Top Reasons HMRC Rejects HS304 Forms and How to Ensure Compliance

Every year, many HS304 claims are rejected by HMRC due to avoidable errors. This guide outlines the key pitfalls and best practices to help you submit your form successfully.

What is Form HS304?

HS304 is a form that non-resident individuals use to request a refund or exemption from UK tax, based on the terms set out in the tax treaty between the UK and their country of residence.

Note: Double Taxation Agreements (DTAs) exist to ensure your income isn’t taxed both in the UK and your home country—they determine which country has the right to tax specific types of income.

Common Reasons HMRC Reject HS304 Forms (and How to Fix Them)

1. Missing or Incorrect Certificate of Overseas Residence:

The Problem: You didn’t include a valid Certificate of Overseas Residence from your country’s tax authority, or the certificate lacks necessary details.

How to Fix It:

• Request the Original: Obtain an original Certificate of Overseas Residence from your country's tax authority. HMRC typically does not accept photocopies or scanned versions.
• Verify the Certificate Includes:
  1. Confirmation that you are liable to tax in your country of residence on all or part of the UK income for which you are claiming relief.
  2. Details of the specific types and amounts of income that have been taxed in your country of residence.
• Attach the Original: Securely attach the original certificate to your completed HS304 form when you submit it with your tax return.

2. Using an Outdated HS304 Form:

The Problem: You've used an older version of the HS304 form.

How to Fix It: Always obtain the most up-to-date HS304 form directly from the official GOV.UK website (search "HS304").

3. Incomplete or Inaccurate Information on the Form:

The Problem: You've left mandatory fields blank or provided incorrect details on the HS304 form.

How to Fix It:

Double-Check Every Section:

• Your personal details: Name, current overseas address, and UK Unique Taxpayer Reference (UTR).
• Income details: Ensure the amounts and sources of your UK income match your supporting documents.
• Tax year: Confirm you're claiming for the correct tax year based on when the income was received.

Cross-Reference Documents: Align form entries with bank statements, pension statements, and your residency certificate.

4. Incorrect Understanding of Your UK Tax Residency:

The Problem: You incorrectly determined your UK tax residency status.

How to Fix It:

• Use the Statutory Residence Test (SRT): Thoroughly review HMRC's RDR3 guidance on the Statutory Residence Test to determine your UK residency status accurately.
• Apply Treaty Tie-breaker Rules (if applicable): If you are considered resident in both the UK and another country under their domestic laws, refer to the relevant DTA’s “tie-breaker” provisions to determine which country takes precedence.

5. Failure to Meet Specific DTA Conditions:

The Problem: You haven’t met the treaty requirements for the type of income you're claiming relief on.

How to Fix It:

• Review the Relevant DTA Article: Carefully examine the article within the specific Double Taxation Agreement that pertains to the type of income you are receiving (e.g., interest, dividends, pensions). You can find UK tax treaties on the GOV.UK website (search "UK tax treaties collection").
• Ensure Eligibility: Confirm that you satisfy all the treaty conditions for relief on that income type. Requirements can vary by country and income source.

How to Claim Relief Using Form HS304

Original Income Evidence: Be sure to provide original documents confirming that UK tax was deducted, such as interest statements or pension slips. HMRC usually won't accept photocopies.

Choose the Right Relief Section on the HS304 Form

• Full Relief: Complete Section 3(a) of the HS304 form if you’re claiming full relief under a DTA.
• Partial Relief: Use Section 3(b) for partial relief.
• UK REIT Dividends (PIDs): If you've received Property Income Dividends from UK Real Estate Investment Trusts, complete either 3(a) or 3(b), depending on treaty terms.

Note on UK Dividends: Since April 2016, the Dividend Tax Credit has been replaced by a Dividend Allowance. While DTA relief may still apply, the method of applying it has changed. Refer to the relevant DTA and HMRC guidance for dividends received on or after this date.

HS304 Pre-Submission Checklist

Use this detailed checklist to ensure you’ve included everything before submitting your HS304 form:

• Download the most current HS304 form from GOV.UK
• Confirm your non-residency status under SRT (RDR3)
• Attach your original overseas tax residency certificate
• Include original tax deduction evidence (no copies)
• Complete all relevant form sections accurately
• Review DTA conditions for the income type

Conclusion

Submitting an HS304 form successfully depends on technical accuracy, strong supporting evidence, and a clear understanding of your treaty rights. Avoiding these common mistakes can significantly reduce delays and improve your claim’s success rate. Consider Taxd, an online UK tax filing software, to simplify HS304 submissions with guided tools designed for non-resident taxpayers.

FAQs

What is an example of double taxation in the UK?

A UK non-resident receives pension income from the UK and is also taxed on it in their country of residence. A Double Taxation Agreement may allow either the UK or the other country to offer tax relief, preventing double taxation.

What is the Statutory Residency Test (SRT)?

HMRC’s formal residency test (outlined in RDR3) determines UK tax residency using criteria such as the number of days spent in the UK, ties to the UK, and work patterns.

What is proof of tax residency?

An official Certificate of Tax Residency from your local tax authority confirming you’re a tax resident in that country for the relevant financial year. This is essential to claim tax relief under a DTA.

How to avoid double taxation in the UK?

• Use Form DT-Individual if you want tax relief before UK tax is deducted (e.g., interest, royalties, pensions).
• Use HS304 to reclaim UK tax already deducted.
• Always check the relevant DTA and ensure compliance with its terms.