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HMRC internal manual

Employment Status Manual

Particular issues: relief for overseas tax

Where work is carried out overseas the service company may suffer foreign tax on its profits. A foreign tax authority may also withhold tax in respect of payments made to the company. Relief for any such foreign tax credits is normally given against the company’s UK tax liability.

However, where the company does not have sufficient UK tax liability to give full effect to any such credit, but the worker does, then the balance may be allowed against the tax liability on the deemed payment. Relief can only be given where it is possible to directly link the work in the overseas country and the deemed payment. Relief cannot be given against the NICs liability.

Where it is considered that relief should be given in this way a claim should be made to the tax office dealing with the worker’s tax affairs.

See also DT905.