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HMRC internal manual

Self Assessment: the legal framework

Self Assessment for non-residents: limit to Income Tax charge on non-residents


The rules for individual non-residents at FA 1995/S128 and for non-resident companies at FA2003/S151 limit the income tax charge on non-residents. Broadly, they put into law what was previously achieved by extra- statutory concession. The rules are in line with the accepted principles of international taxation in the OECD Model Tax Convention and Double Taxation agreements between the UK and other countries.

Income tax

FA95/S128 & FA2003/S151

In summary, the effect of these rules is that income tax chargeable on non- residents in respect of:

  • most types of income from investments (except property in the UK, SALF703)
  • income from trading in the UK through a qualifying broker or investment manager

is limited to the tax, if any, deducted at source (provided there is no UK representative for the income).

The limitation does not apply to non-resident trusts if a current or potential beneficiary is either an individual ordinarily resident or a company resident in the UK.

Details of the limit on income tax

FA95/S128 (2) to (6) & FA2003/S151

The income tax charge on the non-resident is limited to the sum of the following amounts:

  • the tax which would be due on the non-resident’s total income if the ‘excluded income’ (see the first paragraph in SALF708) were excluded and no personal allowances were given


  • the tax deducted at source (including credits) from the ‘excluded income’.

‘Excluded income’ is:

  • income chargeable to tax under Case III of Schedule D or Schedule F
  • income chargeable to tax under Case VI of Schedule D by virtue of ICTA88/S56 (transactions in deposits)
  • Social Security benefits
  • income from transactions through investment managers or brokers which is excluded either from FA95/S126 by FA95/S127 or from FA2003/S150 by FA2003/Sch26
  • any other income designated as excluded by Treasury regulations

provided that it is not income in relation to which the non-resident has a UK representative within FA95/S126 or FA2003/S150 (Definition of UK representative and General rule for the obligations and liabilities of UK representatives in SALF704) or profits as a Lloyd’s underwriter

Example: non-resident individual - operation of FA95/S128 limit for income tax

Assume a personal allowance of £5,000 is due and tax is at a single rate of 22%.

  • A non-resident has UK income of bank interest (received gross) £11,000.

Her liability on total income is (£11,000-£5,000) x 22% = £1,320,

but the bank interest is excluded income. Therefore FA95/S115 restricts the liability to tax deducted at source = nil.

  • A non-resident has UK income of bank interest (received gross) £6,000, rents £3,000 and dividends £4,500 plus credits £500.

His liability on total income is (£14,000 - £5,000) x 22% = £1,980,

but the bank interest and dividends are excluded income. Liability is limited to rents (£3,000 x 22%) plus the credit (£500) = £1,160. The only tax to pay is £660 on the rents.

  • A non-resident has UK income of rents £8,000.

Her liability on total income is (£8,000 - £5,000) x 22% = £660.