Living in Italy - business in the UK

as far as i am aware both countries have a concept (though different) of residence, equating with a number of days a year you live in a place as opposed to another country.So (maybe theoretically) if you are a full time resident here then you would be liable for italian taxation . i think you ought to speak to someone like john murphy (you'll find his name and contact details coming up on similar thread questions here,he is an accountant familiar with both systems and professional advice would be essential. as far as capital gains tax is concerned (it hits in here only before 5 years from purchase) i very much doubt that HMRC would give you any reimbursement/ credit for capital gains paid here in italy concerning your questions worries about education.firstly i'd say you have plenty of time given the age of your children.The kindergarten -primary and middle school education in Italy is,on the whole considered very good.As far as secondary is concerned could depend much more on where you would live in the big cities in the north it can be very good and there are alternative possibilities of international schools ( english schools/german/swiss etc some excellent) by the time uni would be an issue they'll be big enough and presumably with two/three languages could choose (consider germany too for that)

our neighbours are in your situation so the wife is registered as a resident but the husband who still has a UK business is not and continues to pay uk tax although they still have a property there.that could be a solution ...

Thank you Sebastiano - your feedback is much appreciated. With regards to the capital gains tax I thought the same as you - 5 years from purchase. I have fallen into the reverse of a loop hole - if you renovate the property it is the date the renovation work is officially finished! It is not a huge problem because there is not a huge profit.

If you are tax resident in Italy (this can be a bit of a grey area as the tax man is likely to assume you are if you to take residency but I believe in theory you need to physically be here at least 183 days a year), then you should pay tax here in Italy on your worldwide income. There is a question on the Italian tax return specifically asking you to declare any assets (upon which you will be taxed) including bank accounts and shares in companies held in the UK. There are some rather complicated ways to protect yourself but you will need specialist advice. I used Michael J Murphy (easily Googled).

Thanks Penny, I do not believe that I will have to pay tax on the same income twice. Are you suggesting that I would not have to pay tax in the UK?

It depends on where you are tax residence: Fiscal domicile (1) For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that Contracting State only if he derives income from sources therein. (2) Where by reason of the provisions of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules: (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);interests); (b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has no permanent home available to him in either Contracting State, he shall be deemed to be a resident of the State in which he has an habitual abode; (c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national; (d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.   Elimination of double taxation (1) Double taxation of income shall be avoided in accordance with the following paragraphs of this Article. (2) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof): (a) Italian tax payable under the laws of Italy and in accordance with this Convention, whether directly or by deduction, on profits or incomes from sources within Italy (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits or income by reference to which the Italian tax is computed; (b) in the case of a dividend paid by a company which is a resident of Italy to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Italian tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph) the Italian tax payable by the company in respect of the profits out of which such dividend is paid. (3) Where a resident of Italy owns items of income which are taxable in the United Kingdom, Italy, in determining its income taxes specified in Article 2 of this Convention, may include, unless specific provisions of this Convention otherwise provide, such items of income in the base upon which such taxes are imposed. In such a case, Italy shall deduct from the taxes so calculated the United Kingdom tax paid on the income, but in an amount not exceeding that proportion of the aforesaid Italian tax which such items of income bear to the entire income. However no deduction will be granted if the item of income is subjected in Italy to a final withholding tax by request of the recipient of the said income in accordance with the Italian law. (4) For the purpose of paragraphs (2) and (3) of this Article, profits and income owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other Contracting State. It is a common misunderstanding that the double taxation treaty means if you have paid in one state then you can't be charged on that income in another. In reality they just offset the amount you have paid (in the UK for example) against your tax bill in Italy.