INTM162620 - UK residents with foreign income or gains: claims for double taxation relief against UK tax: rate of exchange to use

For the purpose of computing tax credit relief, foreign tax, payable directly or by deduction, should be converted into sterling at the rate of exchange obtaining on the date when the foreign tax for which credit is to be allowed becomes payable.

In practice

  1. Officers need not make enquiries in all cases in order to establish the precise date on which the foreign tax became payable under the foreign country’s laws. Where the date is not known, the date of payment of the tax can normally be taken as the payable date. Where the foreign tax has been deducted at source from income, for example, from dividends, interest or royalties, the payable date will normally be the same date as the date on which the income is paid. If, however, the customer objects, or a substantial amount of tax is involved, the actual payable date should be determined. In many cases the date can be obtained from the demand note, provided that there has been no appeal against the foreign charge. If any difficulty arises in determining the payable date, in a case where such date is material, or if the customer objects to this basis, the case should be submitted to the Business, Assets & International, Assets Residence & Valuation in the case of individuals and to CSTD, Business Assets & International, Base Protection Policy Team in all other cases. See, however, INTM167190 in the case of interest on a loan relationship.
  2. Any reasonable established basis of conversion which has previously been applied in any particular case may continue to be used in that case if the customer agrees to its consistent application. If there is a dispute which cannot be resolved within the terms of the established practice, the general basis described above should be adopted.