SAIM1130 - Savings and investment income: foreign income
Territorial scope
ITTOIA05/S368 charges savings and investment income arising to a
UK resident whether or not it is from a UK source, and savings and
investment income arising to a non-UK resident only if it is from a
UK source. See
SAIM1170 for more on the tax treatment
of non-residents.
So a UK resident is chargeable under ITTOIA05/S369 on
interest arising on a deposit account, debt security or similar
asset, even if the asset is located abroad.
The charge encompasses income formerly charged under Cases
III, IV and V of Schedule D.
UK source
In many cases it will be unusual for a source to arise outside
the UK, because of the effect of other UK laws. For example, in
theory a building society may satisfy the test of being resident
outside the UK, and its dividends may therefore arise outside the
UK. However, a building society may only be incorporated under the
Building Societies Act 1986 if its principal office is in the UK.
Similarly, an Authorised Unit Trust is one authorised by the
Financial Services Authority and only such an AUT is treated as a
UK company under ICTA88/S468 and therefore making distributions
from a UK source. It is theoretically possible, but unlikely in
practice that income from an Open Ended Investment Company (OEIC
– see
SAIM6000) or an Industrial or Provident
Society will have a non-UK source.
See also
SAIM9090 on the meaning of UK source in
the context of interest paid abroad.
Foreign dividends
See SAIM5210 on the taxation of foreign dividends.
Foreign income: special rules
Part 8 of ITTOIA 2005 (ITTOIA05/S829 to S845) has special rules
on foreign income.
If someone is either not domiciled in the UK, or not
ordinarily resident in the UK, they may claim to be taxed only on
‘relevant foreign income’ that is actually received in
the UK. This is the ‘remittance basis’ (
SAIM1140). ‘Relevant foreign
income’ includes trade and property income, but the rules in
Part 8 ITTOIA05 are most likely to be applicable to savings and
investment income taxable under Part 4 of ITTOIA05 (interest,
dividends from non-UK companies, deeply discounted securities,
sales of foreign dividend coupons), and to certain types of
miscellaneous income taxable under Part 5, including annual
payments.
Where income arises outside of the UK, and it is not
possible – because of local laws or currency restrictions
– to transfer the income to the UK, a taxpayer may claim
relief in respect of ‘unremittable’ income (
SAIM1150).
Deductions from foreign income
Where ‘relevant foreign income’ is taxed on the arising basis, but not where it is taxed on the remittance basis, a deduction is allowed from that income for expenses incurred outside the UK in collecting the income – ITTOIA05/S838.
Double taxation relief
Relief for foreign tax on income arising in a foreign country to a UK resident may be given under Double Taxation agreements. See the International Manual (INTM150000 and INTM160000) for more details ( SAIM20000).
