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Personal allowance - EEA national/non EEA resident

Personal allowance on EEA national but not resident

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I have an EEA national who is currently resident in Saudi and will be receiving rental income from UK property.

Will she be eligible for the UK PA?
The UK domestic leg does reference that the PA is available to EEA nationals but the Double Tax Treaty between the UK and the EU country appears to restrict the PA to individuals who are both nationals AND residents in the EEA country.

Which one (UK dom leg or DTA) should be relied upon in this case?

Thanks

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By Jdopus
10th Jan 2019 12:47

I have similar clients although not in Saudi - which section of the tax treaty are you reading as restricting the PA?

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By ConnieA
to Jdopus
10th Jan 2019 13:22

I've been using the below which includes a list of (most) jurisdictions - if you scroll down to the tables, you'll see a column for 'personal allowance'.

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

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By Jdopus
to ConnieA
10th Jan 2019 13:40

I think you're reading the table wrong. I believe the reference to the requirement to be a national and a resident is that if you're a non-Saudi national resident in Saudi that doesn't automatically grant you access to the UK personal allowance, however a Saudi national who is resident in Saudi and who has UK income is entitled to the personal allowance.

The same table contains this section on page 4 prior to the country by country breakdown that I think you missed:

"UK Personal Allowances for non-residents
Some of the UK’s double taxation treaties provide for personal allowances to certain categories of individuals (for example, nationals of the other territory who are
resident in that territory).
In addition to the provisions of any double taxation treaty, if you are not resident in the UK you may use form R43 to claim the same UK tax allowances as a
UK resident if, at any time in the tax year you meet any of the following conditions:
a. You are a British citizen or a national of another member state of the European Economic Area (EEA)"

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By ConnieA
to Jdopus
10th Jan 2019 14:01

Hi Jdopus, I think your point is similar to Wanderer's - I've replied below to Wanderer

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10th Jan 2019 13:01

As per my reply to your same question on another thread:-

Wanderer wrote:

ConnieA wrote:

but the Double Tax Treaty between the UK and the EU country appears to restrict the PA to individuals who are both nationals AND residents in the EEA country.

& what's that got to do with a Saudi resident? Last time I checked Saudi wasn't in the EU.


Hint: Why are you reading the Double Tax Treaty between the UK and the EU country?
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By ConnieA
to Wanderer
10th Jan 2019 13:21

Because it covers eligibility for the UK PA.

Refer to this which includes a table of jurisdictions and whether or not the UK PA applies and under what conditions. For the EU country I'm interested, it says 'N&R' which means that the individual must not only be a National but also a Resident of the EEA to get the PA -

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

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to ConnieA
10th Jan 2019 13:38

Read Page 4. Second paragraph on.

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By ConnieA
to Wanderer
10th Jan 2019 13:59

Yes, page 4 does state that all EEA nationals (irrespective of residency) can get the PA.

However, if this is the case, why does Denmark (country individual is a national of) state 'Yes (N&R)' under PA but Netherlands only states 'Yes (R)'?

Shouldn't it be a blanket 'Yes' for all EEA countries?

The guidance appears rather conflicting with the UK domestic legislation which only requires for nationality.

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to ConnieA
10th Jan 2019 14:20

ConnieA wrote:

Yes, page 4 does state that all EEA nationals (irrespective of residency) can get the PA.

However, if this is the case, why does Denmark (country individual is a national of) state 'Yes (N&R)' under PA but Netherlands only states 'Yes (R)'?

Shouldn't it be a blanket 'Yes' for all EEA countries?

The guidance appears rather conflicting with the UK domestic legislation which only requires for nationality.

Where is the confusion? The guidance merely confirms the legislation and makes allowances available in additional circumstances. I don't see a conflict.

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By ConnieA
to Tim Vane
10th Jan 2019 14:41

The UK leg gives the PA to EEA nationals (no requirement to be EEA resident).

The guidance I have attached earlier, gives the PA to nationals AND residents.

The discrepancy arises when an individual is an EEA national but resident outside the EEA.

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By Jdopus
to ConnieA
10th Jan 2019 15:13

The key phrase in the section I quoted above from page 4 is the following:
"In addition to the provisions of any double taxation treaty.."

"In addition to" means that if the Double taxation treaty doesn't itself give you access to the personal allowance, you're entitled to claim it on form R43 anyway as an EEA national.

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By ConnieA
to Jdopus
10th Jan 2019 15:23

Thank you, Jdopus - v. helpful!

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By Jdopus
to ConnieA
10th Jan 2019 15:52

No problem, I'm handling a few similar clients at the moment myself so looking it up was a useful refresher.

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10th Jan 2019 16:49

ConnieA

I think you have confused yourself by even thinking about the UK <-> Denmark Double Tax Treaty. Not that I've read it but I would only start reading it in your case if they were a resident in Denmark and /or potentially liable to tax there. In your case they are a Saudi resident so (subject to certain exceptions) unlikely to be subject to tax in Denmark.

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10th Jan 2019 17:49

The DTA is irrelevant where the taxpayer is resident in a third country like Saudi Arabia. UK legislation simply gives a PA to all British citizens (that's people with an unrestricted British passport and right to reside and work), all residents, and all EEA nationals. No bar on where they are.

The UK used to give a PA to all residents and Commonwealth citizens, not EEC workers. However, there was an anti-discrimination case in the ECJ called Schumacker (in about 1994?) where Germany was found to be discriminating against a Belgian-resident dentist who commuted each day to work in Germany. The other dentists in the practice got full access to allowances, but he was denied because of his residence in Belgium. The German system is different from ours, but the principle was established that cross-border workers in the EEA cannot lose PA because they are working in a state where they don't reside. The UK reacted to this finding by giving an unconditional PA to EEA nationals, which guarantees non-discrimination inside the EEA.

REVISIT THE FILE ONCE WE LEAVE THE EU/EEA, AS THIS RULE IS LIKELY TO CHANGE.

You only need to consider a DTA if he has tax to pay in the UK (ie, taxable income > PA) as a non-resident on income that is also taxable in another state where he is resident. That will depend on the residency and tax rules in his home state, and in Saudi Arabia, although the latter should not tax him.

You personally need not worry about any DTA: the UK gets first dibs on taxing his UK-source rental income. IF he has tax to pay (rents > UK PA), its his state of residence that gives double tax relief under any treaty. That's not your problem as a UK tax adviser.

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