Double taxation problem

Hi HMRC officers, I have read all relevant contents on your website about personal tax as well as double taxation agreement, but I would like to confirm my understanding below to avoid double taxation or tax evasion. Thanks. My background: I am from Hong Kong. I will move to the UK in early November 2022. I confirm that I am a UK tax resident as well as a Hong Kong tax resident in the year 2022/23 (in HK, the tax year begins from 1 Apr 2022 to 31 Mar 2023). I will still work under my Hong Kong employment contract remotely in the UK (i.e., work from home in the UK) and all my salary is borne by my HK employer and sent to my HK bank account. Below is my questions: Question 1: I understand I cannot fully exempt my tax payable in the UK under Article 14 (income from employment) of the double tax agreement (DTA) given that I will stay in the UK for more than 183 days in the year 2022/23. Since I will pay my salary tax in Hong Kong for the year 2022/23 and given that the same income will be taxed in both jurisdictions for the period from November 2022 to early April 2023 for the year 2022/23, can I get the tax credit from UK income tax under article 21 (a) (method for elimination of double taxation)? How does the amount of credit to be calculated? Is it full exemption or using the UK tax payable minus the Hong Kong tax paid? Can I still ask for Hong Kong tax credit relief for double taxation after claiming the UK tax credit? Question 2: My salary components include: a) basic salary, b) housing allowance (it is cash allowance for housing, but it is not reimbursement ), c) MPF (a mandatory pension fund under Hong Kong law, which is contributed by employer and employee monthly), d) qualification pay (a cash payment). May I confirm whether only basic salary and qualification pay will be taxed and the housing allowance and MPF contribution (by employer and employee) are not subject to UK income tax. Also, would like to check whether I have to report these non-taxable items in my self assessment form? In addition, if some of the items are not taxable in UK, will the tax credit mentioned in the above decrease to the extent that the tax paid in Hong Kong for non-taxable item in UK will be disregard? Question 3: Please confirm whether I am required to contribute to my NI even though I am under Hong Kong employment after moving to the UK and I have to create an account to report my salary as an employer and contribute my NI through PAYE. If I am working in PwC Hong Kong (the big 4 accounting firm) and I have no relationship with PwC UK and I think PwC Hong Kong should be independent from the UK, may I know whether PwC has to contribute to my NI and whether I can report my salary on behalf of my company for NI contribution? Question 4: I understand that the registration deadline for self-assessment is 5 October 2022. Since I will move to UK in November, can I register for self assessment after the deadline and fill in the online tax returns by 31 Jan 2023? I also understand that the tax year end in UK is 5 April 2023. Do I have to report my estimated income from February 2023 to 5 April 2023 in my online tax returns? Also, if I choose to report in self assessment and fill in online tax return, do I have to report my salary and pay income tax monthly? Thank you in advance for your help. Look forward to seeing your reply.

Hi,

As you won't become a resident of the UK until you move here in November, you are likely to be eligible for split year treatment in the 2022/23 tax year. You can apply for split year treatment when you complete your 2023 Self Assessment tax return.                                                  

Tax on foreign income

Regarding the amount of foreign tax credit relief you will be able to claim as a UK resident, please refer to the HS263 helpsheet here:                                                           
Relief for Foreign Tax Paid 2022 (HS263)                                                             

When declaring your total employment income (from the date of your arrival in the UK in November 2022 until 5 April 2023), please only include the UK taxable elements in the total figure.                                                                        

DT9201 - Double Taxation Relief Manual: Guidance by country: Hong Kong: Admissible taxes
                                                                                                                               
You can find guidance on how to register for Self Assessment here:                                                               

Register for Self Assessment                                                    

You can also contact our National Insurance team for advice on National Insurance.

National Insurance: general enquiries

Thank you.

