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Where Taxpayers and Advisers Meet

DTA interpretation - practical aspects

Brightonian
Posts: 99
Joined: Wed Aug 06, 2008 3:31 pm

DTA interpretation - practical aspects

Postby Brightonian » Fri Jun 15, 2018 3:02 pm

I have no experience of claiming relief under DTAs. I have a client, a dual UK/S African national, who went to work in Italy in 2014. I have completed returns for the last few years to show rental income on their UK property. I have shown him as non-resident by virtue of automatic overseas test 3, working full-time abroad. However, in 2017/18, his wife came back to live in the UK family home. Since August 2017, he has worked 5 days a week in Rome and come back to the UK at weekends. His total number of days and work days in the UK in the tax year is too high to claim non-residence and, by virtue of the ties test, he is resident in the UK. He is also resident in Italy and being paid a salary there and paying Italian tax.
I have looked at the DTA and the various tie-break questions. From the example on the HMRC helpsheet and other information I have found online, it looks like the UK is his centre of vital interests but, even if it isn't, he is a UK national and, ultimately, that will make him UK resident under the treaty.
My question is - how does he get relief for the Italian tax he has paid? Does he apply to the Italian tax authorities or can I claim foreign tax credit relief on his UK tax return for Italian tax on his employment income? I have never come across this situation before and am flummoxed.

I should be very grateful if anyone could explain this to me.

bd6759
Posts: 3106
Joined: Sat Feb 01, 2014 3:26 pm

Re: DTA interpretation - practical aspects

Postby bd6759 » Fri Jun 15, 2018 5:51 pm

Have you read Article 15? This stipulates in which country the employment income shall only be taxed.

Brightonian
Posts: 99
Joined: Wed Aug 06, 2008 3:31 pm

Re: DTA interpretation - practical aspects

Postby Brightonian » Wed Oct 03, 2018 12:00 pm

For complicated reasons, this case was put down and only recently picked up again. I have looked at Article 15. Under their domestic law, he is resident in both countries but do I assume for the purposes of the article that he is UK resident (because that is the answer after the tie break questions)? If so, then the remuneration should only be taxed in the UK unless the job is carried out in Italy, which it was. In which case, it may be taxed in Italy, which it was. Does this mean I have to show it on UK tax return and claim credit for the Italian tax? many thanks.


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