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Double taxation and split year treatment

Double taxation and split year treatment

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Hi all,

A client of mine falls under a split year treatment under case 3 (ceasing to have a home in the UK), with the period up to Feb 2019 being in the UK. He had a capital gain on the disposal of a foreign property (in Croatia) in Jan 2019.

He also has ongoing rental income on a foreign property.

He paid tax on the capital gain in Croatia in March 2019 and hasn't yet paid tax on the rental income, though some will be due.

My thinking is as follows:

  • The capital gain is taxable in the UK, based on the DTA between Croatia and the UK
  • The rental income is taxable in the UK up to the point his departure from the UK, due to the split year treatment and based on the DTA between Croatia and the UK

My questions are:

  1. Can we use the foreign tax payable on the gain as FTCR, or is FTCR done on a cash basis and therefore can't be relieved against UK tax, based on the fact that it was paid after the part of the split year where he was outside the UK. I found in the Croatia DTA that 'Croatian tax payable .....shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains', which makes me think we can recover it, but any thoughts would be welcome.
  2. The same question really, but for the rental income - can the amount payable but not paid be used to relieve UK income tax, or is FTCR done on a cash basis, i.e. relief is given only on tax paid.

If anyone knows of the best place for me to look at the legislation / guidance on this, please do let me know.



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