Double taxation relief

Income and gains arising in another jurisdiction to UK residents may be subject to tax both overseas and in the UK. UK residents may also be subject to UK tax on dividends received from companies which have paid tax overseas.

In order to mitigate this, the UK has entered into a large number of double taxation agreements (DTAs) to reduce the incidence of double taxation. In addition, the UK has legislation to provide unilateral double taxation relief in certain situations where no DTA relief is available. The double taxation relief rules (for both DTA and unilateral relief) are in Part 2 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010). Double tax relief is extended to capital gains tax by virtue of TIOPA 2010, s 9(2). Although it has no legal force, there is also guidance to be found in the following HMRC internal manuals: International Manual at INTM160000 onwards, and the Double Taxation Relief Manual at DT1690PP, DT2100 and DT2140PP.

Definition of double taxation

There are two types of double taxation:

  1. economic double taxation, which focuses on the continuity

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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