HMRC is writing to taxpayers who claimed foreign tax credit relief (FTCR) on employment or other income in their 2022/23 self assessment returns and may be considering similar claims for 2023/24.
The letters outline the conditions for claiming FTCR, encouraging taxpayers to check any double tax agreements (DTAs) between the UK and the other country to confirm their eligibility. HMRC reminds taxpayers that FTCR cannot be claimed if the DTA does not give the other country the right to tax the income. In such cases, relief should be sought in the other country where tax was paid under domestic rules.
For employment income, HMRC clarifies that references to the “employer” in DTAs relate to the entity that funded the employment and bore its risks, which may differ from the contracting employer.
The letters also address US taxes, highlighting that the UK/US DTA only covers US federal tax, not state taxes. Taxpayers must instead claim unilateral relief for any US state taxes paid.
If errors are found in past returns, HMRC advises taxpayers to follow GOV.UK guidance to amend their returns. The deadline for correcting 2022/23 returns is 31 January 2025. HMRC warns that errors could lead to additional tax, interest, or penalties if a compliance check is opened.
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