Foreign royalties

Clarification required

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A few days ago I asked a question about whether royalties derived from a trade were subject to Class 2 and Class 4 Nic's and I am now clear on this.

However I am unsure on whether Overseas Royalties (WHT deducted) are subject to Class 2 and Class 4. As we are deeming these royalties as being derived from a UK trade and it is my understanding that overseas trading income is not liable to Class 4, presumably I do not need to worry about the foreign element being assessable from a Class 2 and Class 4 point of view.

 

Any help would be greatly appreciated.

Liam

Replies (3)

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Portia profile image
By Portia Nina Levin
11th Oct 2017 12:43

It probably isn't foreign trading income. Is the individual UK resident?

The fact that the source is overseas doesn't make it foreign trading income.

Where dis you get the idea that foreign trading income (for a UK resident) isn't liable to class 2 and class 4 NIC, anyway?

Oh, and if the withholding tax exceeds the maximum set out in the relevant treaty, HMRC won't give you credit for it.

These sorts of client need careful management. Just trying to work out what the f*** has happened and how the f*** to deal with it after the event is going to cost them.

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Replying to Portia Nina Levin:
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By Liam.em
11th Oct 2017 13:14

Yes the individual is a UK resident and the royalties arise as a result of his self-employment which he performs in the UK.

Rightly or wrongly (most likely) I thought this may apply:

"Section 15, SSCBA 1992

Self-employed contributors pay Class 4 NICs on all profits which are

immediately derived from carrying on or exercising one or more trades, professions or vocations.

Profits chargeable to income tax under Chapter 2 of Part 2 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005); and not profits of a trade, profession or vocation carried on wholly outside the UK"

Of course if I am incorrect in my assumption and it is Uk trading income from a foreign source, that raises the question of where the WHT goes on the return? (provided I check the maximums beforehand).

Liam

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Replying to Liam.em:
Portia profile image
By Portia Nina Levin
11th Oct 2017 13:20

You say he "performs" his self-employment in the UK, , but then seek to not have class 2 or 4 on the profits on the basis that it is "carried on wholly outside the UK". Two mutually exclusive propositions.

The income gets included in the accounts profits and the tax deducted gets claimed via the foreign pages, where there are specific boxes for the purpose.

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