Foreign Employment Income

burg
burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
I don't normally deal with Foreign income but one of our existing clients worked in Greenland for two months last year.

There is not Double Taxation Agreement with Greenland so the income has been taxed in Greenland as well as in the UK where it was paid via PAYE.

The income (converted) was £6,480

Tax in Greenland was £2268

Tax in UK was £1296

From my understanding the maximum relief she can claim is either:-

Unilateral Relief (max of UK tax due) = £1296

Deduction from earnings of the foreign tax - £2268 x 20% = £454


Please confirm I'm not missing something or haven't got the wrong end of the stick!
Regards,

Burg

Comments

  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    burg wrote: »
    I don't normally deal with Foreign income but one of our existing clients worked in Greenland for two months last year.

    There is not Double Taxation Agreement with Greenland so the income has been taxed in Greenland as well as in the UK where it was paid via PAYE.

    The income (converted) was £6,480

    Tax in Greenland was £2268

    Tax in UK was £1296

    From my understanding the maximum relief she can claim is either:-

    Unilateral Relief (max of UK tax due) = £1296

    Deduction from earnings of the foreign tax - £2268 x 20% = £454


    Please confirm I'm not missing something or haven't got the wrong end of the stick!

    Don't quote me on this but my understanding was that the maximum relief is the lower of:

    1) Tax deducted at source from Greenland, i.e. £2,268.

    2) UK tax incurred on the Greenland income (in order to calculate this figure you would have to perform two personal tax comps and take the difference between the two, i.e. personal tax liability with the Greenland income less personal tax liability without the Greenland income). E.g. lets say that the personal tax liability with the Greenland income in it comes out to be: £6,000 and the personal tax liability without the Greenland income comes out to be: £5,000, the UK tax incurred on the Greenland income is £1,000 (i.e. £6,000 - £5,000).

    Therefore because £1,000 is lower than £2,268, the maximum relief that could be given is £1,000.

    Although I could be getting the wrong end of the stick as well!

    I'm assuming that she hasn't been away for the whole of the tax year on a full-time job and therefore cannot claim to be not ordinarily resident (NOR) in the UK for the tax year (if she was NOR I think her foreign income would be exempt from UK Tax).
  • burg
    burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
    Thanks Reader.

    I have found some info and yes you are right. Does not make any difference in the above case though as she was a basic rate tax payer but would have done has she been a higher or additional rate payer.

    And no this was only for two months.
    Regards,

    Burg
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