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Correspondence from readers on the statutory residence test, the Tooth decision and self assessment.
Statutory residence test
The answers to ‘Application of statutory residence test to sick client’ in Readers’ forum, Taxation, 17 June 2021, page 25, look only at the UK position and refer to HMRC’s Residence, Domicile and Remittance Basis Manual. However, the question refers to the taxpayer being a resident of Cyprus, so it would also be necessary to look at the double tax convention between the UK and Cyprus. Article 4 paragraph 3 states:
‘Where by reason of the provisions of paragraph 1 an individual is a resident of both contracting states, then his status shall be determined as follows:
a) he shall be deemed to be a resident only [my italics] of the state in which he has a permanent home available to him; if he has a permanent home available to him in both states, he shall be deemed to be a resident only of the state with which his personal and economic relations are closer (centre of vital interests).’
Therefore, were he to have a permanent home in Cyprus only, the convention is clear.
HMRC’s Residence, Domicile and Remittance Basis Manual mentions almost nothing about double tax agreements and their respective residency tie-break tests, so they are often overlooked in circumstances like this.
Peter Ferrigno, Senior tax counsel, Reed Smith, London EC2.
Tooth and discovery
I have read the various articles and reports on the Supreme Court’s decision in CRC v Tooth, and, I suspect along with many others who deal with tax every day, I am perplexed about ‘the dog that didn’t bark’, namely statement of practice 1/06 ‘self assessment: finality and discovery’ (tinyurl.com/hmrcsp106). It seems to me that Mr Tooth did everything to fall within that statement and that he did so, but there is no specific mention of that. The fact remains that SP1/06 has always been at the heart of self assessment. It is a vital protection for all taxpayers.
But in the light of Tooth, which was to its embarrassment solely about HMRC ‘discovering’ that it had not included - literally – the phrase ‘and in the alternative s 9A’ in its initial letter to Mr Tooth, I and others must all share the fear that HMRC will now seek to attack the fundamental taxpayer protection that is SP1/06.
Chris Try, Try Lunn & Co.
A heads up or should I say, ‘hands up’?
A client contacted me to say she had received a demand for the original tax due on 31 July 2021. She had paid on 31 January 2021. This puzzled me as I submitted the return for 2020-21 online and have a submission receipt dated 11 May 2021. Due to Covid-19 and low income she is not due to pay anything on 31 July. She is, in fact, due a refund.
I called HMRC’s dedicated agent line. After the usual 20 minute or so delay until the call is answered, I was told that client had to pay the July instalment because ‘people have been sending tax returns in a lot earlier and the system is inundated and behind’ – it seems that tax returns sent in May have been logged but not processed. I queried why she should have to pay tax that is not due. The officer said she still owed that because the return was not processed. She would get it back when the return was processed. ‘Really?’ I said. ‘Due to Covid-19 – she is an out of work actress.’ All this bearing in mind that HMRC urges people to get tax returns to them as early as possible.
So, I had to go through the process of reducing the payments on account so the ‘system’ could see she does not need to pay the original amount. What concerned me too is the bureaucratic response of the call centre person who could not see the utter nonsense of this. The officer was very nice but according to their script HMRC is not to blame – it is us, the taxpayers, who are to blame for daring to overwhelm the ‘system’.
Beware too that if the system shows tax outstanding HMRC is quick to pass the recovery to an outside debt collection agency.
This is an organisation that is blindly proceeding with a digital tax system but throws the implementation and cost of it on to taxpayers. So why am I outraged or surprised?
Gerri Baird.
