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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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Double Taxation claims and applications: Beneficial ownership: Why beneficial ownership matters

The legislation under which HMRC processes claims and applications generally provides for relief to be allowed only to the beneficial owner of the assets or income in question.

But it is vital to distinguish between legislation which depends upon the beneficial ownership of the asset, and that which depends upon the beneficial ownership of the income which flows from that asset.

For example:

  • the majority of double taxation agreements provide for relief to the beneficial owner of the income, whilst
  • the “FOTRA” (Free Of Tax to Residents Abroad”) regulations provide for relief to the beneficial owner of the asset.

The country-specific guidance notes in this manual will tell you whether beneficial ownership is a condition for relief under the agreement with each country. The notes will tell you this under each category of income.

In some countries, no distinction is made between the concepts of legal and beneficial ownership, so beneficial ownership as a condition for relief may thus not appear in a double taxation agreement between the UK and one of those countries. But in such cases, the agreement usually requires the income to be subject to tax (INTM332200) in the other country. The person who is subject to tax on the income in question can usually be treated for practical purposes of relief under the agreement as if they were its owner.