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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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.
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.
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!
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.
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!
MLR??????????
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.
So did you.
We did not make it a moral case. You did when you talked about HMRC getting unjust enrichment. 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.
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).
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.
Snippets of information
Do you mean like this snippet of information? 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.
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. 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.
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.
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.
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.