IR20 - Residents and non-residents liability to tax in the United ...

This guidance does not apply from 6 April 2009. The guidance it contains is replaced by the
guidance provided in HMRC6 – Residence, Domicile and the Remittance Basis. It is kept
available for those people who need to make reference to IR20 for their tax affairs before
5 April 2009.
rate) on any dividends.
You may, however, be entitled to a tax credit if you are a resident of a country with
which the UK has a double taxation agreement, and the agreement provides for
payment of the same tax credit as a UK resident would be entitled to receive. In that
case, you are liable to income tax on the total of the dividend and tax credit, at the rate
of tax laid down in the agreement.
From 6 April 1999, all double taxation agreements that provide for payment of a tax
credit on dividends paid by UK companies continue to give a right to claim a tax credit in
excess of the amount which the UK is entitled to retain. However, because the rate of
tax credit has been reduced (see paragraph 9.11), the amount which the UK is entitled
to retain under those agreements will in practice cover the whole of the tax credit. So if
you make a claim under an agreement where a dividend has been paid on or after 6
April 1999, there will be no balance of tax credit left for us to pay to you.
9.13 You may also have the right to a tax credit if you receive UK tax allowances and reliefs
through a claim in accordance with paragraph 7.3. But if you can only claim these
allowances because of the terms of a double taxation agreement (the final category in
paragraph 7.3), whether you are entitled to the tax credit will depend on the terms of the
agreement.
Capital gains
9.14 Under many agreements, if you are a resident of another country for the purposes of the
agreement, you will often be liable to tax only in the other country on any gains you
make from disposing of assets. In that case, you will be exempt from capital gains tax in
the UK even if you are ordinarily resident here. If, however, you are carrying on a trade
or running a business through a permanent establishment in the UK, any gains you
make from disposing of assets connected with the permanent establishment will
continue to be chargeable to capital gains tax in the UK.
UK residents
9.15 If you are resident in the UK and have overseas income or gains which are taxable in
both the UK and the country of origin, you may qualify for relief against UK tax for all or
part of the overseas tax you have paid. Even if there is no double taxation agreement
between the UK and the other country concerned, you may still be entitled to relief
under special provisions in the UK’s tax legislation.
List of the UK’s double taxation agreements
9.16 Countries with which the UK has double taxation agreements in force covering taxes on
income and/or capital gains (other than limited agreements concerned solely with air
transport and shipping) at October 2007 were as follows
Antigua and Barbuda Lithuania
Argentina Luxembourg
Australia Macedonia
Austria Malawi
Azerbaijan Malaysia
Bangladesh Malta
Barbados Mauritius
Belarus Mexico
Belgium Mongolia
Belize Montenegro
Bolivia Montserrat
IR20 44
HMRC 03/09