INTM165030 - UK residents with foreign income or gains: income tax: Computation - assessable amount
Where credit is claimed against UK Income Tax for foreign tax paid on income from a foreign source, the amount of that income for all UK tax purposes is:
a) Foreign income assessable on the arising basis
No direct foreign tax is to be deducted. Where, exceptionally, the double taxation agreement provides for relief for underlying tax on a dividend (see INTM164410) the underlying tax should be added to the amount of the income. Treat the whole of a foreign pension as chargeable to UK tax notwithstanding the deduction of one tenth under ICTA88/S65 (2).
Example:
An individual receives a dividend of 100 from which 15 foreign withholding tax was deducted. The amount of income assessable is 100.
b) Foreign income assessable on the remittance basis
Add the amount of direct foreign tax attributable to the amount of income remitted. Where, exceptionally, the agreement provides for relief for underlying tax on a dividend (see INTM164410), the underlying tax should also be added to the amount of the dividend remitted. If you have difficulty in determining the amount of foreign tax attributed to income remitted, refer to CSTD, BAI, Assets Residence & Valuation.
Example
| 听 | 拢1,000 |
|---|---|
| Foreign tax | 拢400 |
| Net foreign income | 拢600 |
| Remitted to UK | 拢300 |
| 听 | 听 |
| UK measure of the income | 听 |
| Income remitted | 拢300 |
| Plus foreign tax (300/600 x 400) | 拢200 |
| Therefore UK measure is | 拢500 |