Avoid double tax on the same income. No one likes to pay tax twice on the same income. This can happen in real life. However, you can avoid it.
For example, you bought a property outside UK, say, in Italy, using your limited company registered in the United Kingdom. You paid for stamp duty and everything necessary to register the ownership of your property with the Italian Tax Authority and Land Registry. Later, you would like to sell your property in Italy. which is cool as you wish.
Now, you are to assess if there is any capital gain to dispose of your lovely property in Italy. Capital gain is the selling price of your property less your cost of purchase.
If there is a capital gain then that gain is taxable in the UK. You would pay corporation tax on it under your UK company because of your company’s residency status. At the same time, you are also obliged to pay tax on the same gain with the Italian Revenue Services because your property situated in Italy. It is not fair! Of course. But, hang on for a second.
How to avoid double tax on same income
Generally, you can avoid paying double tax on the same income where the country you have to pay the tax has a double taxation agreement with the UK government.
There is something called double tax relief. Your company can avoid double tax on the same income. Say, you have submitted your corporation tax return with HM Revenue and Customs reporting your capital gain from the property you sold in Italy. Let say, you made a net gain of £30,000. You would pay corporation tax on the amount.
Apply certificate of residence
Thereafter, you would contact HM Revenue and Customs to apply for a certificate of residence. You would provide this certificate to the Italian Revenue Services. the certificate would certify you have paid tax in the UK and thus you do not have to pay tax in Italy for the same capital gain.
You may use the form RES1 to request your certificate of residence. Before you apply online, check to see if your country has a double taxation agreement with the UK.
Lastly, here are the useful contacts in case you would like to speak directly with HM Revenue and Customs.
|Corporation tax helpline:||If you prefer to write:|
|0300 200 3410||Corporation Tax Services|
HMRC BX9 1AX