Foreign tax credit relief

d6fs1l

I am trying to deal with the calculation of foreign tax credit relief (for the first time) and am attempting to use HS263 (the FTCR working sheet 1) for this purpose.

The problem is that none of the HMRC help that I can find makes any sense – it refers to boxes in the FTCR working sheet which simply do not exist. Example: https://www.gov.uk/government/publications/calculating-foreign-tax-credit-relief-on-income-hs263-self-assessment-helpsheet/relief-for-foreign-tax-paid-2025-hs263#appendix-1-completing-the-ftcrws

Problem: this refers extensively to boxes with labels beginning with an A – but there aren’t any on the working sheet!

 

So can I just get a quick sanity check:

1.      Say (for example) I have self-employment income from work done in the UK paid by a Spanish entity which has deducted 24% tax. So 1000 EUR gross, of which I have received 760.

2.      If I am a UK higher-rate payer, I can claim foreign tax credit relief against the tax paid in Spain so that I only pay the additional 16 percentage points of tax in the UK (40-24=16).

3.      To do that I calculate my tax liability on my income including the gross Spanish income, and then compare it with my tax liability on my income excluding the gross Spanish income.

4.      The difference between those two liabilities is the unrelieved UK tax liability on the gross Spanish income, from which I deduct the Spanish tax paid, giving me the UK foreign tax relief to claim on the return.

Is that right?

And then, if I have further income from another country, I repeat the process as above except that the starting tax liability is the liability as adjusted by any prior claims of foreign tax relief?

Thank you in advance for any replies.

probate_slave

Your sanity check looks good to me. The current 2014 UK-Spain treaty (at articles 14 and 22 para 2a) allows Spanish employment income tax to be credited in full against UK tax. Unlike other income sources, there's no maximum allowable rate.

The FTCR working sheet assumes that you use the tax calculation summary (SA110) and associated notes, which is where you will find boxes A to M mentioned above. It's arguable how useful this is if you already understand how your tax is calculated. But it may be worthwhile to work through (twice!) as there can sometimes be interaction between FTCR and other reliefs.

d6fs1l

Thank you very much -- I realise now, having read the worksheet more carefully, that my description for the subsequent claims is incorrect -- you remove the income in respect of all the items previously considered for the FTCR to calculate the difference between the starting tax liability and the tax chargeable in respect of the subsequent item.

Thank you also re the TCSN pointer -- the FTCR working sheet could be clearer that this is what is being referenced! The overall tax position I am dealing with is very simple so I think it is probably overkill to use the summary notes. (But what a demonstration they provide of the complexity of the tax code...)

I also have an item of Italian income to deal with (again for UK self-employment where some Italian tax has been deducted) -- again it appears that the tax here can be credited in full against UK tax, insofar as I can understand the HMRC digest of tax treaties.