Foreign tax credit relief claim when they have a different financial year

Foreign tax credit relief claim when they have...

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Hi, I have a tax return to do where the UK resident taxpayer has a property in Australia rented out for a profit. An Oz tax return is done for I think the calendar year, and tax calculated and paid.

Do you apportion the tax deducted and the rental income to coincide with the 5/4 year end, or do you just slot in the figures for say the 2011 Australian year to 31st December into the 5th April 2012 UK tax return?

Probably a daft question but I just cannot find the answer!

Thanks!

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By kdauda
15th Jan 2013 11:24

Not a daft question

I doubt you'll find the answer written down anywhere. The strictly correct answer is to apportion the income and tax for the non-UK tax years so that they match the UK tax year. This is what HMRC also says, see http://www.hmrc.gov.uk/manuals/intmanual/INTM161220.htm

But, apparently way back in 2000, HMRC accepted the alternative (simpler) also gives the right result in most cases i.e. use the income and tax for the non-UK tax year that ends in the UK tax year. (e.g. use the 2011 calendar year income and tax for the 2011-12 UK tax return). I have always used this method, but for the cases I have seen, the tax has been a flat rate of tax, so both methods would have given the same answer in the long run.

The problem with apportioning is that, for example, you would have to wait until the foreign tax for both 2011 and 2012 have been paid before you can put the apportioned figure in the 2011-12 Uk tax return. But the UK deadline is 31 Jan 2013, by which time, you would probably not have calculated the 2012 foreign tax. So, you include an estimate? Then you amend afterwards? Very impractical, especially if the answer is going to be the same (or very close) anyway.

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