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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
, see all updates

PAYE operation: double taxation claims submitted by non resident individuals: income remitted to country of residence (Action Guide)

Where a repayment of tax is due for years where income was remitted to the overseas country, follow steps 1 - 20 below.

The guide is presented as follows

  Step 1
   
  Steps 2 - 7
  Steps 8 - 13
  Steps 14 - 19
  Step 20

Initial action

1. The tax year in the country of residence may differ to the UK tax year. Before reconciling you will need to determine which UK tax years the remitted income covers. This may not be clear from the information given on the claim form. Where this is not clear, you may need to request the information from the individual
   
  * Ensure Employment Summary details are updated to show all income in payment for the relevant year
  * Review Employment P14 Summary Screen to ensure all pay and tax details are shown for relevant year
  * Check IABD Summary for any other income

Reconcile years where income has been remitted for the UK tax year

2. Where the individual has stated that income has been remitted to the overseas country from April to April
   
  * The total amount of income remitted to the overseas country is exempt from UK income tax for the UK tax year specified and subsequent tax years
3. * In IABD Landing, select other form and earliest year as relevant tax year, enter the date of receipt
  * Drill down into allowances
  * Enter remitted amount as Foreign Pension Allowance
  * Save
  If the total income remitted to the overseas country is greater than the occupational pension, you should reduce the state pension by the amount the remitted income exceeds the occupational pension
  Where there is no state pension, or where the total amount remitted is less than or equal to the occupational pension, go to step 5
4. Drill down into Pensions then into state pensions
  * Enter the liable amount of state pension
  * Set the Actual NIB indicator
  * Select frequency of payment to annual (if not at present)
  * Save, then
  * Save again
5. Submit
  * Contact History Note: Document type is ‘Other Contact’, Contact Channel is ‘Document in’, Contactor type is ‘Individual’
  * Save
6. Select where the copy of the repayment calculation is to be issued, Agent / Capacitor / Individual and submit
  * Select submit again to take you to the second ‘reason for repayment’ screen
  * Select reason as ‘other’ and enter reason as ‘Repayment following double taxation relief’
  * Select where the repayment will be made, Agent / Individual / Capacitor / Nominee and submit
  * Contact History Note: Document type is ‘Other Contact’, Contact Channel is ‘Document In’, Contactor Type is ‘Individual’
  * Save
7. Where the year has already been reconciled, re-reconcile by selecting the tax year then reconcile. This will take you to the Tax Calculation screen. Follow instructions as at step 6

Reconcile earliest year where income has been remitted for a calendar year

8. Where the individual has not stated that the income has been remitted to the overseas country from April to April, assume that the income stated on the claim form was remitted during the overseas country’s tax year. Where the overseas country’s tax year is a calendar year, you will need to calculate how much income was remitted to the overseas country of residence for the earliest tax year
   
  * Determine effective date of exemption; follow Action guide tax40170 and tax40181 Double Taxation Claims
  * Apportion the income remitted to the overseas country to calculate the amount which will be exempt from UK income tax for the earliest year
  * Calculate the amount remitted from 1 January to 5 April as follows
  * In Excel open SEES - other calculators + forms + NPPS - dates calculator
  * Select time apportionment tab
  Base period
  * ‘From’ date is the 1 January or date of commencement of the pension if later
  * ‘To’ date is 31 December
  Amount
  * Amount remitted
  Apportionment Period
  * ‘From’ date is 1 January or the effective date of exemption (see Action guide tax40170 and tax40181 Double Taxation Claims) if later
  * ‘To’ date is the following 5 April
  This calculates the amount not liable to UK income tax for the earliest tax year ending 5 April. This amount will be entered as the Foreign Pension Allowance in the earliest tax year reconciliation
  * Print a copy of the calculation
  You will only need to do this calculation for the first year of remittance
9. In IABD Landing, select other form and earliest year as relevant tax year, enter the date of receipt
  * Drill down into allowances
  * Enter apportioned amount as Foreign Pension Allowance
  * Save
  If the total income remitted to the overseas country is greater than the occupational pension, you should reduce the state pension by the amount the remitted income exceeds the occupational pension
  Where there is no state pension, or where the total amount remitted is less than or equal to the occupational pension, go to step 11
10. Drill down into Pensions then into state pensions
  * Enter the liable amount of state pension
  * Set the Actual NIB indicator
  * Select frequency of payment to annual (if not at present)
  * Save, then
  * Save again
11. Submit
  * Contact History note: Document type is ‘Other Contact’, Contact Channel is ‘Document in’, Contactor type is ‘Individual’
  * Save
12. Select where the copy of the repayment calculation is to be issued, Agent / Capacitor / Individual and submit
  * Select submit again to take you to the second ‘reason for repayment’ screen
  * Select reason as ‘other’ and enter reason as ‘Repayment following double taxation relief’
  * Select where the repayment will be made, Agent / Individual / Capacitor / Nominee and submit
  * Contact History Note: Document type is ‘Other Contact’, Contact Channel is ‘Document In’, Contactor Type is ‘Individual’
  * Save
13. Where the year has already been reconciled, re-reconcile by selecting the tax year then reconcile. This will take you to the Tax Calculation screen. Follow instructions as at step 12

Reconcile later years where income has been remitted for a calendar year

14. For later years, where the same amount is remitted each year, or when the full amount of income has been remitted, the amount of Foreign Pension Allowance would be the total amount of income remitted to the overseas country of residence
   
  In IABD Landing, select ‘other form’ and relevant tax year, enter the date of receipt
  * Drill down into allowances
  * Enter the total amount of income remitted to the overseas country of residence as Foreign Pension Allowance
  * Save
  If the total income remitted to the overseas country is greater than the occupational pension, you should reduce the state pension by the amount the remitted income exceeds the occupational pension
  Where there is no state pension, or where the total amount remitted is less than or equal to the occupational pension, go to step 17
15. Drill down into Pensions then state pensions
  * Enter the liable amount of state pension
  * Set the Actual NIB indicator
  * Select frequency of payment to annual (if not already set)
  * Save, then
  * Save again
16. Submit
  * Contact History note: Document type is ‘other contact’, Contact Channel is ‘Document In’ Contactor Type is ‘Individual’
  * Save
17. Select where the copy of the repayment calculation is to be issued: Agent / Capacitor / Individual and submit
  * Select submit again to take you to the second ‘reason for repayment’ screen
  * Select reason as ‘Other’ and enter reason as ‘Repayment following double taxation relief’
  * Select where repayment will be made, Agent / Individual / Capacitor / Nominee and submit
  * Contact History note: Document type is ‘Other Contact’, Contact Channel is ‘Document In’, Contact Type is ‘Individual’ - [tax year reconciled] Repayment following double taxation exemption
  * Save
18. Where the year has already been reconciled, re-reconcile by selecting the tax year then reconcile. This will take you to the Tax Calculation screen. Follow instructions as at step 17
19. Where a new claim for double taxation relief is received in respect of income remitted to the overseas country of residence, and it shows that a different amount has been remitted for a later tax year, refer to example at PAYE81057

Final action

20. When all relevant tax years have been reconciled, you may need to issue an amended tax code. Go to Action guide tax40170 and tax40181  Double Taxation Claims