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Claim foreign tax paid by UK Company on CT600?

Claim tax paid in India by a UK Company on CT600

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Hello Everyone

My client, a UK Company with UK Tax Residence Certificate, My client receives income from India. However a 10.4% tax has been deducted and remaining funds paid in to UK Bank account of company. I understand I will claim this tax paid under BOx 450 "Double taxation relief".  Please correct me if I am wrong.

Now further in this case, tax paid in India on gross income were around £1900.00. However after deducting Director Salaries and other expenses tax payable as per UK Taxation is £1500. So I understand my relief for DTR will be restricted to £1500.00.

But can some please advise how will account for additional £400.00 paid in indian tax ?

Can I transfer £400.00 it to profit and loss account as foreign tax paid and then disallow it when it comes to calculation of UK Tax ? Otherwise the amount of £400.0 will stay on balance sheet as tax paid which will not receive and credit in future!

Please do correct me if any of my accounting entries are incorrect

Kind regards


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By Matrix
04th Mar 2021 19:06

You can expense the foreign tax instead of taking it as a deduction but I expect it would be on a source by source basis (rather than taking some as a credit and some as a deduction).

You will obviously need to check that the tax is a tax on profits and is creditable and steps have been taken to reduce it, e.g., by claiming under a DTT.

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Replying to Matrix:
By Tax Dragon
05th Mar 2021 06:31

Yeah I think (caveat: without checking) that if you expense any of it then you have to expense it all. So tax credit relief is almost certainly better and there's then no relief for the £400.

That said, this sounds like withholding tax on a receipt, not a tax on profits. As you say, the OP should consider claims to recover the tax in India.

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