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When income arises in a foreign country to a UK resident company and that income is taxable in that foreign country (for example, withholding tax on interest or royalties, or tax on the profits of an overseas permanent establishment), a double tax charge will arise. This is because the UK company is generally taxed in the UK on its worldwide profits. However, the UK may give the company relief for the foreign tax by crediting the foreign tax against the UK tax charged on that income. The UK has three options for providing relief from double taxation: two via credit relief and one by way of deduction from the profits of the business.

These are summarised below, but for further commentary and examples, see Simon’s Taxes D4.803 onwards and E6.4.

In addition, a UK resident company (or other person) may need to withhold from payments it makes to foreign people. This is often the case for interest payments, royalty payments and rental payments in respect of UK property.

For interest payments, a double tax treaty will often