View the related Tax Guidance about Underlying tax
Foreign tax relief
Foreign tax reliefIncome and gains may be taxable in more than one country. The UK has three ways of ensuring that the individual does not bear a double burden:1)treaty tax relief may reduce or eliminate the double tax2)if there is no treaty, the individual can claim ‘unilateral’ relief by deducting the foreign tax from their UK tax3)the individual can also deduct the foreign tax as an expense from their income (known as relief by deduction), although this is generally less efficient This guidance note looks at these three options in turn, and then considers how the reliefs should be used efficiently for income tax and capital gains tax and how they should be reported for self assessment. It does not cover remittance basis users. For this, see Simon’s Taxes E4.1323.HMRC guidance on a country by country basis is given in DT2140PP.Minimisation of foreign taxBefore claiming relief for foreign taxes suffered, you should note that the individual can only make a claim if they have taken all reasonable steps to have their foreign liability reduced to a minimum.This includes claiming, or securing the deduction of, all allowances, reductions, reliefs and deductions which the individual might have reasonably expected to have claimed or secured if no foreign tax relief claim was open to them. Examples of such reliefs might be personal allowances in the overseas country, deductions for expenses, etc.Treaty reliefNext, you should consider the provisions of the relevant tax treaty. There is a list of current UK
Flexible benefits schemes ― an overview
Flexible benefits schemes ― an overviewAn introduction to flex schemesA flexible benefits scheme allows an employee some degree of choice in how their remuneration package is structured. The terms ‘salary sacrifice scheme’ and ‘flex scheme’ are often interchangeable, because they usually refer to the same thing. The main difference, if there is one, is that ‘salary sacrifice’ may refer to a degree of employee choice given on a single employment benefit. A flex scheme on the other hand often applies choice to a number of different employment benefits at the same time, therefore the considerations on implementation are more numerous.This document sets out the basics of how a flex scheme might work, alongside the usual steps involved when implementing a successful scheme. A number of additional guidance documents then provide further assistance on the various practical steps and considerations, as listed below:DescriptionGuidance notesPreliminary work around feasibility prior to implementing a flex schemeFeasibility study for a flexible benefits schemeEmployee car or company car, matters to considerOwn car v company carRules applicable for valuing benefits when employee has the choice between cash or a benefit in kind, including exceptions to the rulesOptional remuneration arrangementsWhat are the potential areas of salary sacrifice and the risk factors?Salary sacrifice arrangements ― overviewInteraction between salary sacrifice and national living or minimum wageSalary sacrifice and national minimum wageWhen and how often may an employee change a salary sacrifice agreement?Changing the terms of a salary sacrifice agreementInteraction between salary sacrifice
A–Z of international tax terminology
A–Z of international tax terminologyList of commonly used phrases in international taxThe table below lists some of the terminology commonly used in the context of corporate international tax and transfer pricing, together with links to additional sources of information including other guidance notes, Simon’s Taxes and HMRC’s manuals.Navigation tip: press ‘Ctrl + F’ to search for a particular term within the table.TerminologyDefinitionFurther detailsAAnti-conduitCertain double tax treaty provisions contain anti-conduit conditions, which deny treaty benefits where the amounts received are paid on to another company. This ensures that treaty benefits are only obtained by the contracting states, rather than residents of third countries who have deliberately arranged their transactions to obtain treaty benefits to which they would not otherwise be entitledDT19850PPArm’s length arrangementAn arm’s length arrangement reflects the price that would be payable and the terms which would be agreed for a transaction between unconnected parties. This is important for the purposes of the transfer pricing legislation (see ‘Transfer pricing’ below)Transfer pricing rules ― overview guidance note Simon’s Taxes B4.147INTM412040ATAD (anti-tax avoidance directive)ATAD is an EU directive which provides for a series of anti-abuse rules relating to interest expense deductions, controlled foreign companies and hybrid mismatches, and requires the introduction of a corporate GAAR and an exit tax (these two measures not being part of the BEPS project). ATAD II introduced further measures to combat hybrid mismatches, whilst ATAD 3 aims to limit the use of ‘shell’ holding
Disguised remuneration ― overview
Disguised remuneration ― overviewIntroductionLong before the disguised remuneration (DR) legislation, HMRC had challenged employee benefit trusts (EBTs). Macdonald (HMIT) V Dextra and Sempra Metals Ltd v Revenue and Customs Comrs, heard the decade before disguised remuneration, were largely considered by the profession to have set a clear precedent on the tax treatment for contributions to and benefits received from EBTs. The tax purpose of the DR legislation was to create a tax charge upon certain events ― ‘earmarking’ thereby rendering the use of third party arrangements to ‘remunerate’ employees obsolete without tax advantages. However, the DR legislation, when considered against the disclosure of tax avoidance schemes legislation, the promoters of tax avoidance scheme legislation and the general anti-abuse rule, is intended to change the perception of tax avoidance. On 26 November 2020, HMRC published a report ‘Use of marketed tax avoidance schemes in the UK (2020 to 2021)’. The report states “circa 99% of the avoidance market was disguised remuneration schemesâ€. HMRC published the names of 18 promoters and 20 schemes between April and September 2022 (see the current list of named tax avoidance schemes, promoters, enablers and suppliers at GOV.UK).The DR legislation was introduced over a decade ago by FA 2011.The Government confirmed at Budget 2016 that a further package of measures would be introduced to tackle the ongoing use of DR avoidance schemes. These were the subject of a technical consultation (which closed on 5 October 2016) on provisions to be introduced in Finance Bill 2017. However,
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