12 - Treatment of Foreign Income and Non-Residents

Abstract

This chapter discusses the treatment of foreign income and nonresidents. The United Kingdom has entered into agreements with other countries to prevent the same income being taxed in both countries. Thus, rent received by a UK resident from letting property in the United States of America will be liable to income tax in the United States and to United Kingdom income tax under case V of Schedule D. In these circumstances, the tax is confined to the higher of the two taxes and any excess is given as double taxation relief. In case of doubt, the actual double taxation agreement should be examined. Dividends from foreign companies are subject to the United Kingdom tax under case V of schedule D on the arising basis, if the recipient is resident and domiciled in the United Kingdome. Double tax relief is usually given by the paying agent. Foreign taxes can also be repaid even if no bilateral agreement exists between the United Kingdom and the country where the income of a United Kingdom resident is taxed.