Income Tax Personal Allowance for BNO holders

I have an enquire regarding personal allowances for BNO holder as I find conflicting information from the HMRC and the Income Tax Act 2007. According to Section 56 (3)(za) of the Income Tax Act 2007, ''An individual meets the condition in this subsection if, at any time in the tax year, the individual— [F2(za)is a [F3national of the United Kingdom or a] national of an EEA state,]'' This section of the Income Tax Act says that the individual is entitled to a personal allowance if the said individual is a national of the United Kingdom. But according to HMRC RDRM10330 Residence: Personal Allowances: Non-Resident Individuals who are entitled to Personal Allowances ''Current legislation sets out a range of circumstances where individuals have a right to claim UK personal allowances and reliefs from income tax, despite being not resident in the UK. The individual may qualify as: an EEA national a British Citizen (including those covered under the British Overseas Territories Act 2002) a resident of the Channel Islands or the Isle of Man a person who has previously resided in the UK and is resident abroad for the sake of their health or that of a member of their family who is resident with the individual a Crown servant a person employed in the service of any territory under Her Majesty’s protection a person employed in the service of a missionary society, or a person whose late spouse or late civil partner was employed in the service of the Crown'' The Income Tax Act says a UK national is entitled to the personal allowance, whereas the HMRC manual says it has to be a UK citizen. As far as I am aware, a BNO passport holder is a UK national, but not a UK citizen. Links for reference - https://www.legislation.gov.uk/ukpga/2007/3/section/56 RDRM10330 - Residence, Domicile and Remittance Basis Manual - HMRC internal manual - GOV.UK I believe that HMRC manuals do not carry the force of law, while the actual legislation does. Surely, we should be following the Income Tax Act on this issue?

Hi,
 

Our specialist tax treaty team have confirmed that BNO holders are not entitled to personal allowances as they are not classed as British nationals or EEA nationals. If you wish to take this further you may wish to seek legal advice or talk to the home office.  Thank you.

I received conflicting information again as the home office has advised that BNO holders are British nationals. Can you ask your tax specialist to clarify where in legislations does it say BNO holders are not British nationals?

Hi,

UK personal allowances are granted by either a Double Taxation Agreement the UK has in place or under Section 56 Income Taxes Act 2007.

We know the UK/Hong Kong Double Taxation Agreement does not permit UK personal allowances.

Digest of Double Taxation Treaties

Thank you.

Hi, if you read my original post, I quoted the section 56 of the Income Taxes Act 2007 : ''An individual meets the condition in this subsection if, at any time in the tax year, the individual— [F2(za)is a [F3national of the United Kingdom or a] national of an EEA state,]'' The home office advised that a BNO holder is a British National, and following this logic, a BNO holder should be entitled to a personal allowance? What I asked was where in the legislation does it say that a BNO national is NOT considered to be a British national? Or does HMRC has the power to decide the classification of a British national beyond the power of law?

Hi Raymond Yiu,

UK PA’s are granted by either a DTA the UK has in place or under Section 56 Income Taxes 
Act 2007 – We know the UK/Hong Kong DTA does not permit UK PA’s (per the DT Digest), so 
we must refer to S56 ITA of which S56(3) states that PA can only be granted in the following 
circumstances:
1. is a national of an EU/EEA state (including the UK),
2. Is a UK resident for the tax year
3. is resident in the Isle of Man or the Channel Islands,
4. has previously resided in the United Kingdom and is resident abroad for the sake of 
the health of–
(i) the individual, or
(ii) a member of the individual's family who is resident with the individual,
4. is a person who is or has been employed in the service of the Crown,
5. is employed in the service of any territory under Her Majesty's protection,
6. is employed in the service of a missionary society, or
7. is a person whose late spouse or late civil partner was employed in the service of the 
Crown.
In short, British National (Overseas) are not EEA/EU nationals as they are not nationals of 
the UK – To be an EU/EEA national, They would need to be ""nationals of a Member State"" 
under the Maastricht Treaty. This is achieved in relation to the UK by being:
· British citizens;
· British overseas territories citizens who derive their citizenship from 
a Gibraltar connection; or
· British subjects under Part IV of the British Nationality Act 1981 having the right of 
abode under s.2 of the Immigration Act 1971.
British National (Overseas) are Instead Commonwealth nationals by virtue of a connection 
to Hong Kong and as you are probably aware, Commonwealth nationals are no longer 
entitled to Personal Allowance and have not been for a number of years. This is in someway 
confirmed on gov.uk here:
Types of British nationality
You can:
 hold a British passport
 get consular assistance and protection from UK diplomatic posts
However, you:
 are subject to immigration controls and don’t have the automatic right to live 
or work in the UK
 aren’t considered a UK national by the European Union (EU)
INTM334580 - Double Taxation applications and claims: applicants/claimants - individuals: Individuals entitled to UK personal allowances
can also be referred to. If you disagree with this then you would need to either sesk legal advice or write in for a formal response.

