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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I received income from France in FY13-14 and paid UK tax on

Customer Question

I received income from France in FY13-14 and paid UK tax on it. Then I paid French income tax on it in Jan 2015 (FY14-15) but received no French income in FY14-15. Can I claim Foreign Tax Credit Relief when completing my return on-line. It won't let me create a Foreign section with zero income!
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Since the French tax can only be offset against a UK tax liability on French income which is taxable in the UK, HMRC aren't going to offset that tax against your UK income tax liability on UK income because that would mean the UK Treasury would be subsidising the French tax system. If there was no French income in 2014/15, you should make a claim for repayment of the French tax paid.

I hope this clarifies your UK tax situation but let me know if you have any further questions.
Customer: replied 2 years ago.

I do indeed want to offset French tax against the UK tax liability on French income which is taxable in the UK. The problem is that because the French tax year is a calendar year, the UK tax and the French tax are paid in different tax years.

Expert:  TonyTax replied 2 years ago.

When I have claimed relief for foreign tax paid on foreign income against the UK tax liability on the same income for a client, I take the actual foreign tax liability on the foreign income for the foreign tax year which ends in the UK tax year that you want to claim relief against.

For example, I would disclose the French income for the year end 31 December 2014 in the UK tax return for the year ended 5 April 2015 and claim the French tax paid on that income against my UK tax liabilty on that income for 2014/15, regardless of when the French tax is actually paid. I used to do this frequently with clients who had US dividends and it became accepted practise as the US companies provided a certificate of the income and US tax withheld for the calendar year.

As you have discovered, you cannot offset foreign tax against a UK tax liability where there is no foreign income.

Customer: replied 2 years ago.

That doesn't work for French income; you can't even submit a French tax declaration for 2014 until June 2015. So you would have to lie on your 2014/5 UK tax return, claiming that you had paid French tax when you hadn't.

Expert:  TonyTax replied 2 years ago.
Where the foreign tax liability hasn't been quantified exactly you can estimate it in your UK tax return or if you have no idea what it will be, then you can leave the foreign tax box blank in your UK tax return until you do know the liability at which time you can amend the tax return. If you did estimate the foreign tax or put £0 provisionally, you would be well advised to put a note to that effect in the white space.

If you made payments on account for the French tax year 2015 which would have been provisionally based on the 2014 French tax liability and there was no French rental income in the French tax year 2015, then you should be able to get the French tax back from the French tax office assuming you had no other French income in 2015.

As far as your UK tax position is concerned for 2014/15, there is no French income to be assessed to UK tax and, therefore, no UK liability on French income against which the French tax paid can be offset. The French tax paid cannot be offset against your liability on non-French income sources. As I said in the previous paragraph, you will need to make a claim for repayment of the French tax you paid on account. If you look here, you will see that French payments on account can be reduced where appropriate so it follows that excess payments on account can be repaid. That's how the UK tax system works as well.