Double tax relief

By Tolley in partnership with Anne Fairpo of Temple Tax Chambers
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The following Corporation Tax guidance note by Tolley in partnership with Anne Fairpo of Temple Tax Chambers provides comprehensive and up to date tax information covering:

  • Double tax relief
  • Credit relief
  • Deduction relief
  • Unrelieved foreign taxes
  • Changes introduced by Finance Act 2014
  • US LLCs

The UK has three options for providing relief from double taxation: two via credit relief and one by way of deduction from the profits of the business.

Credit relief
Tax treaty relief

The UK has more than 115 tax treaties, which may exempt income from tax in one country or give credit for foreign taxes suffered on income. The precise mechanism will vary from treaty to treaty. Treaty relief takes precedence over other forms of relief for foreign taxes. For details on tax treaties, see the Structure of a tax treaty guidance note (subscription sensitive).

TIOPA 2010, s 9

To claim treaty relief, the taxpayer must have been resident in the UK throughout the chargeable period. Residence for these purposes is defined by UK law, not by the relevant treaty. See the Residence of companies guidance note.

TIOPA 2010, s 26

A non-resident company with a UK permanent establishment can claim treaty relief on the same basis as is available to a UK company. However, the total relief is not to exceed what would have been available if the permanent establishment had been an entity resident in the UK. See the Permanent establishment guidance note.

TIOPA 2010, s 30
Unilateral tax relief

The UK also unilaterally allows foreign tax paid as a credit against the UK tax liability on the same income.

TIOPA 2010, s 18

This is useful where either there is no tax treaty with the jurisdiction of payment, or where the tax treaty does not cover the particular type of tax (such as local taxes).

Treaty relief and unilateral relief are both given by w

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