HM Revenue and Customs

3. Mr R complains that HMRC inappropriately handled his non-residency status and DT relief while he was living abroad. He also complains HMRC will not retrospectively apply a NT tax code (apply the code now to a tax year that has ended) to a pension fund he would like to draw down (taking money out of a pension early to fund retirement).

4. Mr R says he is now not able to draw down a lump sum of £187,500 because it will be subject to UK tax. This has caused financial difficulty since he came back to the UK in March 2020 due to the pandemic.

5. Mr R would like HMRC to accept its part in why he was not able to draw down the pension abroad. He would like HMRC to review its decision and retrospectively apply a NT tax code. He would also like a financial payment.

6. Mr R has been working abroad since 2004. He told us that in around 2008, he and HMRC agreed that he would be classed as non-resident for UK tax purposes until he told HMRC otherwise. Mr R had intended to draw down his pension while living abroad. He had a conversation with HMRC in December 2019. It told him he needed to complete a DT relief form and have the foreign authorities sign and stamp it to confirm his residency status.

7. Mr R returned to the UK on 20 March 2020 and requested his pension drawdown a few days later. The lump sum is being held in a suspense account.

8. The foreign authorities did not recognise the DT form and would not sign it. By the time the authorities provided the information needed, it was September 2020.

9. Mr R had several calls with HMRC during 2020 and 2021 about the completion of the DT form. In March 2020, HMRC told Mr R that it could not issue an NT code until he had drawn down his pension. It also told him that the DT form he had sent to it on 5 March could not be accepted because the foreign tax authorities had not stamped it to authorise it. HMRC told him he needed a certificate of residence from the foreign tax authorities. HMRC told Mr R that an NT tax code for relief from UK tax could only be issued once he had drawn down his pension lump sum.

10. In July 2021 when Mr R contacted HMRC to chase things up, it incorrectly told him that the NT code had been accepted and that a technical adviser would call him back.

11. Having not heard back, Mr R called HMRC on 27 July. HMRC explained he had been given incorrect information and a technical adviser would contact him in three weeks.

12. On 12 August, Mr R complained to HMRC about its delays in dealing with this matter. HMRC apologised for the incorrect information and offered to pay him £130. HMRC also confirmed that as Mr R had not drawn down his pension while abroad, any pension drawdown made in the UK would not qualify for an NT code.

13. Mr R wrote back to HMRC in November 2021 to explain that he had returned earlier than expected to the UK due to the COVID-19 pandemic. Mr R requested a drawdown of £187,000 on 26 March 2020. The payment was made on 22 April 2020, but it was being held in a suspense account. Mr R wanted HMRC to retrospectively apply a NT code to this amount.

14. HMRC responded in March 2022. It apologised for its delay and said it understood that Mr R had to return to the UK because of the pandemic. It confirmed an NT could not be retrospectively applied. It said it must act on the current position of a taxpayer and not their intended circumstances.

15. Mr R contacted HMRC again on 27 April. He wanted HMRC to explain why it would not accept his residency status when he first applied for an NT code – if it had done this he would have been able to draw down the pension while he was living abroad.

16. On 3 November, HMRC replied. It said that when he contacted it in December 2019, he was correctly advised to complete a DT form but it was not accepted by HMRC because the foreign authorities had not signed or stamped the form. HMRC explained that in these circumstances Mr R needed a certificate of residence along with a further DT form. HMRC explained he had provided the certificate of residence, but not another DT form.

17. HMRC further explained that as he had not drawn down his pension lump sum while abroad, it could not retrospectively apply a NT code and UK income tax is applied in the year the payment is received.

18. Mr R complained to the Adjudicator’s Office (the AO investigate complaints about HMRC).

19. The AO did not uphold Mr R’s complaint about HMRC not retrospectively applying an NT code, but it upheld his complaint about HMRC’s complaint handling delays and customer service. The AO recommended HMRC pay Mr R £150, on top of the £130 already offered.

22. When reaching our decision on a complaint, we look at whether the organisation concerned has got something wrong. We do this by comparing what should have happened with what did happen. If what happened fell far short of what should have happened, we call this a failing. When we see evidence of a failing, we next look at whether that failing had a negative impact on the person. If we think it did, we go on to consider what, if anything, the organisation has done to try to put things right.

Residency Status and double taxation relief

23. Mr R considers that if HMRC had not changed his residency status without telling him, he would have been able to draw down his pension lump sum while he was abroad and it would not be liable to UK tax. Instead, he was told to complete a DT form, which he could not do before returning to the UK sooner than planned because of the pandemic.

24. He says he has been working abroad since 2004 and that in around 2008, HMRC agreed that until he told it otherwise, it would class him as non-resident for UK tax purposes. Mr R did not give us any evidence of this agreement.

25. Taxpayers may not have to pay tax twice on their income if the country where they live has a ‘double taxation agreement’ with the UK. The country where Mr R lived and where he used to live and work before has a DT agreement with the UK.

