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Posted Mon, 18 Sep 2023 16:08:30 GMT by Barry Hamblin
I worked in China. My employer deducted/paid my income taxes there. I returned to be UK resident during Covid. Employer paid me a severance sum after I was terminated remotely at the end of 2021. Is my UK tax liability on the severance calculated using the nett figure (what GBP I received in the UK from the employer after he paid tax on it in China), or the gross figure (the GBP I received in the UK from the employer, plus the tax the employer paid in China, converted into GBP)? If the latter, and after the application of the foreign tax credit, employer has underpaid the tax on the severance payment. This may be because of how he described the components of the severance package to the China Tax Bureau, or because he has claimed certain allowances and/or exemptions that may not be accurate/justified. If this is the case, how can I challenge this situation? Would I challenge the employer's tax payment and allowances/exemptions (double tax treaty) when I pay the UK tax before end of January 2024. Would HMRC do anything about it if I did challenge the employer's submission on my payment?
Posted Wed, 27 Sep 2023 13:30:22 GMT by HMRC Admin 19

You should take this up with your employer and if any amendments are required you can then amend your Self Assessment tax return to take account of the revised figures.  

We can confirm that UK tax liability is calculated using the gross figure.

Thank you.
Posted Wed, 27 Sep 2023 14:23:45 GMT by Barry Hamblin
The severance discussions involved lawyers over a period of 18 months. The employer has no interest in meeting his fiduciary or professional responsibilities as an employer. I defined my fears on his non-payment of my taxes, and requested clarity on his tax payments for me, probably thirty times in writing, so 'taking it up with the employer' in China would not even get a reply. There is a UK/China double tax treaty, so would HMRC not ask to review the employer's tax payment in China if I asserted (in my tax return) that it was too low, or that he had claimed allowances/deductions that he should not have? On the gross calculation. Why is the severance payment grossed up in the UK, when it has already been grossed up in China, with taxes deducted? That is taxing twice, which I assumed the double tax treaty was in place to obviate?
Posted Thu, 05 Oct 2023 11:13:58 GMT by HMRC Admin 25
Hi Barry Hamblin,
No we would not take this up.
The tax treaty does not include reviewing how another country operates their tax is only to give relief if tax has ben paid on certain incomes.
You need to include gross income, the same as the UK , and then claim any foreign tax credit relief for the tax paid abroad.
Thank you. 

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