INTM161140 | UK residents with foreign income or gains: double taxation relief: Definitions - root income basis, statutory income basis

The following definitions apply for the purposes of foreign tax credit relief:

a) ‘Credit on the root income basis’ means credit allowed for foreign tax against any UK tax computed by reference to the same income on which the foreign tax is computed.

b) ‘Credit on the statutory income basis’ means credit allowed in accordance with the decision in Duckering v Gollan 42 TC333, that is the foreign tax on the foreign income is the foreign tax payable in respect of the income from the same source, for the same year as that for which the UK tax is assessed. For example, if interest of £100 has been taxed by the foreign country , and credit was due upon the statutory income basis, credit for the foreign tax charged for the 2022/23 period would be allowed against the UK tax charged on income from the same source for 2022/23. Credit against UK tax for the 2023/24 period would be allowed for the foreign tax paid for 2023/24. Where the foreign basis period for assessment does not coincide with the UK basis period see INTM161220. See SI1997/405 for the treatment of foreign tax paid in respect of profits or losses arising from the business of a Lloyd’s underwriter.