UK Taxation of Foreign Income: Navigating Double Tax Treaties
Tax Question
My client, who is a UK resident and UK domiciled, has received income from abroad from which tax has been withheld. Do I simply return the income on the tax return and claim relief for the foreign tax deducted?
Tax Answer
It is not as straightforward as that. The relief available for double taxation is governed by the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010). Although section 18 TIOPA 2010 confirms double taxation relief is available, the quantum of the relief is subject to section 33, which requires that two actions be taken before any claim is considered valid.
Firstly, there is a requirement to ensure that the deduction is minimised under the domestic legislation of the country concerned. This may, of course, require the input of a specialist in the domestic law of that country.
Secondly, you must consider the terms of any Double Tax Treaty between the UK and the territory concerned. Any action required to minimise the overseas exposure under the treaty must be taken. The treatment of any source of income will be detailed in the treaty or included in a general clause.
If the UK does not have a treaty with the country concerned or the source is not included in the agreement, relief should be claimed as a tax reducer against the tax due on the income concerned on a unilateral basis. The following link gives more information on this point: INTM161030 – UK residents with foreign income or gains: double taxation relief: Unilateral relief – HMRC internal manual – GOV.UK
This action may require claims being made in the overseas territory to reclaim non-UK tax, which can be reduced under the domestic tax law of the other jurisdiction, or which exceeds the amount due under the treaty.
Always bear in mind that the treaty will outline which country is entitled to the tax. If a country outside of the UK is not entitled to tax, or to a limited (treaty rate) tax imposition, then this limits the amount available for relief in the UK.
In addition to the rule in s33 TIOPA 2010, the relief cannot exceed the UK tax due on the income (the excess cannot be relieved against other income, nor can it be carried forward – s36 TIOPA 2010).
We can help with the application of tax treaties. These are readily available by search on the Gov.UK website.
It should be noted that HMRC does police double tax credit claims quite closely, and an invalid claim will give rise to an inquiry.
For more information, contact us at consultancy@vantagefeeprotect.com
Related Tax Questions
MTD Self-employed
My client had turnover from self-employment of £55,000 in the 2024/25 tax year, which means he has to enter Making Tax Digital (MTD) from 6 April 2026. The turnover will be much less in th
Non Residence & Personal Allowance
My client is a UK national but resident abroad. My software does not grant personal allowance. Are they entitled to the allowance and how do they get it?
Self Assessment Penalty Guidance
My client has received a penalty for a late Self Assessment tax return. Is there anything that can be done to have the penalty removed?
Loans to Participators and Budget Changes
The rates of tax on dividends are going up on 6 April 2026. Will this change the amount of tax I pay as an individual on the dividends I receive? What if I overdraw my director’s loan
HMRC Nudge Letters
My client, a limited company, has recently received from HMRC a letter stating that they believe that the company may have paid the wrong amount of corporation tax. The letter asks my client to che
Deceased Estate Management Expenses – What can be done with them?
Deceased Estate Management Expenses – What can be done with them?
Real people, real results
Vantage Fee Protect provide market leading Tax Fee Protection
Insurance schemes through accountants.
Don’t be shy,
get in touch
Vantage Fee Protect provide market leading Tax Fee Protection
Insurance schemes through accountants.
"*" indicates required fields