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Posted Thu, 13 Jan 2022 23:35:36 GMT by MarcoC
I moved to the UK from Italy on 4th August 2020 and started my business as sole trader that same day. Up until that time I ran the same activity - freelance translating - in Italy (closed business before moving to the UK). As the tax year in Italy runs Jan-Dec, I count as a tax resident both there for 2020 and in the UK for 20-21, as I lived in each country for more than half a year during the respective tax years. As such, I have already filed a return and paid income tax on my worldwide income to Italy (according to Italian tax law) for 2020, and wish to avoid double taxation on the same earnings in the UK from August 2020. On completing my self assessment, I have sought advice from HMRC on the specific cases that apply to my scenario and the sections I need to complete but have unfortunately received 3 different answers. My main queries are: Residence and remittance pages: - For box 3.1 - Do I qualify for split-year treatment and if so which case(s) apply? I believe 4, 5, 6 and 8 are applicable. - Which date should I use as a start date in box 6. I believe 4.08.20, my first day in the UK and the day I began full time work, if applicable to self employment (case 5). I am assuming it is from this date that I should declare my worldwide income here in the UK, not my previous earnings in Italy from April until 4th August. - I don’t think box 7, third automatic overseas test, applies to me and am unsure as to whether I need to complete box 13 (will depend if split year case 6 applies). - For boxes 20, 21, 22 - do I need to complete form HS304? This should be for non-residents to claim tax relief, whereas I am a resident. - As these pages are not available online I have been advised I can complete the self assessment online and provide the paper version of the residence pages separately. Is this correct? Foreign section: - I am unsure how to answer the question: ‘Were you unable to transfer some or all of your overseas income to the UK?’ I think the answer is no. - I have worked through worksheet HS260 for Foreign Tax Credit Relief (FTCRWS), but am getting zero for tax relief in my calculations. How’s it possible? - Foreign tax paid on self employment: does this apply only to the period from August 2020 onwards, so when I started living in the UK? Do the months before moving here need to be reported as well? Or not, if I get split-year treatment? Thanks
Posted Mon, 17 Jan 2022 14:27:14 GMT by HMRC Admin 10
Hi

You would need to check our guidance here to which cases you qualify for split.

You would need to be classed as UK tax resident in the first instance to consider split year.

If you are classed and non UK resident then you only need to declare the income from when you arrived in the UK.

RDR3 Statutory Residence Test

and

Residence: The SRT: Split year treatment: Contents

You will need to refer to this helpsheet to determine who has the taxing rights for your income if you are classed as tax resident in both countries.

If you are reporting the income to us then this will go on the self employment section with any tax paid being entered on the foreign section of the return so that you can clam foreign tax credit relief.

You would be correct to select no for the question "were you unable to transfer some or all of your overseas income to the Uk".

If you have a zero in your tax calculation then if go select next after print and view your full tax calculation you can amend the figure from zero to the amount of foreign tax credit due.

Foreign tax credit relief applies to the income that you are delcaring both the the UK and Italy. 

Thankyou.

Regards.
Posted Mon, 17 Jan 2022 16:35:12 GMT by MarcoC
Thank you for your reply. If I believe that I am a UK tax resdent for 20-21 (as I have lived and worked here for more than 183 days - from 4.08.20) and I believe that I qualify for split-year treatment, which means that I will be treated as a non-UK tax resident for the part of the tax year before I entered the UK (5 April - 3 August 2020): 1. For my self-employed business, which in the UK has a start date of 4.08.20, in the self-employment income section shall I include earnings from 4.08.20 onwards (UK income) or also include self-employed income from 5.04.20 until 3.08.20, before I entered the UK? 1a. If the answer to question 1 is that I should only include UK income (from 4.08.20 onwards) do I need to declare the income from 5.04.20 unti 3.08.20 anywhere else on the self assessment, or not mention it at all because I believe I qualify for split year treatment? 1b. If the answer to question 1 is that I need to declare all income from 5.04.20 onwards, I do not understand how/if split year treatment would apply in this case. Could you explain? 2. In either case, I understand that I can submit a claim for foreign tax relief related to the income tax paid overseas for the corresponding period - either April-Dec 2020 or August-Dec 2020 depending on the answer to question 1. Is this correct? 3. Can you please clarify which helpsheet you are referring to, about who has taxing rights for my income, if I'm tax resident in both countries? Again, I have already paid taxes on worldwide income in Italy for 2020, which also includes my UK income from August 2020 to December 2020. According to the RDR3 Statutory Residence Test page, if I have been in the UK for 183 or more days I will be a UK resident. For this, I am using the date of 4th August - the day I arrived in the UK. This is when I a) began full time work, if self employed qualifies for this, (Case 5) and b) I ceased full-time work overseas (Case 6). FYI - I was in temporary accommodation from 4th August until 5th December 2020, and then moved into a rented home on that date (Cases 4 and 8). Thanks
Posted Tue, 18 Jan 2022 09:53:09 GMT by HMRC Admin 17

Hi,
 
If you qualify for split year then you declare your self employed income up until the point that you became tax resident in the UK.

Please see guidance here regarding taxing rights when you are tax resident in 2 countries:

Dual residency (Self Assessment helpsheet HS302) .
 
If there is an overlap of income being declared to the UK then you can consider claiming Foreign tax credit relief for tax already paid:


Relief for foreign tax paid (Self Assessment helpsheet HS263)    . 

Thank you.

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