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HMRC internal manual

General Insurance Manual

HM Revenue & Customs
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Double Taxation Relief: background: Double Taxation Conventions


Where the foreign tax is imposed by a country with which the United Kingdom has concluded a comprehensive Double Taxation Convention (DTC) which remains in force, then that convention (or treaty as it is sometimes known) will provide the extent to which credit may be given. A typical DTC will provide:

‘Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):

Freedonian tax payable under the laws of Freedonia and in accordance with the provisions of this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Freedonia shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Freedonian tax is computed.’’

The reference to “the provisions of the law of the United Kingdom” means that limitations on the ability of a company to claim and use a foreign tax credit apply both to foreign tax which is subject to a DTC, and foreign tax for which relief is given unilaterally, in the absence of a DTC. For unilateral relief a similar wording is found in ICTA88/S790 (4):

Credit for tax paid under the law of the territory outside the United Kingdom and computed by reference to income arising or any chargeable gain accruing in that territory shall be allowed against any United Kingdom income tax or corporation tax computed by reference to that income or gain…’

The International Manual (INTM151000 and INTM161000) provides guidance on Double Taxation Relief.