Taxation (International and Other Provisions) Act 2010 section 25

Credit not allowed if relief allowed against overseas tax

Section 25 establishes a priority rule that prevents UK credit relief from being claimed where relief is already available in the overseas territory against the foreign tax concerned.

• Where a double taxation arrangement (or the law of the overseas territory giving effect to such an arrangement) makes relief available against tax that would otherwise be payable in that territory, no UK credit relief is given for that overseas tax.
• This rule applies regardless of whether the overseas relief has actually been claimed or used — the mere availability of the relief is enough to block the UK credit.
• The UK credit that is denied is the credit that would otherwise be available under section 18(2) of the Act, which normally entitles a person to reduce their UK tax liability by the amount of qualifying foreign tax paid.
• The purpose of this rule is to prevent a double benefit arising where a taxpayer could potentially obtain both overseas relief and a UK tax credit in respect of the same foreign tax liability.