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Overseas Income – What Is My Tax Position?Written on July 15, 2019 by Kirk Rice LLP

Overseas Income – What Is My Tax Position?
Taxing Times Questions

The Question:

I live in the UK permanently, but I receive a regular income from outside the UK, which has tax deducted at source. Is this overseas income also subject to UK tax?

Kirk Rice LLP answers:

I would need to know a little more about your personal situation to give an accurate answer, but assuming you have been resident in the UK for some time, or have always been resident in the UK, then you are subject to tax on your worldwide income and capital gains. So yes, the overseas income could well be subject to UK tax.

However, this would mean that your income would be subject to tax in the UK and the overseas jurisdiction. To mitigate the effect of double taxation, double tax relief operates to reduce the UK tax liability by the amount of the foreign tax paid. The UK has a number of double tax treaties in place with other countries throughout the world.  In most cases, such agreements provide for credit against UK tax for foreign taxes on income and gains arising to UK residents. In some cases, however, the agreements provide for exemption from taxes on income or gains in the country where they arise for UK residents.

If there is no double tax treaty with the country concerned, then there are unilateral double tax relief provisions within the UK tax legislation which provide for credit against UK tax. Where relief is not available, then the foreign tax may be deducted from the UK income before calculating the UK tax liability arising.

So, the starting point in applying double tax relief is to look at what the domestic position is i.e. Is there a taxable income or gain? If there is, and overseas tax has been paid the next step is to check if there is a double tax agreement in place, if so it should be applied. If there is no double tax agreement in place the UK unilateral relieving provisions will apply.

If relief is not available as a credit, the foreign tax paid can be treated as a deductible expense in calculating the income or gain.

I should stress that this is often a fairly complex area and a lot depends on your personal circumstances and so professional advice is recommended.

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Any reader interested in finding out more about the taxation of your overseas income can call 01344 875 000, 01252 960 500 or 0208 789 8588 or email info@kirkrice.co.uk to speak with one of our financial planners.

Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. The FCA does not regulate tax and trust advice.