Foreign income can be from any source such as foreign stock, foreign debentures, foreign interest and dividends or foreign property.
The taxation of overseas income is entirely dependent on the residence and domicile status of the recipient.
A person who is resident and domiciled in the UK is taxable on an arising basis which means he will be taxable on his worldwide income. However, they will get a tax credit for all or part of the foreign tax when calculating the UK tax liability.
If a person is resident in the UK but domiciled abroad, he will pay tax on an arising basis i.e. on his worldwide income but he has the option to claim for the remittance basis. A claim for the remittance basis means that the individual will pay tax on his foreign income only if he brings it into the UK.
If you have any overseas source of income, you need to ensure that this has been correctly included in your tax return or an election has been made for remittance basis.
At Martax, we can help you with the following:
- Determining whether you are resident or not in the UK
- Whether or not you are required to pay tax on your overseas income
- Determining if any double taxation relief is available on the foreign tax paid
- Calculation of foreign tax credit relief based on double taxation treaties
- Whether it is beneficial to claim remittance basis
For more information and to arrange a free consultation, please get in touch.