Is there any reason why a corporate body in the UK would not be able to reclaim withholding tax? I'm really only familiar with this in the personal tax sphere, but where a company doing work in Kenya has had Withholding Tax deducted according to local regulation, should there be any problem in their reclaiming the tax against their CT bill (apart from the obvious of not having a CT bill)?
The corporate body has said that, with a £1,000 fee (a bit more than that!) having had £150 deducted, they will need to invoice for the £150 which of course would in turn need to have withholding tax taken etc. Am I missing something through lack of knowledge of CT issues, or isn't it just a case of 'suck it up guys'?
Replies (9)
Please login or register to join the discussion.
No should be no issues in getting UK credit for the WHT - the UK - Kenya DTA provides for it- and it would just be incorporated in the relevant pages of the CT600 return, tho subject to a maximum UK relief of the UK CT payable on the doubly taxed income.
Accept those provisos
Well I did say "should", but no argument about Portia's qualifications (probably in both senses)
I vaguely remember in the dim recesses of my mind ...
... that there is some further limitation that if the tax can be reclaimed form the foreign state then you cannot voluntarily choose to recover it in the UK instead.
Or is that baloney?
With kind regards
Clint Westwood
@Clint
I believe that you are thinking of unilateral relief in cases where treaty relief is unavailable. In such cases relief will be restricted or denied if the taxpayer has not done everything in their power to minimise the foreign tax. Eg if they could have signed a document exempting them from tax in the overseas country, but didn't, relief may be denied.
Re: WHT
WHT gets deducted from invoices all the time they would only usually pay you more if you have written a gross up clause into their contract with the party in Kenya. Otherwise you can issue extra fees but they will tell you to whistle for it. So gross up clause if you invoice 1,000 the Kenyan part (if the WHT rate is 15%) would have to treat this as if they'd received an invoice for 1,176 and account for 176 to their local tax authorities and 1000 to you. The law the contract is written under is relevant as some territories declare gross up clauses illegal or deny treaty relief etc. Lots of things to consider, for example, did the activity of the UK company constitute a PE in Kenya and if so is there any local Kenya filing obligation, if so the WHT is likely creditable against Kenyan tax, then the UK status depends on lots of things branch election or not etc. Assuming no PE in Kenya then normally you need to work out the costs associated with providing whatever was invoiced for then the profit of this multiplied by UK tax rate applicable is the limit of the amount you can take a credit for... as you've alluded to there are other options to explore and c/f / tracing can get complicated to track etc.
Seperate CT Comp
The withholding tax allowance is governed by a separate CT computation for the work undertaken as James26 says.
I have a few clients who operate in Botswana in addition to the UK so we have set their accounting records up accordingly. If your client is to continue suffering WHT you may wish to consider this.
separate CT computation?
Hi Alexdon, could you please explain this further? How can this be done while filling the on-line tax return?
Many thanks.