Income and gains may be taxable in more than one country. The UK has three ways of ensuring that the individual does not bear a double burden:

  1. treaty tax relief may reduce or eliminate the double tax (TIOPA 2010, ss 2, 18)
  2. if there is no treaty, the individual can claim 'unilateral' relief by deducting the foreign tax from his UK tax (TIOPA 2010, ss 8, 18)
  3. he can also deduct the foreign tax as an expense from his income (known as relief by deduction), although this is generally less efficient (TIOPA 2010, ss 112-113)

This guidance note looks at these three options in turn, and then considers how the reliefs should be used efficiently for income tax and capital gains tax (CGT) and how they should be reported for Self Assessment. It does not cover remittance basis users. For this, see Simon's Taxes E5.318 (subscription sensitive).

HMRC guidance on a country by country basis is given in DT2140PP.

Minimisation of foreign tax

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