How Expats Can Complete HS304 for UK Tax Relief

A double taxation agreement is an agreement between 2 countries to make sure you do not pay tax twice on the same income.

What is a HS304?

HS304 is the name of the form and corresponding guidance document that you need if you are a UK non-resident and want to reclaim UK tax under the Double Taxation Agreement rules.

What is a Double Taxation Treaty?

A Double Taxation Treaty (DTA) is a pact between two countries that eliminates the possibility of paying tax on the same income in both countries. If you are originally from one country but now reside in another, it does not mean that you don’t pay any income tax at all.

Why Do DTAs Matter To Me?

If you are a resident of another country and still earn income in the UK, you are entitled to UK tax relief if a DTA is in place between your new home and Britain.

Check if your country has a double taxation agreement with the UK.

Can I Claim Tax Relief On All My UK Income As A Non-resident?

You are able to claim relief on the following types of income:

• interest from banks and building societies
• royalties
• most work pensions
• annuities
• UK dividends

Does this mean I get tax relief on the full amount of UK tax I paid on my income?

Full relief: You will be able to claim full relief to get back all of the UK tax you pay on your UK income. Depending on its double taxation agreement with the UK, you will have to pay tax on the income to the country you live in.

Partial relief: You can claim partial relief to get back some of the UK tax you pay on your UK income. For example, if the UK’s basic rate is 20% and your country’s double taxation agreement with the UK is 15%, you can claim 5% relief.

Credit relief: You can claim credit relief if your income is taxable in both the UK and the country you live in. Your country of residence will give you credit for the tax you’ve paid on your UK income against its own tax. You need to make a claim for credit relief from the country in which you live.

Other Types of Relief

Your country’s double taxation agreement with the UK may have other conditions that you need to meet to claim UK tax relief. For example, it may say:

• You have to be the ‘beneficial owner’ of the income — this means the income is not in your name, but you enjoy its benefits.
• Your income has to be ‘subject to tax’ — this means it’s taxable in the country you live in, whether it’s for all your income or just the amount you get in your country.

Before you claim relief from UK tax, you need to:

• Check all the terms of the double taxation agreement that affects you.
• Collect enough evidence to show that you meet its conditions.
• Keep the evidence — you may need it to support your claim.

How Do I Prepare To Make A Claim Using HS304?

Firstly, make sure that you understand all the details of your country’s DTA with the UK and that you meet all the requirements. Collect, collate, and keep all the evidence that proves you meet the requirements. You may need to show this evidence to support your claim.

Do I Need a Certificate of Overseas Residence to Claim UK Income Tax Relief?

You will need this certificate if you want to claim relief from UK tax on your UK income, and the country you live in has a double taxation agreement with the UK. To get one, contact your country’s tax authority.

The certificate of overseas residence must show:

• You pay taxes in the country you live in on all or part of the income for which you’re claiming relief.
• The amount of income you’ve paid tax on in that country.

You must attach the certificate to your claim form and send it in with your tax return.

Is this certificate of overseas residence something that I need for all countries with which the UK has a DTA?

If you live in any country that has a DTA with Britain, you need a certificate of overseas residence, except for the USA. America has a different approach to taxation, and its residents are subject to income tax based on their worldwide earnings, no matter where they live. If you are a USA resident, this rule applies to you, too.

How do I know if I am a US resident?

The question of residency status isn’t as obvious as it first seems. You are considered a US resident if you “have a substantial presence, permanent home or habitual abode in the US,” and no other country considers you a resident (other than Britain).

What Does Substantial Presence Mean?

This shows how often you’re in the US over a certain period. You will have a substantial presence if you’re in the US for:

• At least 31 days of the calendar year in question.
• The year in question and the 2 years before that, and all 3 years add up to at least 183 days.
• If you spend part of a day in the US, count it as a whole day.

For the purpose of this example, a day spent in the US in the following year under test counts as one-third, and a day in the year before that counts as one-sixth.

How Do I Claim My Non-UK Resident Income Tax Relief?

You need to keep all your original vouchers (not photocopies) showing the amount of UK tax or tax credit to support your claim.

If you want to make a claim for:

• full tax relief from the UK, fill in section 3(a) of the claim form
• partial tax relief from the UK, fill in section 3(b) of the claim form

UK Real Estate Investment Trusts

You may be able to claim relief if you get a property income dividend and you live in a country that has a double taxation agreement with the UK. To claim full relief, fill in section 3(a) of the claim form and section 3(b) to claim partial relief.

Do dividends still have a tax credit?

No, since April 2016, tax credits for dividends have been replaced by the Dividend Allowance. This applies to any dividends earned after 6th April 2016.

Conclusion

This is how you can claim part or full relief from UK tax on your UK income if you’re a non-resident and the country you live in has a double taxation agreement with the UK. You should refer to the text of the particular double taxation treaty for more information.

Consider Taxd, an online UK tax filing software, to complete HS304 in the simplest manner!

FAQs

1. What is HS 304?

Claim by a non-UK resident for relief from UK tax under the terms of a Double Taxation Agreement (DTA).

2. What is the double taxation treaty rate in the UK?

You may be able to claim partial relief to get back some of the UK tax you pay on your UK income. For example, if the UK's basic rate is 20% and your country's double taxation agreement with the UK is 15%, you can claim 5% relief.

3. How can double taxation in the UK be avoided?

Your home country should give you double tax relief by giving a credit for UK taxes paid. However, if you are resident in a country with which the UK has a double taxation agreement, you may be eligible for relief from UK tax if you spend fewer than 183 days in the UK and you have a non-UK employer.