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HMRC internal manual

International Manual

UK residents with foreign income or gains: income tax: Continuing sources

Where a source of foreign income commenced on or before 5 April 1994 but does not cease until on or after 6 April 1998, (6 April 1999 for income from trades, professions or vocations) so that no old-style cessation adjustments arise, no income from the source escapes assessment by falling into a non-basis period. In these circumstances, recovery of the additional tax credit relief given in the years of commencement is made by reference to the foreign tax paid for which no tax credit relief was allowed in 1996-97 because of the transitional year averaging provisions (FA94/SCH20/PARA6 and FA94/SCH20/PARA11).

In determining the amount to be recovered, the following should be compared:

  1. the additional tax credit relief allowed in the years of commencement, and
  2. the amount of the foreign tax for which tax credit relief would have been allowed but for which, because of the averaging provisions, no credit relief was actually allowed, in the transitional year 1996-97.

If (a) exceeds (b), the excess is to be recovered by way of a charge under Case VI of Schedule D.

If (b) exceeds (a), there is no recovery to be made, nor is the excess allowable as tax credit relief for any year.