Taxation (International and Other Provisions) Act 2010 section 32

Calculation of amount received where UK tax charged on remittance basis

Section 32 provides a special rule for grossing up the amount of foreign income or gains remitted to the UK, where the taxpayer is taxed on the remittance basis and is claiming double taxation credit relief for foreign tax paid.

• When a taxpayer is taxed on the remittance basis and claims credit relief for foreign tax, the amount remitted to the UK must be grossed up to include the foreign tax withheld, any special withholding tax, and (for dividends) any underlying tax taken into account under the double taxation arrangements.
• Where the gain is a "special gain" — meaning a chargeable gain on a disposal where the consideration includes savings income and special withholding tax has been levied — a specific formula applies to limit the gross-up for special withholding tax: AWT × (GUK ÷ (SG − AWT)), where AWT is the special withholding tax, GUK is the gain received in the UK, and SG is the total gain.
• The gross-up does not apply to any foreign tax that is deemed to have been paid under tax-sparing provisions (that is, tax which was not actually payable but is treated as payable under section 20(2) for the purposes of international development relief).
• "Savings income" and "special withholding tax" have the meanings given in Part 3 of the Act, and the special withholding tax provisions only apply where a claim has been made under that Part.