Chapter 26 Double Tax relief for CGT

Question 1

Unilateral relief

Answer 1

Unilateral relief – if a UK resident suffers tax on capital gains in both the UK and in a foreign country, he receives double taxation relief or DTR. This is either available under a double taxation treaty or by virtue of unilateral relief. Typically, unilateral relief is available where a UK resident makes a capital gain on the disposal of a foreign asset, the gain will be chargeable in both the UK and the foreign country, so DTR applies. This is the lower of:
• The double tax relief can never exceed any foreign tax paid
• The DTR cannot exceed the amount of UK CGT paid on the foreign gain
We deduct the DTR from the UK CGT liability to get the UK CGT due. Any losses and annual exempt amount should be allocated against UK gains in priority to maximise the amount of DTR available.