Double taxation - are you paying too much tax ?

Are you being taxed twice ? I had two recent cases where individuals were being taxed twice, in the UK and Norway.

There are many double-tax treaties between the UK and other countries, both inside and outside the EU. These are in place to stop individuals and companies being taxed twice for working and operating in a different country and their home country. This can especially adversely affect individuals who do not know that there are such treaties and do not have access to information to help them. There are also agreements in place in respect of National/Social Insurance. Even less is know by individuals about these.

Most responsible employers do try to help their employees but what about the self-employed, contractors and small businesses who do not have accountants to hand to research and give advice and assistance ?

Overseas workers should check with their employers to be sure they are being taxed correctly or consult an independent professional.

Self-Assessment tax returns & Child Benefits

Those earning over £50,000 per year and claiming Child Benefits must now declare these benefits through the Self-Assessment tax return process. Failure to do so could result in a penalty.

High income earners must register by 5 October 2013 to avoid a penalty.

HMRC has added the Child Benefit declaration to the self-assessment tax return process but it seems that it has not been widely advertised. High income earners who are employed under PAYE schemes and who may not have filed self-assessment tax returns before may not be aware or prepared for this.

If you are in this category then you must call the HMRC helpline as soon as possible and request a Unique Tax Reference (UTR). It will take HMRC up to two weeks to issue the UTR so this should be done immediately.

The myth about the 75% income rule in Norway

Much is touted about the rules surrounding how much income a contractor declares through a UK Limited company as salary earned in Norway. The most common one I come across is the 'rule' that you must declare 75% of income as salary in Norway and pay related taxes there.

Norwegian law requires that 75% of profit (not gross income) earned by a Ltd company should (not must) be distributed as salary. You can offset your Norwegian costs against Norwegian income and pay the payroll taxes on 75% of the net. Therefore, if your costs equate to 10% of gross income then you will be able to reduce your taxes to payment on 65% of gross income.

In addition:

1. Your UK Ltd company can make an application for exemption from Norwegian Social Insurance.
2. As a foreign employee of a foreign company operating in Norway, you will be eligible for the 10% standard tax relief.
3. If you work offshore, aboard a vessel for 130 days or more then you may be eligible for the Norwegian seafarers tax relief.
4. Your UK company can pay out residual profits (after corporation tax id deducted) as dividends to shareholders.

By managing the structure correctly a UK Ltd company can be a tax-efficient vehicle in a Norway, achieving gross income retention rates of between 65%-80% as opposed depending on individual circumstances in an environment where starting tax rate is 28%.

UK Self-assessment tax returns - late filing

Three million people have not yet filed their self-assessment tax returns in the UK. Last year one million were late - that's £100 million into the Chancellor's coffers in penalties not to mention interest charges !! Money for old rope ? 

Individual taxpayers have 9 months to file a self-assessment tax return after the tax year end on 5 April each year, and yet one million fail to do so. Why ? 

Within each year I file tax returns for clients and approximately 40% of those are filed in the final two months  before the 31 January deadline. This, despite sending reminders each year. 

I have thought about this many times, why ? Apathy, fear, finances, cash-flow ?

Is there a misconception that once a tax return if file and tax due has to be paid there and then ? A self-assessment tax return can be filed and time after 5 April each year and HMRC will send a bill if tax is due and payable but that does not have to be paid until 31 January of the following year.

Are people afraid of what they might have to pay and stick their heads in the sand for as long as possible ? Isn't it better to know the situation and to plan for any outcome ? Getting the tax return done quickly gives breathing space (up to 9 month) to find a solution and to look at possibilities to legitimately reduce the final tax bill.

Is too much time given to file the tax return ? Does this create apathy ? In other countries the time to file is much shorter:

Norway - 5 months
USA - 4 months
France - 5 months
Spain - 6 months

Coming to the end of another 'mad month' I can say that it is really not worth waiting. The number is sighs of relief I hear on the telephone or emails with comments such as "what a lovely surprise !", " a refund ?" , "I wish I had done this sooner"..... these all tell me that 9 months of fretting is really not worthwhile.

.....it could turn out that HMRC have been holding onto your money without good reason.