Thanks for your reply. Regarding the foreign tax credit, can I ask for tax credit relief on both sides? or is there any restriction on choosing which side to claim the tax credit given that I am the tax resident on both sides. In addition, in Hong Kong, normally the tax bill will be issued within half-year after the year-end and the tax payment will be due in one year after the year-end, the timeline is much later than UK. It is likely that when I file the tax return in UK, I do not know the amount of tax paid in Hong Kong. Can I claim the foreign tax credit at a later stage? Is there any timeline for revising my UK tax payment? Regarding question 2, may I know whether housing allowance (a monthly cash allowance for housing purpose, and it is not in the form of reimbursement) be taxable in UK? Regarding question 4, the deadline for registration of self assessment is passed and I will arrive UK in November. In this case, can I register the self assessment after November? In addition, the deadline for filing the online tax return is end of January 2023. Since the tax year end date is 5 April 2023, how could I report my income from February 2023 to 5 April 2023? In estimation or I can ignore the income in this period? Thanks for your help.

Hi Wayne Suen,

We are unable to comment on the tax requirements of Hong Kong.  
If you arrive in the UK around November 2022, then this would fall under 2022 to 2023 tax year and the last date for filing the self assessment tax return would be 31 January 2024.
To determine if your are deemed resident in the UK for the whole tax year, you will need to review the statutory residence section of www.gov.uk.  
This can be found at RDR3 Statutory Residence Test.
 If you are deemed resident in the UK for tax purposes for the full tax year, then you would declare your Hong Kong income in the self assessment tax return and and claim foreign tax credit relief up to the maximum of the foreign tax paid.  
The main tax return has a tick box to show that you have used estimated figures.  
You would have up to 2 years after 31 January 2024 to correct the tax return with actual figures.
 If you are deemed not resident in the UK for the full tax year, then you would only declare any UK income arising since you entered the UK.

Thank you.

Sorry, may I know whether housing allowance (a monthly cash allowance for housing purpose, and it is not in the form of reimbursement) be taxable in UK?

Hi,

Housing allowance is paid by the employer and is subject to witholding tax. It is considered taxable compensation paid as wages.  

This would then fall under article 14, income from employment.

Thank you.

Dear HMRC I had an overseas rental property and the income will subject to tax in that country also. For the double taxation credit relief, the problem is UK has different tax financial year with that country. When I submit my uk tax assessment, I has not yet submit tax assessment in that country. Can I reimburse the foreign tax credit relief after I settle my UK tax submission? If so, should I tick the box for the credit relief application during my submission (even I have not submit tax in another country and not knowing the tax amount I used to pay in that country yet)? many thanks for the clarification

Hi samwai,

You do not need to convert profits and expenses for the tax year of the other country, to match the UK tax year.

Instead, please use the figures of the tax year for the other country, converted into pounds sterling, using the official exchange rates and apply them to the UK tax year.

E.G.  If the foreign tax year is 1st Jan 2022 to 31 Dec 2022, then use the same figures for the UK tax year 2022 to 2023.

Thank you. 

 

thanks admin reply. In this case, when i submit foreign income in uk (SA106), then pageF4, : column B - i input the rental income recieved Columc C - i enter tax i paid in foreign country column E- i put a "X" to claim foreign rax credit relief At the time i input column C, I hv not yet paid the tax nor submit tax Ass in that country. So can i just calculate the tax based on the tax rate of that country and write it down in column C? (so it is jusy my calculation but not the final value, i fear there may have some discripency with the final amount as calculated in that country tax dept. later) So may i know if this is right to proceed ? If yes, should i attach anything to justify my calculation on the tax which i paid off in foreign country? thanks very much for clarification

Hi,

Column A is for the 3 digit country code (which can be found in the SA106 notes below) and is mandatory, if anything is declared in column B.  

Foreign notes (2022-23)

Failure to include the correct country code will result in the tax return being rejected. Column B is for the gross income from overseas sources, before anything is deducted. Column C is for any tax that was deducted from the income.  

To claim a Foreign Tax Credit Relief (FTCR), you enter 'X' in column E and the amount of FTCR in box 2, if you have worked out how much is due.  If you are entering provisional figures, you must declare this at box 20 of SA100, as instructed on the tax return guidance.

How to fill in your tax return

You can at a later date, amend the return to finalise your figures. You do not need to include any calculations.

Thank you.