British taxpayer non-resident in 2018/2019. All income arises in UK and comprises state & other pensions and lettings income. Tax deducted at 20% from net lettings by estate agent. Does the taxpayer a) report ALL UK income and b) claim Personal Allowance on NR pages (SA109 box 16)? If he does not report ALL income, there will be an overpayment of tax but an underpayment if pension income is included. Is the PA given as a matter of course, even if only lettings income reported?
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I assume that he is formerly resident and domiciled, or that you have otherwise established an entitlement to PA (via the DTA for example).
That done, it's all UK income (again, subject to the DTA).
If (s)he is going to have a tax liability given that rental has already suffered 20% I assume that your client will be higher rate.
Thanks for that. The reason he has a tax liability is that the Agent made an error in the tax to be deducted, i.e. it is less than the 20% net profit on letting. But his untaxed UK income is less than his PA, hence the anomaly. He has moved to Spain so the DTA applies.
It is as I thought it would be. The outcome is fair both to the taxpayer and HMRC if his total UK income and the PA are in the pot.
Thanks again.
it might depend on where he is resident . you need to check whether there are reciprocal arrangements in his country of residence for state pension payments. otherwise its likely to be rental income and tax deducted if any.
I have advised him to check if he has a liability arising in Spain if their rules are very different from ours.
a deceased client received a UK state pension in Spain , if my memory is correct this was deemed to have been paid in and taxable in Spain , a cursory search of the Net will give the
Re-reading all the replies to my original post, I confess to being confused still. I suppose it boils down to the following:
What actually goes on the UK SA Tax Return?
a) Just the property income & expenses and the Non-Resident Tax deducted by the agent?
b) The UK pension Income as well?
c) Does he claim the UK Personal Allowance? See Box 16 on SA 109 and page 5 of RRN - the guidance notes.
d) I believe that he should also complete a Spanish Tax Return on which he will have to declare ALL the (worldwide) income and the UK tax suffered, if any, for which he will receive tax relief under the DTA. Is that right?
Thanks again for your input. Much appreciated.
Further to the post above, I have now spoken to a very helpful young lady from HMRC who confirmed that the rental income will always be taxable and require reporting on the SA Return. The other income MAY be exempt from being reported if application has been made under the DTA for such exemption. The Personal Allowance will remain available if the taxpayer is a British National.
As the taxpayer has not filed the exemption, he/she must report ALL income from ALL sources and claim the Personal Allowance.
A taxpayer should always put his worldwide income and gains on his UK return.
I counsel very strongly against omitting income from a return, not only is it plain wrong, but omitted foreign income from certain countries can lead to high penalties, if HMRC successfully contend that the taxpayer is UK resident. The SRT is complex and uncertain and in the case of a UK resident 'leaving' the UK, UK residence is very 'stickly', just ask Robert Gaines-Cooper (I know his case was under IR20, but the CRT is based IR20) and John Hargreaves after several rounds over procedural matters, abandoned his claim to be NR.
Income that is asserted to be wholly or partly not taxable in the UK because of relief due under a DTA on grounds of non residence goes in boxes 20 to 22 on page RR 2.
If your client meets one or more of the criteria listed in the notes to box 16 then he can claim the PA. What's hard about that?
Surely the pension depends on the DTA and source?
Civil service pensions are often treated differently to private, ditto state pensions.