Related Links

BrassTax news

Shock horror! Taxation not unique to UK!

Occasionally it may seem that we state the obvious. Our apologies for that: but we can absolutely promise that even the most obvious things are sometimes overlooked.

Enough apologies, already: today’s statement of the obvious is that (believe it or not) countries other than the UK sometimes have the temerity to charge tax. So when a UK resident receives income or capital gain which has its source in another country, tax may be payable in that other country. That is one of the reasons why Double Taxation Conventions exist. So the first point is that one should always investigate whether foreign-source income or gain has suffered (or will suffer) local tax. If it has (or will), the general rule is that the local tax will be creditable against UK tax. But only if you claim it: and you can claim it only if you know about it: so ask! (For countries which impose taxes on even their non-resident citizens – notably the USA - carving up the taxing rights gets even more complicated and both countries can end up giving partial relief for each other’s taxes).

The second point is more subtle: it’s that you cannot assume that all foreign tax suffered will automatically be deductible against UK tax. If a reduced “treaty rate” is available, it’s only tax at that treaty rate which is available for double tax relief. For obvious reasons it is not acceptable to volunteer to pay more foreign tax than the treaty requires and to recover the excess foreign tax against UK tax. And (final point this and it’s really obvious) if the foreign tax paid exceeds the UK tax which would otherwise be due, you cannot expect HMRC to repay the excess! (It’s a question we have been asked, honestly).

For more on international taxes (including points which are not quite so obvious as these) contact help@bkltax.co.uk