Hi all
I have a UK resident client, who has worked in the Netherlands, for a dutch based company, for the past 6 years. Other co-workers have all received substantial refunds from HMRC relating to their overseas employment.
This has puzzled me as I couldn't understand why HMRC would repay tax when it was the dutch authorities who had withheld it. Helpsheet 263 also says this.
I have looked at the double taxation manuals etc which state that a credit can be given against the income, when a certificate of residence is available.
One of the co-workers has provided me with a copy of his return prepared by another UK accountant, which shows his income and tax deductions in £ and states that it is foreign income. It appears to me that he has converted the dutch income into pounds to get the figures and the rebate and he has completed the employment pages as I would for a uk based co, when this is not the case?
Surely this is not correct is it? Any advise would be appreciated as I think I am going to have to give my client disappointing news when he's expecting a large refund!
Replies (5)
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Eh?
Are you saying that the other accountant converted the Netherlands tax deducted into £ sterling and then claimed that this was UK tax deducted? Ooooh!
With kind regards
Clint Westwood
PS
It has been a while since I looked at these, but my recollection is that despite that under domestic law an individual is taxable in the UK on worldwide income, DTRs trump domestic legislation and most DTRs specify that where employment is undertaken in one state, for an employer in that state, and taxed in that state then it exempts the source from taxation in the other state. If that is the case I would not expect the Netherlands income to feature in a UK tax return.
Credit
My understanding is that a credit is issued by using the Foreign pages in a tax return.
Doesn't seem right, unless there are circumstances which mean its actually a company that is registered here, a branch there but pays them in local currency.
UK Branch of Dutch company?
Does seem odd on the face of it. Have the Foreign pages also been completed? Has the amount of Foreign tax relief been restricted correctly ? Is the income definitely paid by a Dutch company and not a UK branch of it? Is there a P60 which would suggest that it's paid from a UK subsidiary/branch? Does he have a contract translated into English, sometimes this mentions how the income is taxed and where?