If a person has income or gains from a source in one country and is resident in another, that same income or gain can suffer tax twice. Double Tax Relief (DTR) is designed to alleviate this double charge on the same source of income or gain.
The UK provides three options for providing relief from double taxation – two via a form of tax credit and one by way of deduction from the profits of the business.
Of the two forms that provide relief via
Double tax reliefWhen 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 reliefTax treaty reliefThe 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
Tolley tax case trackerThis tax tracker tool displays the current status and most recent developments of direct tax cases being heard by the Upper Tribunal (UT), the Court of Appeal, the Court of Session, the Supreme Court and the EU Court of Justice as at 14 May 2024. It is updated on a rolling monthly basis.The tracker is split into three parts:•Cases subject to an appeal•Cases potentially subject to an appeal, and•Finalised tax casesRecent updates are shown below in bold.Cases subject to an appealThis section of the tracker shows those cases that are currently subject to an appeal.Name of parties and citationCurrent statusAltrad Services LFtd (formerly Cape Industrial Services Ltd) and another v HMRCCA/2022/001869; [2023] EWCA Civ 474; [2022] UKUT 185 (TCC); [2020] UKFTT 162 (TC)Corporate tax: Ramsay principle The FTT found that the scheme failed on Ramsay grounds because the taxpayers had not really disposed of (and then reacquired) the assets on which allowances were claimed. However, FTT found that, but for Ramsay, the scheme would have worked. The UT decided that the taxpayers were entitled to capital allowances even though these had been created by an artificial series of transactions with no business purpose, reversing the FTT’s decision that the arrangements were defeated by a Ramsay analysis. The Court of Appeal granted HMRC permission to appeal the UT’s decision on its first ground of appeal, namely that the UT erred in law in concluding that the taxpayers
Corporate interest restriction ― calculating tax-interest expense amounts and tax-EBITDAWhy do we need to calculate these amounts?This guidance note sets out details of the initial calculations a group will need to undertake for the purposes of the corporate interest restriction (CIR) regime. For a general overview of the regime, see the Corporate interest restriction ― overview guidance note.Having established who is part of the worldwide group, the next step to take when looking at the CIR is to calculate the aggregate net tax-interest expense for all companies in the worldwide group that are within the charge to UK corporation tax. In order to do this, it is necessary to calculate the net tax-interest expense (or income) for each relevant company and then sum these amounts. Details of how to go about this are set out under ‘Calculating tax-interest expense amounts’ below. Net tax-interest expense is also required to calculate tax-EBITDA.In order to undertake the CIR calculations in both the fixed ratio method (see the Corporate interest restriction ― fixed ratio method guidance note) and the group ratio method (see the Corporate interest restriction ― group ratio method guidance note), it is first necessary to calculate tax-EBITDA for each relevant company. Again, these figures are the aggregate for the worldwide group. Aggregate tax-EBITDA is the amount to which the fixed ratio (30%) or, if an election is made, the variable group ratio percentage (GRP) is applied when calculating a group’s interest allowance for a given period of account. Details of
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