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By Fiona Moore, for Expatbriefing.com
24 May, 2017
Scottish people living abroad risk paying the wrong amount of tax on UK-earned income, the Association of Taxation Technicians (ATT) has warned.
HM Revenue and Customs (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.
But if HMRC holds a Scottish address for a non-UK resident, the ATT said that HMRC may incorrectly determine them to be liable for Scottish rates of income tax.
The ATT said 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, the ATT said.
It added that 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. This is because the threshold between the basic rate band and the higher rate band is set at GBP43,000 (USD55,767) for those entitled to the personal allowance in Scotland, compared with GBP45,000 in the rest of the UK.
"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," said Yvette Nunn, Co-chair of ATT's Technical Steering Group. "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."
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