What is HS302?

Form HS302 is for dual residents who want to claim tax relief on their UK income.

How do I know that I am a dual resident?

You are considered a dual resident if you live in the UK and another country, and your income is taxed in both countries.

Is there any way to only pay tax in one country?

Yes, if the UK has a Double Taxation Treaty (DTA) in place with your other country of residence, then you should be able to claim some tax relief from the UK. The whole point of DTAs is to make sure that people are only paying tax on the same income in one country. Each of these treaties is unique and not all countries have such an arrangement with Britain.

How do I know if the UK has a Double Taxation Treaty with my other country of residence?

The government publish an alphabetical list of all the countries we currently hold DTAs with and some of the fine detail of each one

If there is no DTA, there won’t be any allowable UK tax relief on your income. Also, the following countries do not allow for UK income tax relief: Antigua, Belize, Brunei, Burma, Greece, Grenada, Guernsey, Isle of Man, Jersey, Kiribati, Lesotho, Malawi, Montserrat, St Kitts, Sierra Leone, Solomon Islands and Tuvalu.

There is the possibility that you can get credit for the tax you pay in the other country on the income you earn abroad. This is different to the DTA treaty, dual residency tax relief that the HS302 form is for. You do not fill in this form, but must follow a different process.

Can I claim tax relief on all my income?

There are particular types of income that you can claim tax relief on using HS302: work pensions, annuities, building society and bank interest, and royalties.

What types of UK tax relief can I apply for using HS302?

HS302 can be used to apply for the different types of tax relief for dual residency UK taxpayers whose other country of residence has a DTA with Britain.

• Full relief: All the tax you have paid on income earned in Britain. Depending on the fine print of the DTA, you may have to pay tax in your other country of residence.
• Partial relief: Get some of tax back on your UK income. The proportion depends on the relevant DTA.
• Credit relief: If your income is taxable in both countries, you can claim credit relief. This means that your country of residence gives you credit, against its own tax requirements, for the tax you pay on your British earnings. You claim back tax from the country you live in.

How do I know which country to claim tax relief from?

You claim relief for tax paid in your country of residence. Each DTA has residence tie-breaker rules which lay out a series of tests that determine your residency status for tax relief purposes. You don’t have to work through all the tests, you just need to meet the criteria for one of them.

What are the residence tie-breaker tests?

These are a series of tests to establish your residency status.

Permanent Home Test

The definition of ‘permanent home’ is somewhere that is available for you to live in throughout the year. You do not need to be the owner of this property.

If you have a permanent homes in both countries, you take the ‘centre of vital interests’ test. If neither country has your permanent home, you take the ‘habitual abode’ test.

Centre of vital interests test

This test is trying to figure out which country you are most strongly linked to. It looks at “social, domestic, political and cultural’ aspects of your living arrangements. If you originally lived and worked in Britain, still have a home and family here, but now live in another country, it is likely that your ‘centre of vital interests’ would be seen as the UK.

Habitual Abode Test

This test looks at how many times you visited each country and the length of each stay. It is designed to determine which of the countries you “live in regularly, normally or customarily”. If you are unable to prove an habitual abode in one country, or you have one in both countries, then you take the ‘nationality test’.

Nationality Test

The nationality test identifies your residency status by looking at which nationality you hold. This is complicated by situations where an individual holds dual nationality, or is not a national of either country in question. DTAs can contain the necessary information to determine the outcome of this test.

What difference does residency make to my UK tax relief claim?

This is an important question, with two consequences:

• If you are a UK resident, you have to pay UK tax on all your global income and gains. Your ability to claim tax relief from the other country involved in the DTA will depend on its details.
• If you are not UK resident, you can claim UK tax relief on your UK income.

Do I need any extra paperwork to substantiate my claim?

Yes, if you are submitting a claim for UK tax relief and you live in a country that has a DTA with Britain, you need a Certificate of Overseas Residence.

You can get this from the taxation department of your country and it needs to prove that the country legally regards you as resident for the time you are claiming for. You must send this with your HS302 at the same time.

The only time you don’t need a Certificate of Overseas Residence is if you are living in the USA. The American government requires its citizens to pay US tax on all their worldwide income, regardless of where they live.

Am I an American citizen?

To be considered an American citizen, you must meet two criteria:

• Only America and Britain treat you like a resident.
• You have a habitual abode, permanent home or ‘substantial presence’ in the USA. A ‘substantial presence’ means that you spend at least 31 days of the year you are claiming for there, or at least a total of 183 days for the previous three years (31 days minimum per year).

How do I make a claim for partial tax relief from HMRC?

To claim for partial UK tax relief, you need to complete 3(d) of the claim form.

How do I make a full tax relief claim from the UK?

If you are making a claim for full tax relief from the UK, you need section 3(c) of the claim form.

What about my UK Real Estate Investment Trusts (UK-REITS)?

Claiming the relief on property income dividends when you live in a country with a UK DTA is a possibility. You use the same sections of the form as for partial or full tax relief.

Does the new Dividend Allowance affect things?

Yes, the Dividend Allowance now means that you are entitled to earn £5,000 dividend income tax free. Your other income amount does not affect this. But they are still part of your tax band calculation and could push you over the threshold into a higher rate of tax overall. (Payable on anything over the £5,000.) Obviously, if you haven’t paid tax on your Dividend Allowance, you can’t then claim Tax Credit Relief on that amount in your country.

As of the 6th April 2016, the dividend tax rates on any amount over the £5,000 allowance, are:

• Additional rate: 38.1%
• Higher rate: 32.5%
• Basic rate: 7.5%