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HMRC internal manual

International Manual

UK residents with foreign income or gains: claims for double taxation relief against UK tax: adjustments to foreign tax

Customers who have claimed relief for foreign tax are required to notify an HMRC Officer if there is an adjustment to the amount of the foreign tax and this result’s in the amount of the relief becoming excessive.

The notice must be given in writing within one year from when the adjustment was made. A person who fails to give the required notice within the time limit is liable to a penalty of an amount not exceeding the amount by which the credit allowed has been rendered excessive by reason of the adjustment. Any penalty chargeable is subject to the provisions of TMA70/S100, and to the normal abatement procedure.

Members of Lloyd’s are subject to separate reporting requirements in respect of claims for relief for foreign tax. They are therefore not subject to the procedure described above.

The provision relates to foreign tax paid under a wide variety of systems and methods of collection. It is not possible therefore to define precisely what constitutes an adjustment of the tax paid. However, in most cases this will involve the foreign tax authority formally accepting that the amount of tax paid is excessive and agreeing to repay the excessive tax, either directly, or indirectly by setting it off against other liabilities that the customer may have.

An adjustment should be considered to have been made when the foreign tax authority issues a notification, in writing to the person (or their advisers) who has paid the tax in respect of which the claim to relief has been made, that it accepts that the amount of tax paid is excessive. Where the foreign tax authority does not issue such a notification but simply repays or sets off the excessive tax, the date when the repayment was issued or the set off carried out should be taken as the date when the adjustment was made.

In some circumstances, for example where underlying tax is involved, claims may be made in respect of foreign tax paid by a person other than the person claiming relief in the United Kingdom. Notification of any adjustment to the amount of tax paid will normally be sent only to the person who has paid that tax. Persons who have claimed relief in the United Kingdom in respect of foreign tax paid by another person will need to ensure that they will be made aware of any subsequent adjustment to the amount of foreign tax on which their claim is based.