My Swedish father's pension tax arrangements

[dl83]

Hello

I am trying to help my dad get his tax affairs in order. He is retired and has lived in the UK for over 6 years. During this time he has received his Swedish pension into his UK bank account, and each year he has completed a Swedish tax return. His pension is taxed in Sweden at 25% however I have been advised that his pension should instead be taxed here in the UK. So I am trying to sort this out on his behalf, given that he is 83 years old. Also, if possible, it would be very nice if he could claim back the difference between the tax he paid in Sweden and the tax he would have paid here in UK.

We have contacted the Swedish tax authority who pointed us towards the relevant forms to complete. A form can be downloaded for each tax year going back to 2015, so it seems we can seek to amend these previous years.

And I understand that in UK you can amend income tax returns for the previous 4 years. So far so good.

However, he has not applied for a certificate of residence in UK, nor has he filed any income tax returns with HMRC. So I am unclear if he even qualifies to pay tax in UK, or is able to submit corrected returns for years in which he didn't actually submit a return in the UK.

I would be very grateful for any advice on all of this. I did approach an accountant, but he referred me to a consultancy that charges £280 per hour (+VAT) for a phone consultation. Not something I can really afford at the moment, as my own income has practically vanished due to the coronavirus.

TIA for any replies

[bd6759]

I don’t think “qualifies to pay tax” is correct terminology. He will certainly be liable to pay tax in the UK.

He ought to have told HMRC about his income. Technically that is an offence.

He cannot reduce his UK liability by the amount of foreign tax paid (commonly called foreign tax credit relief) because his pension is not liable to foreign tax, even although it has been paid. His only relief from double taxation is to have the Swedish tax refunds.

Any competent accountancy firm should be able to deal with this without charging an excessive fee.

[darthblingbling]

Per the double tax treaty, pensions (including state pensions) are also taxable in their source state. So Sweden would have the primary right to tax.

So yes a foreign tax credit should be available. It is not solely taxable in one or the other state.

[dl83]

Thanks for the replies.

So would we first apply for a refund from the swedish tax authority, then, if successful, file backdated returns with HMRC? Even if he has made no previous submissions or a certificate of residence?

In Sweden there are certain conditions to be met to qualify for 'special income tax for foreign residents', the conditions are published on this page (in Swedish): https://www4.skatteverket.se/rattsligvagledning/360471.html?date=2017-01-23&q=pension+fr%C3%A5n+Storbritannien

My Swedish is too basic to be able to understand the document. And even though the translated text makes sense, it is still quite a solid block of legal speak. Should a concerted effort be made to understand these conditions, or should we just apply and hope for the best?

Thanks again

[maths]

It appears under the UK/Sweden DTA that the Swedish tax authority has the right to levy its tax on the Swedish source pension. If so then any such tax is offsettable against any UK tax charge on the income.

Only if your father is, under Swedish domestic law, entitled to exemption from Swedish tax on his pension or may lodge a reclaim would it then be necessary to reclaim the tax from Swedish tax authority as an offsettable tax credit would not then be available in the UK.

[dl83]

Hi maths,

Thanks for your reply. Whether he is exempt from Swedish tax seems to depend on this document: https://www4.skatteverket.se/rattsligvagledning/360471.html?date=2017-01-23&q=pension+fr%C3%A5n+Storbritannien

The Swedish Tax authority advised that we can invoke article 29.5 in the application.

I can't make head or tail of the document. Would it be worth contacting an accountant in Sweden regarding this, or should we just apply and see what happens? I would be grateful for any advice on the next steps.

[bd6759]

The new treaty allows for grandfathering the terms of the old treaty, if that is more beneficial.

[dl83]

The new treaty allows for grandfathering the terms of the old treaty, if that is more beneficial.

Thank you for the translation!

Would you be able to advise which terms are more beneficial in his case?

[darthblingbling]

Is your dad a UK national?

[dl83]

Is your dad a UK national?

Not technically I don't think - we are currently applying for EU settled status for him. Also he has not applied for a certificate of residence and has no national insurance number.