INTM151060 - Double taxation: concept and principles

UK legislation - unilateral relief

ICTA88/S790 together with TCGA92/S277 for Capital Gains Tax, allows unilateral tax credit relief to be given against United Kingdom taxes for foreign taxes imposed in a country with which the United Kingdom has no double taxation agreement. The legislation provides that Sections 792- 806M (rules for giving foreign tax credit relief) are to apply as if there was an agreement in force with the country concerned which contained the provisions in Sections 790(3) and (4).

Unilateral relief under S790 can only be given by way of credit for foreign tax. Part of the income cannot be taken out of assessment. In broad terms credit is limited to amount that would be due if a treaty were in existence.

ICTA88/S793A provides a restriction to credit relief under S790. It provides that where a double taxation treaty contains an express provision to the effect that relief by way of credit shall not be given in particular cases or circumstances specified or described in the agreement, then neither shall credit by way of unilateral relief be allowed in those cases or circumstances. The provision has effect for arrangements made after 20 March 2000. At 1 April 2003 the only provision to which S793A applies is Article 24(4) (c) of the new UK/USA DTA.