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HMRC internal manual

International Manual

UK residents with foreign income or gains: double taxation relief: Foreign tax

Where credit is claimed on the root income basis (see INTM161140 paragraph (a)) there should normally be no difficulty in identifying the foreign tax on the doubly taxed income where the income consists of dividends, interest or royalties, because a withholding tax will have been deducted from the income at the time of payment. Where, however, the foreign income is charged to foreign tax by direct assessment and the basis period for the foreign assessment is different from the UK basis, it may be necessary to apportion the foreign tax. Many foreign countries adopt the calendar year as their basis period so that, for example, foreign rents of the year ended 5 April 2010 will be charged to foreign tax partly in 2009 and partly in 2010. Three quarters of the 2009 tax and one quarter of the 2010 tax will be available for credit against the UK tax charged for 2009-10.

Where credit is claimed on the statutory income basis (see INTM161140 paragraph (b) and INTM161170), identification of the foreign tax on the doubly taxed income may present difficulty. If a satisfactory solution cannot be reached, submit the case to Specialist Personal Tax, PT International in the case of individuals and to CSTD Business, Assets & International in all other cases.