26. We asked HMRC to give us any information about any potential agreement that was in place about Mr R’s residency status from 2004.

27. HMRC told us Mr R left the UK in 2004 to live abroad. He worked for a UK multinational organisation from May 2004 until July 2015 and an NT tax code was applied to his UK income during this time.  Mr R returned to the UK in July 2015, but left again shortly afterwards to go to another country. It said Mr R’s circumstances changed when this happened and under the circumstances, he would need to reapply for an NT tax code to be used against any income he got in the UK while he was abroad. This is what it told Mr R in its responses to his complaint.

28. Although an NT tax code applied while Mr R lived in the first foreign country, this changed because of his brief return to the UK before relocating to another foreign country.

29. HMRC has guidance for pension tax. This says:

‘Broadly, overseas resident individuals receiving pension payments from a registered pension scheme are liable to UK income tax unless they are exempted by a double taxation agreement. A double taxation arrangement means an agreement between the UK and any territory outside the UK as set out in sections 2 to 6 Taxation (International and Other Provisions) Act 2010.’

30. As Mr R intended to draw down his pension as a lump sum while he was in the second foreign country, when he contacted HMRC in December 2019 it acted in line with guidance when it told him he needed to complete the DT form. This is because his circumstances changed when he returned to the UK in 2015 and the previous agreement no longer applied. This is why he had to complete the DT form.

31. HMRC acted in line with its guidance when dealing with Mr R’s residency status and it gave him the correct advice when it told him to complete a DT form in December 2019. There is no evidence of an agreement between HMRC and Mr R where he would continue with an NT code even after returning to the UK and moving to another country.

32. We know this will be disappointing for Mr R who has been through a long process to reach this stage. Unfortunately, events meant he had to return to the UK before this could be resolved with the foreign authorities.

NT code

33. Mr R was unfortunately unable to get his DT form approved by the foreign authorities, so HMRC told him to send it a certificate of residence along with a further DT form. He was unable to do this and draw down his pension using an NT code before he returned to the UK for the reasons we have already explained.

34. Mr R returned to the UK and applied for the pension drawdown. He was not able to go back to the country where he lived due to the COVID-19 pandemic and he stayed in the UK. HMRC explained to Mr R that it cannot retrospectively apply the NT code because in the 2019-2020 tax year there was no UK income for it to apply the NT code to. It cannot apply it now, because he no longer lives outside the UK and wants to draw down his pension from within the UK.

35. Mr R’s view is that HMRC knew he was paying tax abroad and it has all the information it needs to apply an NT code. He thinks it was HMRC that caused the delay and this is the reason why he was not able to draw down his pension while he was still living abroad. As we have already explained, we do not agree with this view.

36. Mr R wants HMRC to consider his individual circumstances and appreciate the fact that the COVID-19 pandemic played a part in the reasons why he could not draw down his pension abroad. We think HMRC did acknowledge the impact of the COVID-19 pandemic and unfortunately nothing can change the way events played out.

37. We asked HMRC why it cannot retrospectively apply an NT code and whether it has the discretion to do this.

38. HMRC told us that Mr R did not pay any tax in the UK during the 2019-2020 tax year. Applying the code to income he did not have would not benefit him.

39. The code NT applied to Mr R’s earnings while he worked abroad from 2004 until 2015. As already noted, his circumstances changed when he returned to the UK and left again to go abroad and HMRC said he would need to reapply for code NT to apply to any UK income he received while abroad.

40. Mr R wants HMRC to apply an NT code based on what he intended to do while he was abroad. Unfortunately, due to the reasons we have already explained Mr R could not resolve things and draw down his pension before he had to leave the UK because of the pandemic.

41. We found that HMRC was clear about the reasons why he needed a DT form and the reason it cannot apply an NT code. It would not be able to issue an NT code now because he no longer resides abroad so cannot benefit from double taxation relief. If Mr R draws down his pension in the UK, it is subject to the usual tax.

42. From the available evidence, we did not find that HMRC acted outside of the DT guidance. For that reason, we do not uphold the complaint.

1. We appreciate the difficult situation Mr R has found himself in due to having to apply for double taxation (DT) relief so that he would not have to pay UK tax on his pension lump sum. We recognise he intended to draw down the pension while he was living abroad and the unfortunate circumstances of the COVID-19 pandemic changed his plans. We know how frustrated he has been because he was not able to provide the necessary forms to HM Revenue and Customs (HMRC) in time for the end of the tax year.

2. We do not uphold this complaint. HMRC did not act outside of its guidance on DT relief and it has clearly explained the reasons why it is not able to apply a retrospective NT (no tax) code to his UK income for the 2019-2020 tax year. We recognise this is a disappointing outcome for Mr R as although HMRC did nothing wrong, the situation was outside his control.