NIC contribution on unremitted income

NIC contribution on unremitted income

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Hi, UK resident non dom now member of the board of directors in an italian company.

I'm going to require the E101 from HMRC to avoid italian contribution, anyway it isn't really clear for me if I have to pay the NIC only on the remitted income or on all the sum I will receive despite they are remitted or not. Any ideas ? Thank you in advance.

Marco

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By Montrose
21st Apr 2015 17:55

Where are duties carried out ?

 

If no duties in the UK and no UK business enjoys the benefit of the services, NIC is not in point .

 

You separately  do have to be careful to ensure that the Italian Company is not a "relevant person" as defined in ITA s809M-

 

If there is such  a UK connection , then the Director has to pay employee's class1 contributions,  and the remittance rule arguably may not apply  - see ITA s. 809L(2)(b).

 

The computation of income for NIC frequently differs from that for I/T. Look at the treatment of Schedule D losses for example. When sideways relief is claimed for I/T in the year of the loss, the losses can still be carried forward for NIC purposes.

A different  example of asymmetry lies in "normal expenditure" computations for IHTA s21 purposes , where the CTO accepts that unremitted income can be taken into consideration to 'frank'  gifts.

 

 

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By marc_london
22nd Apr 2015 22:12

Hi, thank you for your explain. The italian company runs its business only in Italy. The UK resident non dom is also the owner of the company but on the italian tax side it is convenient to receive a director fee instead of dividends because a director fee is taxed in Italy at 30% without further taxes, then it can receive the fee in UK and deduct the 30% already paid in Italy so this way a large amount of money can be remitted without further taxes in UK due the income tax level in UK is well under 30% for this amount. Based on s809MI I understand the italian company is a "relevant person" due the director is also the company owner so the payment to the director would be treated a "remittance" instead of a self-employed income. Is this correct in your opinion ?

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By Montrose
23rd Apr 2015 10:38

Remittance.

There seems to be no problem with your plan if the director's fee from the Italian company is to be remitted to the UK anyway. The UK/Italy Double tax agreement will require a remittance if the client seeks to benefit under its provisions.

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