My client, a single 56 year old woman with no children nor dependents, left the UK before 5th April 2013 to work as a volunteer overseas for an expected 5-7 years living, in so far as she had financial needs over her immediate provided living expenses, off accumulated savings and rents from (1) an inherited house and (2) her previous PPR to which she intends to return in due course; both are in England.
She appointed a friend who is a Scottish resident under a power of attorney with regard to financial matters and it is that address to which tax papers are addressed and which has now received the HMRC letter about the Scottish rate of income tax.
My client may start to draw on her pension funds in the next year or so and concern is expressed concerning any variation in the tax laws under the new Scottish delegated powers since the Scottish address is only that of her ‘agent’.
In the year to 5th April 2015, the client failed to satisfy any of the statutory residency tests and only met one of the ‘sufficient ties’ tests.
The website link given in the letter from HMRC does not give an opportunity to seek clarification and the letter contains no ‘reply to’ address – the envelope only has the standard undelivered mail address at Newcastle.
Do others agree that my client will not be subjected to the effects of Scottish income etc. tax regulations? Where should any correspondence on the subject be addressed?
Any and all assistance gratefully received
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Replies (5)
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It sounds like HMRC have made an error. Presumably her last tax return was submitted as a non-resident, and she is on the non-res landlord scheme? As a non-resident she cannot be a Scottish taxpayer. Assuming she submits future tax returns as a non-resident then the Scottish rate of income tax is not relevant and will not be used, so you can safely ignore the letter (the computations will use non-Scottish rates for all non-resident payers). Once she arrives back in the UK then her address will define her status for tax purposes. So in summary, just ignore the letter.
I agree. You don't need to correct any misunderstanding by HMRC unless and until they start to charge your client Scottish tax rates incorrectly. So you just ignore the letter that has been received.
Not so sure that SRIT will not be applied
I agree with Tim Vane that the SRIT should not apply to your client, but as she has received a letter to say she will be subject to SRIT she WILL get an S-code and the SRIT will be applied incorrectly from 2016/17 to any pension paid in future years. The problem can be solved by checking a box on the 2015/16 or later tax return to state that she is not a Scottish taxpayer.
We were promised that such a box on the SA tax return would exist, just as there would be a phone line for reporting such problems to HMRC. The phoneline has not materialised.
Thank you
for your respective contributions and apologies for not picking up on these sooner but I thought I would get a nudge whenever anyone (or the first person) replied so it was only when I read the weekly newsletter I realised there were replies.
That sent me looking back in detail at the return: the 'issued' address was England; boxes 1 (not resident) 4 (resident in 2013-14) and 8 (any of the 3 previous tax years) all ticked and box 12 stated 1 (tie).
I will have to make sure that the relevant (new) box is ticked in 2015/16 to ensure that this is not followed through.
Many thanks, again
Andrew
Don't forget the rental income
Seems ominous that this lady has been sent the SRIT letter when her tax return claimed her to be non-resident, presumably the address on the return was the friend in Scotland? I always try to put a c/o prefix when using a UK address on a tax return for a non resident but I am probably just deluding myself when I think that might have any effect. If HMRC are not filtering out non resident people using Scottish addresses the situation could become quite chaotic quite quickly. It I my clear understanding that SRIT applies to rental income as well as earnings and pensions so Andrew's client could be subject to Scottish tax from April.