Changes to personal allowance for non residents
The 2008 Budget made changes to the eligibility of some non resdients to claim the UK personal allowance. In this note we look at the position in a little more detail.
Personal allowances and reliefs are not given to individuals who are not resident in the UK unless they fall into certain categories. These are set out in section 278 of ICTA 1988 which states:
'...278 Non-residents
(1) Subject to the provisions of this section, no relief under this Chapter shall be given in the case of any individual who is not resident in the United Kingdom.
(2) Subject to subsection (3) below, subsection (1) above shall not apply in the case of any individual who satisfies the Board that he or she--
(a) is a Commonwealth citizen or a citizen of the Republic of Ireland; or
(b) is a person who is or who has been employed in the service of the Crown, or who is employed in the service of any missionary society or in the service of any territory under Her Majesty's protection; or
(c) is resident in the Isle of Man or the Channel Islands; or
(d) has previously resided within the United Kingdom, and is resident abroad for the sake of his or her health, or the health of a member of his or her family resident with him or her; or
(e) is a widow whose late husband was in the service of the Crown...' etc
Individuals could also still qualify irrespective of this under the terms of a double tax treaty. These allowances and reliefs include basic and age-related personal allowances, married couples' allowances, blind person's allowances and relief for life assurance. One category mentioned in s278 is Commonwealth citizens. As a Commonwealth citizen includes a UK citizen, UK citizens could traditionally claim the personal allowances under S278. The budget note stated that as from 6 April 2010, this category is to be withdrawn. This would therefore mean that Commonwealth citizens who are not resident in the UK would not be able to claim the personal allowance under S278 above. However they could still claim on some other basis (eg if they were entitled to by virtue of the double tax treaty). Most double tax treaties will provide for non UK residents to claim UK personal allowances. HMRC state that those mainly affected are citizens of the following countries: Bahamas; Cameroon; Cook Islands; Dominica; Maldives; Mozambique; Nauru; Niue; St Lucia; St Vincent & the Grenadines; Samoa; Tanzania; Tonga; and Vanuatu. This is because the UK does not have a suitable double tax treaty with these countries. Therefore based on this the amendment to S278 would have little impact for those able to claim the reliefs and allowances under relevant tax treaties.
(2) Subject to subsection (3) below, subsection (1) above shall not apply in the case of any individual who satisfies the Board that he or she--
(a) is a Commonwealth citizen or a citizen of the Republic of Ireland; or
(b) is a person who is or who has been employed in the service of the Crown, or who is employed in the service of any missionary society or in the service of any territory under Her Majesty's protection; or
(c) is resident in the Isle of Man or the Channel Islands; or
(d) has previously resided within the United Kingdom, and is resident abroad for the sake of his or her health, or the health of a member of his or her family resident with him or her; or
(e) is a widow whose late husband was in the service of the Crown...' etc
Individuals could also still qualify irrespective of this under the terms of a double tax treaty. These allowances and reliefs include basic and age-related personal allowances, married couples' allowances, blind person's allowances and relief for life assurance. One category mentioned in s278 is Commonwealth citizens. As a Commonwealth citizen includes a UK citizen, UK citizens could traditionally claim the personal allowances under S278. The budget note stated that as from 6 April 2010, this category is to be withdrawn. This would therefore mean that Commonwealth citizens who are not resident in the UK would not be able to claim the personal allowance under S278 above. However they could still claim on some other basis (eg if they were entitled to by virtue of the double tax treaty). Most double tax treaties will provide for non UK residents to claim UK personal allowances. HMRC state that those mainly affected are citizens of the following countries: Bahamas; Cameroon; Cook Islands; Dominica; Maldives; Mozambique; Nauru; Niue; St Lucia; St Vincent & the Grenadines; Samoa; Tanzania; Tonga; and Vanuatu. This is because the UK does not have a suitable double tax treaty with these countries. Therefore based on this the amendment to S278 would have little impact for those able to claim the reliefs and allowances under relevant tax treaties.