We are a UK based company with debtors in a wide raft of countries and often those debtors withhold a portion of the amount invoiced to them when remitting funds to the UK. As I understand it, the taxes withheld can be claimed back as a relief when completing our annual return. We have however, had tax losses for the past 2 years, and are forecasting another tax loss this year. At what point do these withholding tax items become irrecoverable?
Thanks in advance.
Carla Molloy
Replies (2)
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generally
Double tax relief is generally available for foreign withholding taxes but only against UK tax liability. There can be no refunds so the concept of "claimed back as a relief" is misleading. If your UK tax liability is 19% and you have suffered 15% foreign tax you pay the other 4% to the Inland Revenue. If you have suffered 20% foreign tax then the 1% is your problem. The UK cannot subsidise foreign countries' tax systems.
If you make losses whilst having suffered foreign tax then I cannot see any scope for relief for that tax.
If you can't claim a credit, claim a deduction.
If you can't claim the overseas tax as a credit against the UK tax as described by Phil, you should claim it as a deduction. The effect is to increase the loss. See ICTA s811.