Produced by Tolley in association with Anne Fairpo
  • 21 Dec 2021 16:32

The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:

  • Double tax relief
  • Credit relief
  • Tax treaty relief
  • Unilateral tax relief
  • Deduction relief
  • Restrictions on double tax relief
  • US limited liability companies (LLCs)

Double tax relief

When income arises in a foreign country to a UK resident company and that income is taxable in that foreign country, the UK may give the company relief for the foreign tax by crediting the foreign tax against the UK tax charged on that income. This might include withholding tax on interest or royalties, or tax on the profits of an overseas permanent establishment for example. 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.

For further commentary and examples, see Simon’s Taxes D4.803 and E6.4.

Credit relief

Tax treaty relief

The UK has more than 130 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.

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.

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

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