France, even if you don't have the knowledge of the French tax system to calculate how much.

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By godwinsj.hotmail.com
12th Jun 2015 16:31

I dont agree

So you would aid your client in defrauding another country? Surely your basis for the reclaim is the tax is payable in France and not the UK and when you know the tax is not being paid in France then that's an offence. In fact HMRC and the French authorities will collect tax debts on behalf of each other.

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Replying to Truthsayer:
By cfield
12th Jun 2015 17:01

What fraud?

godwinsj.hotmail.com wrote:

So you would aid your client in defrauding another country? Surely your basis for the reclaim is the tax is payable in France and not the UK and when you know the tax is not being paid in France then that's an offence.

That's a bit out of order Godwins. I don't know what his circumstances in France are and neither do you. You're just making assumptions.

We don't need to file MLR reports unless we have a reasonable suspicion that a money-laundering offence has taken place, and none has yet as far as I know (apart from his employer putting him on PAYE instead of the French equivalent and even that might have been down to ignorance). If this client gets a rebate and then I find out he's failed to pay tax in France, then presumably there are channels for reporting overseas offences by non-UK citizens, but goodness knows what they are, and I would imagine any such report would get even less priority than offences committed here.

It seems to me that the MLR reporting regime is little more than a box-ticking exercise to show we're complying with our treaty obligations. I've never had a single response to any of the MLR reports I've filed so far, nor heard of any follow-up action.

In fact, I've just spent the last 3 months trying in vain to get HMRC to do something about a £2 million a year fraud by a dodgy umbrella company (involving bogus EIS tax relief amongst other things), and there're been no response at all, not even an email to an Assistant Director of their Criminal Investigations Directorate, whose contact details were given to me by an ex-tax inspector I met at Accountex. So I don't think we should beat ourselves up too much over cases like this, where the authorities themselves apparently don't want to know.

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By godwinsj.hotmail.com
12th Jun 2015 16:48

My Last words

Yes but there is a DTA with France which is the basis of your claim and there is exchange of information agreement with France as well.

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Replying to grumpybear:
By cfield
12th Jun 2015 17:07

No, that's not the basis of his claim

godwinsj.hotmail.com wrote:

Yes but there is a DTA with France which is the basis of your claim and there is exchange of information agreement with France as well.

The basis of his claim is that he has never been tax resident in the UK and therefore shouldn't have been paying tax and NI to this country. If HMRC wish to inform their French counterparts, then that's his look-out.

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By cfield
13th Jun 2015 19:53

Too presumptious

Stepurhan, you're making all these assumptions about tax evasion and jumping on your moral high horse and we don't even know yet whether any MLR offence will happen. It's all in your head at the moment.

No offence has occured yet as far as I can see (except by the employer maybe). Two of the assumptions you're blithely making is that a) this chap will fail to pay tax and social security in France, and b) that I'm knowingly assisting him in committing an offence (which I strongly object to).

For your information, he has apparently already informed the French tax authorities (we're only guessing what they know or think) and I've already told him that he must complete a French tax return, so nobody is doing anything wrong yet.

Yes, I am helping him get a tax rebate (hopefully) but the French will still be "out of pocket" whether HMRC keep his tax or not, so leaving matters as they are will not solve the moral conundrum. You seem more concerned about the possibility of this chap paying no tax at all then it being paid in the right jurisdiction. I don't think it would cut any ice with HMRC if he owed them tax but argued that he'd paid it to the French taxman instead.

Paying tax and NI to HMRC when he has never even lived or worked in this country is not right, and it is not "made right" by the fact he didn't pay tax on that income in France. As it is, he will probably get the tax back as he should have been on a NT code. NI works differently so that will be more difficult (if not impossible) but from a moral standpoint it is exactly the same so if they repay his tax they should repay his NI too.

I posted this question for some constructive advice from knowledgeable members, not to get a holier-than-thou finger-wagging from the likes of you. Quite frankly, I see too much of that from you on this forum! If you haven't got anything more useful to say on the matter, kindly desist from any further comments and leave the field open for others with a more helpful approach.

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