Thank you.

May I politely point out that the circumstances you refer to from the Section 56 (3) of the Income Tax Act 2007 are not updated. If you read the legislation on https://www.legislation.gov.uk/ukpga/2007/3/section/56, you can see that it has been updated on the 31.12/2020 by the Taxes (Amendments) (EU Exit) Regulations 2020, since the UK left the EU. Section 56(3) says - An individual meets the condition in this subsection if, at any time in the tax year, the individual— [F2(za)is a [F3national of the United Kingdom or a] national of an EEA state,] Please notice the change of wordings - an individual qualifies for a personal allowance if he/she is a national of the UK OR a national of an EEA state. The fact that the EU doesn't recognise BNO holders as UK nationals no longer overrule the fact that the UK does in fact recognise BNO holders as UK nationals, as you kindly confirmed by referring to https://www.gov.uk/types-of-british-nationality On the UK government website, it clearly states that BNO are a type of UK national. By this logic, a BNO holder in fact qualifies for a personal allowance. Could you provide contact details if you want me to write in for a formal response?

Hi,
 

As explained in an earlier response, HMRC's specialist Tax Treaty team have confirmed that BNO holders are not entitled to the UK personal allowance because they are not classed as British or EEA nationals by HMRC. For a formal written response, please write to: DTT Team,                                                                            HMRC, England, BX9 1QR.  Thank you.

Hi, As I wrote before, I asked why HMRC doesn't recognise BNO as UK nationals, even though UK legislation clearly says BNO are UK nationals? I asked your team to explain where in legislation does it say BNO are not UK nationals, but no one has been able to answer. It seems very peculiar that the HMRC can decide the BNO are not UK nationals without any basis? I am aware that before the UK left the EU, BNO were not considered UK nationals because of the EU law, and BNO were not entitled to personal allowance because PREVIOUSLY in the Income Tax Act 2007, to qualify for a PA one had to be an EU/EEA national. But since the UK has left the EU, the legislation has changed on the Income Tax Act 2007, where it says one has to be a UK national OR an EEA national. Notice it doesn't mention anything about being an EU national, as it reflects that fact that the UK has left the EU and hence not bound by the EU law. Perhaps the HMRC needs to review this and update your policy/ manual, to reflect the change? In short, I just want to understand where in the legislation does it say that BNO are not UK nationals? Because everywhere I look, it says BNO are UK nationals.

Hi,
 

Please note that your detailed comments on this matter have been referred to our Treaty Team, who have confirmed once again that HMRC's position is that BNO holders are not entitled to the UK personal allowance because they are not classed (by HMRC) as British or EEA nationals. For a full explanation as to why this is HMRC's position, please write to: DTT Team, HMRC,                                                                                                                         England, BX9 1QR. Thank you.

I'm sorry to interject, just I know this has been an ongoing issue for some time (I read the forums to keep up to date on current issues etc) and I think I may be able to help. Or at least, I hope I can. You can have a type of british nationality without being a british national. Britain has a very long and colourful colonial past - it has created some rather strange issues and situations. There is a site I can't link to (I dont think they like links in case of advertising or maybe malicious sites) that explains BNOs are commonwealth citizens rather than UK citizens. Prior to the amendment to s53 that has been mentioned, it just stated EEA national. I believe when the page on govuk about BNO holders says "aren't considered a UK national by the EU", it is including that information with regards to freedom of movement etc normally enjoyed by EU citizens and isn't referring to the income tax acts mention of EEA national (because the EU and EEA are different). I believe BNO holders were not considered EEA nationals because they are not UK nationals but nationals of the commonwealth. I would ask if BNOs are in fact BNs, why does the O exist? Why do BNOs not have the automatic right to live and work here, if they are a national? Why do they have to apply? I belive it is because they are not in fact BNs but BNOs. I'd also like to apologise if anything I've said causes offence. I understand how important things like this can be to someone, and how it can be a sensitive subject. It is also only my opinion and isn't intended to amount to advice or a reliable interpretation of the law. I am only trying to help, but you know what they say about good intentions! :)