Uk Tax year April- April, Italian Jan- Jan. How do you tie them up?

Any thoughts? No; except that you need to decide which Country your are Resident in and act accordingly via a good Accountant who can deal with your income/liability in both chosen Countries. Tax year start/finish dates only apply in the Country you are Resident in.

It doesn't really work like that. Italy will consider income for any tax year to be whatever hit your bank account (or you issued a receipt for if it was in cash) between the 1st Jan and 31st December in any year. The UK will consider income to be whatever hit your bank account between 1st (roughly) April and 31st March the following year. The same applies to expenses. You will have to submit a tax return in each country respecting the tax year for each country. The problem is that becoming resident will be the trigger for the Italian state to expect you to start paying tax. Whether you spend over 180 days in Italy (this would mean between 1st Jan to 31st Dec) or not, would be down to you to prove should the taxman ever decide to send you a bill for a period when you say you were not in Italy for more than 180 days. I suspect, although don't know for sure, that if you moved to Italy on 1st March then you would need to spend more than 150 days in Italy in that first year to be due to pay tax here. It gets complicated because the UK would consider you tax resident if you spend more than 180 days in a UK tax year (ie April to March) in the UK. I know this is a simplification of the rules but even they are not clearcut. Whether you earn or not in Italy is irrelevant. It is where you are tax resident that is relevant when it comes to paying tax on your worldwide income. You are not subjected to double-taxation! You are being asked to pay at the Italian rate and under the Italian rules which just happen to mean you will pay more. You are not paying twice, as any money you have paid in the UK can be deducted from your tax bill in Italy. NB - I am ignoring accrual accounting as it is unlikely to apply to you in case anyone is feeling pedantic.

... it's very good for you... Amazing stuff, glad we don't have such complicated lives.. Just to be clear, from what I've read the UK will consider you tax resident there at the drop of a hat... almost if you have any ties at all and that these rules are about to get harder to avoid... 

Thanks for your comments. I understand about double-taxation but when the two countries don't have a mutually agreed sert of allowable expenses from letting property (I understand alarmingly that I can't, for example, deduct my mortgage interest payments for a rented out UK house in calculting my Italian tax owed simply because the mortgage isn't Italian!) it all feels very alarming! It sounds from what you are saying that I literally have two have two parallel accounts. What I don't understand is under the double taxation agreement will I deduct the UK tax based on between April-April in a rather 'loose' way against tax due in Italy from a Jan-Jan year?  I will goa nd see a commercialista next time I'm out but want to absorb all the complications myself before asking the questions!

t gets complicated because the UK would consider you tax resident if you spend more than 180 days in a UK tax year (ie April to March) in the UK. I know this is a simplification of the rules but even they are not clearcut. Penny I thought it was 90 days in the UK, which is why all the VIPS bob in and out all the time?

Is it absolutely necessary, for whatever reason, to take up Italian residency in March or could you wait for a while? It all sounds very complicated and I do not see too many benefits under the circumstances.

Have deleted a comment which I posted here in error, but it seems I can't delete that I have posted at all... user error! Sorry. Have hopefully also managed to post correctly elsewhere. 

RAM the Inland Revenue doesn't actually state precisely what the requirements are (historically the 180 day rule applied but there have been cases of people being classed tax resident with less) but yes they will try to make you resident at the drop of a hat for obvious reasons. There is currently a consultation to compose a 'statutory definition of tax residence' which if you can't sleep one night might just help you on your way. It is a work in progress though so still no definitive answer. Rachel, if (which I suspect as lots of things work this way) the offsetting of the tax you have paid in the UK against your Italian tax bill works in the same way as my maternity pay calculations did (please don't ask me to explain the connection - I don't have the energy for several sheets of A4 to explain it all after picking olives all week ), then I'll give you an example below:

• You paid £1200 (roughly €1440) in tax in the UK for April 2012 to March 2013.
• You owe €3000 for 2012 tax year. The Italian tax authorities will divide €1440 by 12 and multiply by 9 (ie April to December) and allow you to deduct €1080 from your Italian tax bill for 2012.
• The remaining €360 will be allowable against your 2013 tax bill.

It would be a lot easier for you to apply to join the UK's 'non-resident landlord' scheme, get you rent paid without any tax deductions or payments made in the UK and just declare it here in Italy if that is where your home will actually be. It's perfectly legal in the UK as it is an Inland Revenue scheme. You'll pay no more and it will save you in accountant's fees as you'll only have to file a tax return in Italy. Honestly, unless you are talking about big money then any gains brought about by all the schemes for being out of the country to save tax will just be swallowed up by accountants' fees to sort out the complicated tax arising. As Flip said - pick a country, be resident and pay there. It will be a lot less stressful and probably cheaper in the long-run. IVIE you are stuck with as soon as you are resident in Italy.

The position is dependant on the tax residence of each individual. Each country has its own rules as to whether you are resident and for many this means that they would, under each countries domestic rules, be tax resident in both countries. Hence the need for provisions in the double tax agreement which effectively mean you can be tax resident in only 1 of the countries. For UK tax purposes there is no statutory definition of tax residence, there is a substantial amount of case law on the subject. As I mentioned in one of my posts on another thread, the UK rules are in the process of being amended to provide a statutory basis of determining residence by reference to a number of facts. Draft legislationis is due to be published in December which will be enacted in the 2013 Finance Act and come into effect from 6 April 2013 (subject to any changes during the intervening consultation period). I am hoping to do a brief note, which I will post on the forum, about this early next year. At the moment the proposed rules will make it easier to determine UK tax residence and some people who are UK resident under the curent system will be non resident and vice versa. It will also be easier to see what you need to do and how to arrange your life and financial affairs to either ensure UK tax residence or ensure you are not UK tax resident where this is possible. So far as the original question is concerned, it works as follows (with reference to letting income) Assuming UK tax resident: 1)  Work out UK taxable income for the tax year (6 April to 5 April) using UK tax rules. 2)  Work out Italian taxable income for each overlapping tax year using Italian tax rules. With many holiday let situations, if there are no lettings in the period 1 January to 5 April then (taking the current year as an example)  the whole of the taxable income in Italy would fall in the Italian tax year to 31 December 2012 and the UK tax year to 5 April 2013. The whole of the Italian tax would then be available as a credit against the UK tax on the same income. Where income is received over the whole year it would be necessary to apportion it. For example Income taxed in Italy in the 2012 year would be apportioned as to approx 3/12 to UK tax year to 5 April 2012 and 9/12 to UK tax year to 5 April 2013. The Italian tax being apportioned as well and available for offset against the appropriate UK tax year's liability If you are likely to become Italian Tax resident from next March then then the new UK rules are likely to affect you. As noted in the other thead on Fiscal v non-fiscal resdence t is possible to be Fiscally resident in the UK for tax purposes whilst being non-fiscally resident in Italy. Without knowing your full circumstances it is not possible to say whether you would be in that position or not. If you are then it would be necessary to claim non-residence on the Italian tax return (I will be in this position from some point in the next couple of years and would use an experienced commercialista to deal with the Italian tax authorities).  

Hi Rachel, don't forget to take your residency before the 18 month deadline though (both of you if the name was bought in joint names) as the fines for failing to do so are large.

Hi Rachel Please PM me and I will see what I can do. The draft legislation that wis proposed to apply from 5 April 2013 is due out later this week, although I will not be able to do very much before Xmas.