Budget Notes


Who is likely to be affected?

1. Individuals who receive income as part of a trade or profession that is subject to foreign tax.

General description of the measure

2. Legislation will be introduced in Finance Bill 2008 to ensure that the credit for any foreign tax paid on trade or professional earnings is no more than the UK income tax due in respect of the same earnings.

Operative date

3. The legislation will have effect for income arising on or after 6 April 2008 and for foreign tax paid on or after 6 April 2008.

Current law and proposed revisions

4. The legislation will clarify the way that section 796 of the Income and Corporation Taxes Act 1988 defines the maximum credit available against UK income tax in respect of foreign taxes.

5. This measure will confirm existing practice and is in keeping with the changes made in 2005 to the corporation tax regime. It will remove doubts about the basis of foreign tax credit following recent case law.

Further advice

6. If you have any questions about this change, please contact Andrew Page on 020 7147 2673 (email: andrew.page@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk