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International Taxation: UK Tax Resident with Foreign Income - YouTube
Channel: Accounting and Tax Academy by Tony D
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if you are employed or running a
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business here in the uk and you also
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have any type of foreign income that is
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income from overseas then you'll
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probably want to know how your foreign
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income is treated for tax purposes in
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this video i will cover a refresher on
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tax residency how are you taxed if you
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have foreign income what exactly are
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double tax treaties when can double tax
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treaties or relief be claimed and a
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finally section before i get into
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today's video be sure to visit our
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accounting and tax academy membership
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area where you can get access to
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exclusive in-depth courses templates
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calculators and a members q a section
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where you can get your specific
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accounting and tax questions answered by
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a qualified accountant or chartered tax
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advisor
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[Music]
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there's a common misconception that your
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residency of a country that is your
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citizenship determines your tax
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residency just because you hold a
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british passport for example or are
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eligible for one does not necessarily
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mean you are uk tax resident too
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although the probability of this being
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the case is probably quite high your tax
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residency this is where you are resident
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in the uk for tax purposes and pay uk
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taxes is mutually exclusive from your
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citizenship by being a uk tax resident
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you are liable to pay uk income tax and
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dividend tax on your worldwide earnings
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whether through employment
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self-employment or dividends received
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from a company but the question is how
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is your tax residency determine and how
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do you know if you are uk tax resident
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in any particular taxable year to find
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out more we've done a video which you
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can access in the description box below
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that provides a process in helping you
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work out your tax residency
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if you have foreign income for example
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dividends from overseas companies
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interest receipts employment income or
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self-employment income then how is this
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foreign income assessed for tax here in
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the uk
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so the first rule is does the uk
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actually have the right to tax your
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foreign income you see a country cannot
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tax income unless it has some
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jurisdiction over either the income
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itself
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or the recipient that is you and if you
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are tax resident in the uk then the uk
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has the right to tax your foreign income
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and as we know from the previous section
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of this video uk tax residents are
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accessible to uk tax on their worldwide
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income but there is an exception to this
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rule and that is if you are uk resident
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but not uk domiciled and the remittance
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bases of taxation applies for on income
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and gains are only assessed if they are
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admitted to the uk remitted simply means
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if you bring the funds back to the uk
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probably by way of a bank or digital
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money transfer and i really think the
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days of suitcases full of cash are all
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but gone uk's right to tax income is
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also affected by what is known as double
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tax treaties that may exist between the
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uk and the country in which either the
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income arises or the recipient that is
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you is tax resident you see taxes often
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sought by the country in which the
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income arose so let's suppose you were
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earning a pay income here in the uk and
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in addition to this had 20 000 pounds of
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gbp equivalent of dividends from spain
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if you are uk tax resident and domicile
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then this dividend is accessible to uk
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tax and according to their domestic laws
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the spanish tax authorities will most
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likely seek to tax you two on this known
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as double taxation and that's where
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double tax treaties kick in
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double tax treaties also known as double
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tax arrangements are agreements that are
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drawn up between two states one of their
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functions is to clarify each state's
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right to tax in cases where two states
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are claiming the right to tax a source
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of income under their respective
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domestic laws
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this clarification can completely or
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partially eliminate the double taxation
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that you a taxpayer may otherwise suffer
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double tax treaties override a country's
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domestic tax law but they cannot create
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a tax liability that does not exist in
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domestic law so for example here in the
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uk the rate of basic income tax is 20
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and this is part of the finance act or
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domestic tax law a double tax treaty
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cannot go and create a 25 income tax
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rule or rate all current and live double
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tax treaties between the uk and other
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tax jurisdictions can be freely and
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openly viewed by following the link in
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the description box below however a word
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of caution being able to read a double
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tax treaty is one thing but sound
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interpretation and application is
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another so be careful here and i always
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recommend you consult a professional tax
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advisor for this complex area of
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taxation
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[Music]
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now if after applying any available
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exemptions and restrictions your foreign
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income whether in full apart is
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suffering double taxation hmrc here in
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the uk will usually allow double tax
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relief for the foreign tax paid against
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a uk tax liability by granting what's
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known as a credit however there are five
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principles that must be met number one
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is the income must arise in the country
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that has levy tax number two the foreign
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tax must have arisen in respect of the
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same amount of income that is being
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assessed in the uk
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number three is the foreign tax must
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have been levied on the same income
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number four the foreign tax must have
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been minimized and number five the
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credit you will get is the lower of the
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foreign tax or uk assessed tax in
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question converted to gbp that's great
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british pounds where there is no double
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tax treaty between the uk and any
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particular country the uk still allows
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double tax relief known as unilateral
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relief this is quite common between the
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uk and usa for example where many tax
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laws in the u.s are determined by
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individual states and not the federal
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government in the usa
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and finally international tax is a vast
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and often complex area and there's only
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so much i can cover in this short video
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however if you want to learn more
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including specific examples case studies
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and how you can swipe and apply it to
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your particular circumstances head on to
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our in-depth course on international tax
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in our accounting and tax academy
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membership area that covers what are the
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basic methods of getting dtr such as
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credit relief and deduction relief
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foreign dividends and how to declare
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them for an employment income and how to
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declare it for unemployment expenses the
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rules around it if you are non-domiciled
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how does the remittance spaces actually
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work and how to calculations showing you
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how to work out double tax relief
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correctly these are just amongst a few
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of the topics covered in this 60 minute
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course this is tony d'angel for the
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accounting and tax academy thanks for
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tuning in
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