When we paid in March we were told to wait 6 weeks and then call the NI team to see what is happening. Surprisingly both my and my wife's payments have already cleared through and are shown on the NI record and pension forecast within about 4 weeks. If has been more than 6 weeks, I would call the NI team for an update.
Hi HMRC Admin 17,
The two bullets at the end of your post above appear to conflict with the position set out in the "UK Belgium Tax Treaty" thread where your colleague said,
HMRC has now had further discussion with the Belgian tax authorities. This response will provide further details on the taxation of Belgian State pensions as well as the options available for those who are affected by the issue.
Treatment of pensions in UK/Belgium Double taxation agreement (DTA)
Under the pre-2013 DTA, all pensions (apart from Government-service pensions) were taxable only in the country in which the recipient was resident. This changed from 1 January 2013 so that all pensions (apart from Government-service pensions) became taxable only in the country in which the pension arises (that is, the country from which the pension is paid).
Pensions that were already being paid prior to 1 January 2013 are dealt with by a “grandfathering clause” in the amended DTA (sub-paragraph (b) of Article 18).
You can find the full text of the UK/Belgium DTA here:
Belgium: tax treaties
The ”grandfathering clause” in sub-paragraph (b) of Article 18 applies to pensions and other similar remuneration “under a pension scheme”. This does not include State pensions.
The definition of a UK pension scheme explicitly excludes State pensions (or “social security pensions”). Although the corresponding Belgian definition is not as explicit, the Belgian tax authorities have confirmed that a Belgian State pension (which they refer to as a “first pillar” pension) does not meet the conditions and is therefore not considered to be a pension constituted under a pension scheme.
While both governments had intended a different outcome from the 2013 protocol (as is clear from the explanatory notes of both governments), the unfortunate reality is that the intended outcome was not achieved by the legal drafting. This means that both the UK and Belgian tax authorities are legally obligated to apply the actual terms of the agreement.
The realisation of this error coincided with new rules in Belgium that require all non-residents to submit tax returns in Belgium if they have any Belgian-sourced income (that is, income that arises in Belgium). That has led to the Belgian tax authorities implementing this change for the Belgian tax year 1 January 2019 to 31 December 2019. It should be noted that under Belgium’s domestic law, they are able to assess earlier years if they make a specific intervention, though we have seen no reports of this having happened where the only Belgian-source income has been a State pension.
For 2020, 2021 and future years, Belgium will be taxing all Belgian State pensions received by UK-residents regardless of when they were first paid. That income will not be taxable in the UK.
What you should do if you have been receiving a Belgian State pension
It is likely, at this stage, that you have only been taxed in Belgium on your Belgian State pension from the Belgian tax-year 1 January 2019 to 31 December 2019. However, we understand from the Belgium authorities that they can also assess the income for the tax-year 1 January 2018 to 31 December 2018.
You do not need to wait for a further assessment from Belgium to reclaim the UK tax paid on your Belgian State pension for the past 4 years. You should therefore make a claim for repayment of UK tax for the following years:
6 April 2017 to 5 April 2018
6 April 2018 to 5 April 2019
6 April 2019 to 5 April 2020
6 April 2020 to 5 April 2021
You can claim a refund up to 4 years after the end of the tax year to which it relates. You can find details of how to make a claim here:
Claim a tax refund
To summarise, although HMRC thought Belgian state pensions paid before 2013 fall within Article 18(b), thus being taxable only in the UK, that is no longer the agreed interpretation of 18(b) and such pensions are also taxable only in Belgium. Or am I missing something?
I thought I posted a reply to this but it has not appeared for some reason - how strange...
Have a look at the thread on here called "UK Belgium Tax Treaty" and in particular the HMRC entry as the 4th one down on page 5. The treaty has been re-interpreted and Belgian State Pensions that came into payment before 2013 are now agreed to be taxable in Belgium, not in the UK.
Hope this helps.
I wonder why you would worry about paying contributions in each country given how the EU rules on the coordination of social security work in relation to social security pensions, i.e. state pensions. When you reach state pension age in each country (the age may differ), you will be able to apply for a pension from each country in which you have paid contributions, calculated and paid according to their rules and the application of the EU coordination rules. Assuming you meet the requirements, you would then receive a pension from Italy and one from the UK.
My understanding is that for your time in Italy your contributions will enable you to claim an Italian state pension under their rules when you reach their state pension age. Your UK years will be aggregated with your Italian years and may ensure you qualify for the Italian pension (e.g. if they have minimum years' requirements that you do not meet using your Italian years alone) or to increase the amount you receive, depending on how their rules work and what pops out of the bottom of the calculation that must be done under the EU coordination rules - and yes, the rules continue to apply if you were in Italy before the end of the transition period. You may also want to consider paying voluntary contributions to the Italian system now you have left the country, so that you can ultimately qualify for a higher pension from them in due course. You would need to research that with them...
