2021-12 Tax Return Initial Judgement

This month was stressful due to it being the crunch time for sorting out dual taxation, but we did get to enjoy the snow. This post will have random photographs from the month throughout because there is no such thing as interesting photographs of tax returns.

Kick Sleigh (Spark)

This month I budgeted for a kicksleigh. These are awesome. People use them to go to the local supermarket, to carry shopping home. They also act as a stability aid when it is icy. The frame bends and flexes so you can steer it. The runners have a plastic cover which is better for soft snow. The plastic covers are removable, such as if you were going to use it on hard ice.

Dual Taxation

This Christmas was when myself and the tax agencies would work out which agency would claim what amount for the “crossover” year that we came to Sweden. We had been in the UK for six months and Sweden for the following six months. The periods were day-perfect to six months, which caused some problems.

There is a dual taxation agreement between the countries to stop a person from being taxed twice on the same income. Without getting too detailed, there is also guidance on how to split a tax year between the agencies. The split is based on which country you spent the most time in (see above).

The two countries tax agencies do not talk to each other in any way that you as an individual can use. They have different tax year cutoffs. They communicate in different ways. The subject (you) gets treated differently.

For complicated situations, the advice is always to use a good accountant. However, lots of things were uncertain with Brexit or delayed due to Covid. How you find a good accountant versus a bad one is also vaguely defined and involves some amount of luck.

Swedish Payroll

My workplace was fighting to setup a Swedish payroll to meet new Skatteverket requirements that had come in. This required working with an EU accountancy company who were a bit abrupt and unhelpful. It also required trying to get paperwork from HMRC to show Skatteverket during covid, when HMRC were short-staffed. There were months of delays. In the meantime, I was on the UK payroll and working with the tax agencies.

Covid was going on and lots of government systems in the UK were having problems. I stayed in constant contact with Skatteverket for the payroll setup and they were understanding.

There were sometimes some interesting problems. As an example, an easy problem was that a Skatteverket employee needed convincing that the “gov.uk” domain was legitimately connected to HMRC. In Sweden, each agency has a separate website. In the UK all sites were joined into a central site some years ago. This only took a day of discussion and evidence to resolve. There were many other interesting problems that were not so easy.

UK Tax Returns

For the UK tax returns, I needed to know what period the Swedish were going to claim for, and then I could claim the tax back. In the meantime, the UK took all my individual payroll tax.

I found a UK accountant that I paid £300 for. They were easy to work with, and proactive in chasing up the HMRC refund when the case was finally resolved long after December.

You can contact HMRC and ask them questions, but every time I asked I got the wrong answers. My workplace was also having a nightmare getting routine evidence from HMRC. The HMRC guaranteed 2-week complaints escalation process took multiple months. An HMRC employee denied there was any 0% tax code. Both my UK accountant and my workplace accountants called HMRC insane to deal with.

Swedish Tax Returns

I paid for a Swedish accountant which was roughly £200. I think there was a difference in expectations. They instructed me on what to complete in my tax return and I submitted it, but there was no interaction on the best approaches.

Skatteverket spoke with my girlfriend a lot and the staff were helpful and interactive. I had silence however and was starting to get worried. I tried making contact but got a dismissive reply.

Skatteverket sent me a preliminary decision in December asking for a large amount. I later calculated they were asking for tax for the entire years payroll. So my entire years pay would have been taxed by two different agencies leaving almost nothing, and I’d already spent a fair amount on the house. This looked like an emergency. I had until the end of February to pay it, and the tax office would be closed until January. Happy Christmas.

Panic

I contacted the accountant, and I was quite stressed. He pointed out the letter was just a preliminary decision and to wait. He seemed a bit uninterested. I really did not like the idea of waiting until the last 60 or 30 days before needing to pay. I knew I would also not have the tax back from HMRC in order to pay Skatteverket as the timing was wrong. The other worry was if this would be an ongoing problem. I’d be better off quitting my job than paying tax simultaneously to two countries.

I emptied all but the last essentials of my savings and financial safety net into the Skatteverket payment account. The uncertainty, amounts involved, and lack of authoritative knowledge from any source made December stressful. I was able to pay off the full amount by the next months payroll but this was one of the most stressful months.

Resolution

It didn’t happen this month, but as a spoiler, it would all turn out fine in the long term:

I got assigned to a Skatteverket employee that was super-engaged and knew exactly how everything should be. I think I had been escalated to the “something unusual” returns processing. She redid all the numbers and assumptions the accountant had done. I supplied her with all/any evidence requested. I supplied multiple sources where possible. She confirmed everything was complete and I would likely get a partial refund in April. I was impressed by how they were both the ultimate authority and actually seemed to care that the tax return was accurate. In the UK communications from HMRC can be adversarial.

I then contacted the UK accountant. They claimed back the UK tax for the period the Swedish had claimed for, under the dual taxation agreement. I will always have to do a self-assessment tax return in the UK, even when everything is zero.

Much later, the Swedish payroll would be completed, and the cross-border taxation problems would start to disappear. It is not instant as there is some “lag” due to how agencies process the previous year.

In summary, the UK accountant was the best accountant. The Swedish tax agency was the best agency. In all interactions, HMRC were just a gigantic problem generator.