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E6.438 Double taxation relief on chargeable gains

The statutory provisions relating to double taxation relief, both by agreement and unilaterally, also apply to capital gains tax¹.

Foreign tax chargeable on the disposal of an asset, which is borne by the person making the disposal and is not claimed as a credit, is allowable as a deduction in computing the gain. No deduction is permitted for foreign tax paid, where credit relief is claim, but the foreign tax exceeds the UK tax due on the same gain².

The general requirement for tax credit relief under an agreement is that tax payable under the law of the foreign country on gains from sources within that country is allowed as a credit against any UK tax computed by reference to the same gains by reference to which the foreign tax is computed. The legislation applies similar rules for the purposes of unilateral relief³.

The principles applying to the computation of double tax credit relief in relation to capital gains tax are similar