Part 3Income tax, corporation tax and capital gains tax

Chapter 7Savings income: double taxation arising from withholding tax

Computation of income etc

F1111Computation of income etc subject to special withholding tax only

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112Computation of income etc subject to foreign tax and special withholding tax

1

Section 795 of the Taxes Act 1988 (double taxation relief: computation of income subject to foreign tax) is amended as follows.

2

In subsection (1) (remittance basis: grossing up) after “increased by” insert “ — (a) ” and at the end insert—

, and

b

the amount of any special withholding tax levied in respect of the income.

3

In subsection (2)(a) (other cases: no deduction for foreign tax) after “foreign tax” insert “ or special withholding tax ”.

4

After subsection (4) insert—

5

In this section—

a

“special withholding tax” has the same meaning as in Chapter 7 of Part 3 of the Finance Act 2004 (see section 107(3) of that Act); and

b

references to special withholding tax are to special withholding tax in respect of which a claim has been made under that Chapter.

5

Section 277 of the Taxation of Chargeable Gains Act 1992 (c. 12) (which applies Chapters 1 and 2 of Part 18 of the Taxes Act 1988 in relation to capital gains tax) is amended as follows.

6

After subsection (1) insert—

1A

Subsection (1B) below applies where—

a

a chargeable gain accrues to a person on a disposal by him of assets in circumstances where the consideration for the disposal consists of or includes an amount of savings income, and

b

special withholding tax is levied in respect of the whole or any part of the consideration for the disposal.

1B

In section 795 of the Taxes Act, as applied by this section, for the reference in subsection (1)(b) to the amount of any special withholding tax levied in respect of the income, there shall be substituted a reference to an amount equal to—

SWT×GUKG-SWTmath

where—

SWT is the amount of special withholding tax levied in respect of the whole or the part of the consideration for the disposal,

GUK is the amount of the chargeable gain received in the United Kingdom, and

G is the amount of the chargeable gain accruing to the person on the disposal.

1C

In subsections (1A) and (1B) above “savings income” and “special withholding tax” have the same meaning as in Chapter 7 of Part 3 of the Finance Act 2004 (see section 107 of that Act); and references to special withholding tax are to special withholding tax in respect of which a claim has been made under that Chapter.