The Association of Taxation Technicians (ATT) is concerned that Scottish people living abroad risk paying the wrong amount of tax on UK-earned income.
HMRC regulations state that if a Scottish person is classed as a non- UK resident, they should be regarded as a UK taxpayer and not a Scottish taxpayer. However, if HMRC holds a Scottish address for a non-UK resident, the ATT has warned that HMRC may incorrectly determine them to be liable for Scottish rates of income tax.
The ATT was made aware of the problem after learning that HMRC is using the address it holds for a taxpayer as the identifier as to whether they are a Scottish or UK taxpayer. To correct this, HMRC insists on an overseas address being supplied as the main address and will leave, on request, any Scottish address held as a correspondence address. This can create difficulties when the individual is in temporary accommodation abroad and has no fixed address overseas.
This is more than just an administrative problem for taxpayers because, if they are classed a Scottish taxpayer in 2017/18, and they have non-savings/non-dividend income taxable in the UK, such as rental income, they may pay more income tax overall than they would pay if they were classed as a UK taxpayer.1 This is because the threshold between the basic rate band and the higher rate band is set at £43,000 for those entitled to the personal allowance in Scotland, compared to £45,000 in the rest of the UK.2
Yvette Nunn, Co-chair of ATT’s Technical Steering Group, said:
“We would urge relevant individuals or their advisers to contact HMRC to give an overseas address and perhaps ask that they keep the Scottish address as a postal address only. Otherwise the risk is their tax return will be rejected and they may pay more tax than they should because of an assumption that they are a Scottish taxpayer rather than a UK taxpayer.
“The system does not adequately cater for those that cannot provide an overseas address, for example someone who is travelling for a long period. In those circumstances they are unable to provide details of an overseas residence. HMRC needs to move with the times and it needs to be possible to have an address that is a contact address while they are abroad rather than a place of residence.”
Notes for editors
- UK earned income would be taxable at UK rates as would rental income from UK property. Pension income would depend on any double tax treaty.
- Since April 2016, people classified as Scottish taxpayers pay the Scottish rate of income tax on their wages, pension and most other taxable income. Definition of a Scottish taxpayer.