UK Interest - Non-Domiciled

sr814

An Irish resident and ordinarily resident but non-domicile receives UK deposit interest into UK bank account.

Under Ireland UK DTA, the interest can only be taxed in Ireland. Any DIRT (or equivalent) paid in UK) can be refunded by HRMRC. Under remittance basis only foreign earnings brought into Ireland are taxed for non-domciled.

The income earned is not remitted to Ireland. Does the DTA provision mean that the interest is taxed in Ireland regardless of remittance rules or does it mean that the deposit interest is taxed is neither country?

Peregrinus

I'm assuming the taxapayer is neither resident nor ordinarily resident nor domiciled in the UK.

If the only reason he avoids UK tax on the interest is the DTA, then Article 6 comes into play. Under Art 6, his exemption from UK income tax is only available to the extent that he remits the income concerned to Ireland.

However if the UK would't tax him on UK-source interest income in any event, then it's not taxable in the UK.

sr814

Peregrinus wrote: »

I'm assuming the taxapayer is neither resident nor ordinarily resident nor domiciled in the UK.

Sorry, I should have pointed out the individual is UK domiciled.

If the only reason he avoids UK tax on the interest is the DTA, then Article 6 comes into play. Under Art 6, his exemption from UK income tax is only available to the extent that he remits the income concerned to Ireland.

However if the UK would't tax him on UK-source interest income in any event, then it's not taxable in the UK.

Thanks for that - makes sense now.

Peregrinus

You'd want to check this, but my impression is that the UK position is:

1. A non-resident, non-domiciled, etc person who has UK source income is liable to UK tax on that income.

2. They generally don't get personal allowances, tax credits, etc - they pay tax on the first pound of their taxable income.

3. There is what's called the "starting rate for savings", under which the first 5,000 pounds (I think) of interest is tax-free. I don't know whether a non-resident non-domiciled etc person can claim this but it might be worth finding out.

sr814

The individual is UK domiciled and the equivalent of DIRT is deducted from the interest at source.

Marcusm

Peregrinus wrote: »

You'd want to check this, but my impression is that the UK position is:

1. A non-resident, non-domiciled, etc person who has UK source income is liable to UK tax on that income.

2. They generally don't get personal allowances, tax credits, etc - they pay tax on the first pound of their taxable income.

3. There is what's called the "starting rate for savings", under which the first 5,000 pounds (I think) of interest is tax-free. I don't know whether a non-resident non-domiciled etc person can claim this but it might be worth finding out.

sr814 wrote: »

The individual is UK domiciled and the equivalent of DIRT is deducted from the interest at source.

Peregrinus is correct that UK source interest is taxable in the hands of a non UK resident. However, the income is "excluded income" if it was not subject to tax at source (introudced in 1995). In this case it sounds as if the non resident declaration was not submitted to the UK bank. If tax has been deducted, it will not, unless excluded under a DTA, be refunded by HMRC.