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International Manual

DT applications and claims -Types of income: Other income

Types of income

State Pension

Articles in Double Taxation Agreements (DTAs) that deal with pension income often use the words “in consideration of past employment”. Where these words are used there is no relief available for a UK State Pension. If the treaty contains an “Other Income” article that does not contain restrictions in the scope of the income covered by the article then relief may be available. See INTM343000

Incapacity Benefit

Articles in DTAs that deal with pension income often use the words “in consideration of past employment”. As with the State Pension, where these words are used there is no relief available for Incapacity Benefit. If the treaty contains an “Other Income” article that does not contain restrictions in the scope of the income covered by the article then relief may be available. See INTM343000

Income of a third country

The scope of the Other Income article is sometimes restricted so that it covers only income that arises outside of the UK and also outside of the country with which the DTA has been signed. Where the article contains this restriction, no relief is available for any income arising in the UK that is not specifically dealt with elsewhere in the treaty.

Current UK legislation does not require income arising outside the UK to be taxed before it is paid to the beneficial owner. It is very unlikely, therefore, that you will need to consider allowing relief for income originating outside of the UK.

Theatre Backers - Angels

Payments made to non-resident theatre backers of plays and musicals (also known as “angels”) are in return for money put up by them in the finance of a production. If the show is successful their investment is first repaid and then they receive a share in any profit.

These payments are “annual payments” under Case III of Schedule D with tax deductible under ICTA88/S349. See INTM342580

Beneficiaries of UK resident trust

Where the “other income” article in a DTA does not contain any restrictions that limit the availability of relief, all of the tax that is deducted from the amount that is distributed to a qualifying beneficiary is available for repayment.

Some “Other Income” articles in our DTAs exclude from the possibility of relief income that is paid to beneficiaries of UK trusts. Where relief from UK tax is not available under the terms of the Other Income article it is still possible that some measure of relief is available to a non-resident beneficiary by reference to the underlying sources of income from the investments made by the trustees. See INTM367800

Administration period of a UK estate

Some “Other Income” articles in our DTAs exclude from the possibility of relief income that accrues to the estate of someone who has died. Where relief from UK tax is not available under the terms of the Other Income article it is still possible that some measure of relief is available. The persons who may be entitled to claim relief may be either a non-resident beneficiary or the executor of the person who has died. Relief in these cases is calculated by reference to the underlying sources of income from the investments made by the trustees.

UK unauthorised unit trusts

Payments made by UK unauthorised unit trusts are paid with basic rate income tax deducted. They are treated as annual payments and relief may be available under the terms of the ’other income’ article of a DTAs which does not exclude income paid out of trusts.

Annual payments that are not interest or royalties

You will normally only be able to identify that a payment is considered to be an ‘annual payment’ if you have asked for a report on form 4450/1 (interest) or form 4450/2 (royalties). All questions about the proper characterisation under UK law of any payment are for the tax office that is responsible for the payer of the income to consider.

You can allow relief from UK tax for an annual payment that is not interest or a royalty if the double taxation treaty has an ‘other income’ article that applies without restriction to income that is not dealt with anywhere else in the treaty.

Cases of doubt or difficulty should be referred to Technical Advice Group in Nottingham.