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Where Taxpayers and Advisers Meet

Requesting unilateral tax relief from HMRC

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am
Requesting unilateral tax relief from HMRC

Postby riccardob » Wed Feb 24, 2021 8:49 pm

Hello,

I would like to know if it would be possible for my father to request hmrc for untilateral relief for tax paid on a foreign pension.

This is between the UK and Italy. Under the rules of the tax treaty the UK has the right to tax the pension. The italian hmrc tax equivalent withheld 20% withholding tax and provided forms to fill allowing them to pay gross but these forms have been rejected for reasons that are not clear (although deliberation obstruction may be suspected by those of us with a cynical cast of mind). The amounts involved are significant (a few thousand) but not enough to justify appointing local agents to clarify the situation and indeed make a claim in a local tribunal. It is clear from the paper trail and related emails that the 20% has been withheld although as one might expect there is no official certification. The issue is that the italian tax office does not even bother to respond.

Is my father entitled to claim unilateral relief in these circumstances from HMRC? I understand that if one has made reasonable effort to recover the tax the person can then ask HMRC to provide unilateral relief.

maths
Posts:8211
Joined:Wed Aug 06, 2008 3:25 pm

Re: Requesting unilateral tax relief from HMRC

Postby maths » Wed Feb 24, 2021 9:08 pm

The pragmatic answer is to claim the relief here in the UK and supply forms you submitted in Italy to justify your attempt to get the pension "gross" in Italy.

I'm jksy a bit bemused as to the grounds of their declination to pay gross.

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: Requesting unilateral tax relief from HMRC

Postby riccardob » Wed Feb 24, 2021 9:55 pm

The pragmatic answer is to claim the relief here in the UK and supply forms you submitted in Italy to justify your attempt to get the pension "gross" in Italy.

I'm jksy a bit bemused as to the grounds of their declination to pay gross.
thank you for your reply.
does a request need to be made to the international team at hmrc or would a letter to the generic self assessment address do?

maths
Posts:8211
Joined:Wed Aug 06, 2008 3:25 pm

Re: Requesting unilateral tax relief from HMRC

Postby maths » Wed Feb 24, 2021 11:32 pm

When filing tax return also file SA 106 and explain the situation in the white box on the return.

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: Requesting unilateral tax relief from HMRC

Postby riccardob » Thu Feb 25, 2021 10:39 am

When filing tax return also file SA 106 and explain the situation in the white box on the return.

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: Requesting unilateral tax relief from HMRC

Postby riccardob » Thu Feb 25, 2021 10:39 am

many thanks for your patience.

I just want to know your opinion on the following:

Do you think for something like this HMRC would listen more to a professional making the submission or are they open to a layman applying for said unilateral relief? The SA is pretty easy to fill and all the evidence is available in as it is only pension income but I notice that the hmrc international manuals say nothing about requests fore unilateral relief....

bd6759
Posts:3543
Joined:Sat Feb 01, 2014 3:26 pm

Re: Requesting unilateral tax relief from HMRC

Postby bd6759 » Thu Feb 25, 2021 5:29 pm

HMRC will not allow unilateral relief. If the DTA provides that the pension is taxed in UK, then no relief can or will be given. If you claim it in your tax return, you run the risk of being charged a penalty for a deliberate inaccuracy.

Your recourse is to ask HMRC, as the competent authority, to decide the matter with their Italian counterparts.

maths
Posts:8211
Joined:Wed Aug 06, 2008 3:25 pm

Re: Requesting unilateral tax relief from HMRC

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.
\
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.

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: Requesting unilateral tax relief from HMRC

Postby riccardob » Tue Mar 02, 2021 6:01 pm



It is likely to be an uphill struggle to get the foreign tax credit.
do hmrc look at the personal circumstances of those that may make such a request?
In this case an 86 year old pensioner.

darthblingbling
Posts:398
Joined:Wed Aug 02, 2017 9:09 pm

Re: Requesting unilateral tax relief from HMRC

Postby darthblingbling » Tue Mar 02, 2021 6:57 pm

If the UK has the primary rights to tax under treaty then HMRC are not going to allow an FTC under unilateral relief as legislation expressly restricts this.

If the client can't get an an exemption from withholding in Italy then HMRC would assume a tax refund in Italy would be filed instead to claim a refund under the terms of the double tax treaty. If the Italian authorities reject this then it would make interesting reading as to why. In addition, an FTC claim is usually based on the actual tax liability and not withholding taxes (although the latter is usually used as an estimate if the tax return in the other state has not yet been finalised in time, with the expectation that an amendment is made later if the difference is 'excessive').


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