Your UK NI record will be used determine the amount of your UK state pension when you reach UK state pension age and your Italian years will be aggregated with the UK years under the EU coordination rules, which may get you past the minimum 10 years required for a UK state pension. Where you have gaps in your UK NI record, e.g. while you were in Italy, it may be beneficial to fill those gaps to increase the amount of your UK state pension. You would need to speak to DWP about that but at £800.80 per year for Class 3 voluntary NIC or £158.60 if you qualify to pay Class 2 voluntary NIC, you increase your pension by about £267 per year (all in 2021/22 terms), so you would want to do the maths and make your decision. Either way it would probably be beneficial to ensure that the year you are querying is fully paid up in the UK, assuming you are paying a part year in the UK anyway.
Can you not see this from your Personal Tax Account?
Many thanks for your reply - most helpful.
The income is indeed from s/e and above the threshold. The tax returns for all years 2016/17 onwards included the relevant Cl. 2 entries as they were properly completed by her agent. I don't know why your colleague suggested she pay at the 2021/22 rate for the 4 years concerned (2106/17 to 2019/20 - 2020/21 return has been amended) but as she needs to call your colleagues again she can ask that question. At the end of the day the difference is only about £20, so she may decide it is not worth arguing...
I will speak with my friend again as I am 99% certain that she was not given payment instructions and she did not mention a letter - it was me who suggested to her that it may take a while for HMRC to contact her regarding those earlier years given that she had not received payment instructions. Anyway, she may simply have mis-heard or misunderstood next steps as she was struggling enough to ask the relevant questions in any event!
I will ensure she calls again to obtain payment instructions and to clarify/finalise the amount due for those 4 years but unfortunately, being with her during the call is not possible as we live 300 miles apart and I am not sure she can ask you guys to "phone her friend".
While talking with a friend about her NI record and state pension forecast we discovered that despite submitting Self Assessment returns for many years in relation to her self-employment, something caused HMRC to ignore her self-employed status from 2016 onwards and to adjust the amounts shown on her self-assessment return such that no Class 2 was actually collected. She did not notice this small reduction in the amounts payable and as a result her NI record shows empty years for 2016/17 onwards. She understands none of this and her tax accountant is being summarily unhelpful.
Having read various posts on this forum and done a lot of internet research I tracked the issue down to the changes in 2015 when HMRC started collecting Class 2 NIC via the tax return and suggested she call HMRC's NI team to correct the issue as something clearly went wrong at that time.
She did that and the team have corrected your systems. For 2020/21 the Class 2 is now showing as due by 31 January 2022 and she was told she would have to pay the missing NI for 2016/17 to 2019/20 at the current rate. She is happy with that, though personally, I think there is an argument that it should be the rate for the year in question but let's leave that to one side.
What is not clear is how she actually pays the £635 or so. It is a couple of months since she called HMRC and she has received neither a letter, nor any payable amounts (other than the 2020/21 mentioned above) added to her SA account. Will HMRC write to her at some point providing a payment reference or other instructions on how to pay, or must she do something proactively still to create the payable amounts?
As I said, she understands none of this, her adviser is "not interested" in contacting HMRC about it and if she calls HMRC again she will likely not fully understand what they tell her (she is particularly "overloaded" at the moment having recently lost her husband meaning she is dealing with a myriad of complex issues as a result), so other than sending a 64-8 adding me as her "agent" (something I do not want her to do) we are not sure how to enable her to pay the amounts accepts she has to pay and which are needed to secure her state pension next year.
Belgian tax is not my area of expertise but a quick read of the Belgian Finance Ministry pages would suggest that non-residents (broadly the people this thread is talking about) only qualify for the Belgian personal allowance of currently 8,990€ if their "earned income that is taxable in Belgium amounts to at least 75% of the total earned income (both the Belgian and foreign earned income)". I have not gone further to see if there are age-related allowances as well.
The site also states that while worldwide income needs to be entered in the appropriate boxes on the non-resident tax return, it is neither taxed, nor does it feature in setting the tax rate for the income that is taxable in Belgium.
I would suggest that those with Belgian pensions may want to do a little more research to establish what tax they will have to pay...
As I said previously, I am following this discussion purely out of interest. It is encouraging to see that the position is finally becoming clearer, albeit with the outcome I feared in my post from 4 months ago. Despite that, I am sure those affected will welcome the certainty now being provided.
The note above sets out the normal 4-year rule for making repayment claims but makes no mention of the possibility to make a Mutual Agreement Procedure (MAP) claim to obtain repayment of the 2 years preceding that, i.e. back to 2016/16. I don't know the extent to which anyone affected would need look back that far but it would be helpful if HMRC could set out the position regarding MAP claims in relation to this issue.
I believe you need to make an overpayment relief claim for the previous 4 years and then make a Mutual Agreement Procedure (MAP) claim to obtain repayment of the 2 year preceding that. Given that the UK had no taxing right over the pension, it is a good question whether you can obtain repayment for any earlier years but I think the normal rules would get you back to 2015/16 tax year.