When you suffer overseas tax on an overseas engagement you will expect to receive a credit for that amount deducted against your UK tax liability. However, this is not always the case as HMRC will restrict the amount of that credit to the amount you would have suffered as if that income less allowable expenses (i.e. net profit) had been earned in the UK. It is very important that you plan early to obtain the highest amount of allowable tax credit. The calculation of the allowable tax credit is very complex as it involves an apportionment of your expenses between your overseas and UK engagements. We will help you in this process to achieve the highest amount of allowable tax credit.
Remember that the amount of overseas tax you will suffer will normally depend on the country's rate of withholding tax applied to the gross fee you have received. The UK tax credit allowed to you by HMRC, applicable to the overseas country, is normally calculated on your net profit earned in that country, i.e. gross income less relevant expenses.
It may be to your advantage to claim the amount of the overseas tax credit as an expense within your accounts rather than claim the credit under a double taxation treaty agreement or under the relevant tax statute and we shall advise you where this is the case.
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This material provides only an overview of the regulations in force and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.