Split year treatment of pension income.
I have a husband and wife who have returned to the UK mid-way through 2024-25 from France, where they were resident for some eight years. Both are in receipt of state pensions and the husband has a private pension. How are these pensions treated in a split year?
The private pension had a NT code and the state pensions were taxed in France under the double tax treaty.
Are they taxable in full for the whole year or just from the date of return to the UK?
Query 20,583 Home Bird.
HMRC pursuing non-filing penalties for deceased expat.
I have a client whose mother died in 2020. Her estate was left equally to my client and her brother, who has lived in Australia for many years (since 1994). He has not completed a UK tax return in that time and has not apparently had any UK income. Sadly, he died on 5 November 2023; he had received a capital distribution from the estate in 2022, but the administration was continuing and there was, as far as I can see, no UK income to report at the time of his death.
Since then, HMRC has been pursuing his widow in Australia for non-filing penalties. It appears that HMRC must have sent him a notice to file a return for the financial year (FY) 2022-23 – the first penalty notice she received is dated 13 February 2024. However, she has no record of him receiving such a notice, and clearly by that time he was dead.
She has written several times to HMRC to explain the situation, including that as far as she is aware he had no UK income to report (enclosing a death certificate), but the penalty notices keep arriving – now for FY 2023-24 as well. They are addressed to him personally, so HMRC is sending out notices to file to someone it has been told is dead.
The Catch-22 situation (for me at least) is that I don’t think HMRC will engage with me (as it doesn’t seem to engage with the widow) because I am not authorised, and cannot be authorised, to act for the person who is named on the penalty notices. The widow has tried several times and got nowhere, and is obviously quite stressed by the arrival of notices that are quite threatening in tone, even though I reassure her that the chances of HMRC sending bailiffs to Australia are nil.
Do readers have any suggestions?
Query 20,584 Brick Wall.
Resident or non-resident?
We act for a UK resident company that has only one shareholder. That shareholder is currently UK resident, has spent most of her life in the United States and is married to an American citizen. They are both US citizens.
The company has accrued considerable distributable profits, and my client has suggested that she should become non-resident in the UK for all of 2026-27, thus avoiding UK tax on the dividend. Although she will be spending at least 183 days in the US, she will be making trips back to the UK, some for business and some for personal reasons. She expects to be in the US for at least five years. The idea is to declare a dividend of a few million pounds while she is resident in the US. I have been asked specifically not to comment on the US side of things.
Is there any reason why this scheme should not work, and can she spoil it by spending too many days working or socialising in the UK? She will not retain a property in the UK but does have relatives living here.
Any tips readers can give would be most helpful, especially in view of the amount of money involved.
Query 20,585 Cathy Come Home.
Is work being done for US or UK company?
My client supplies management consultancy and project manager-type services to various large organisations; none of her work relates to land and property.
A new insurance client based in London has requested that her services are set out and agreed in a contract with its parent company based in the US, rather than the UK subsidiary based in London. If this is done, her client can avoid being charged VAT on my client’s services, which it cannot recover as input tax.
As long as the contract is made in the name of the US company, and signed by a director based in the US, I believe the services provided by my client will be outside the scope of VAT; is this correct?
Secondly, does it matter that the services will be provided in the UK by my client and she might even be working with other contractors and staff of the UK subsidiary company, who will be doing the same kind of work?
All invoices will be rendered to the US company and raised in sterling if this is relevant.
What do readers think?
Query 20,586 Prudence.
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