Postby maths » Thu Feb 25, 2021 8:18 pm
The strict position is that any double tax relief is only available under the UK/Italy DTA; unilateral relief under the UK's domestic provisions is unavailable.
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Under the UK/DTA a non-Government pension is only taxable in the UK and thus no foreign tax credit is available for any tax levied on the pension. However, if all attempts have been made to recover any Italian withholding tax which has been levied and such efforts can be proved but no refund is forthcoming an approach to HMRC could be made although success is unlikely.
The approach could be made in a letter setting out the facts or in the Foreign income supplementary pages but a note must be made setting out the facts as strictly under the DTA no credit is available. I doubt in such circumstances any penalty would be levied.
However, despite the difficulty, it is important to try to ascertain under what authority Italy is levying the withholding tax (possibly you have not produced sufficient evidence to demonstrate you are entitled to DTA benefits?).
It is likely to be an uphill struggle to get the foreign tax credit.