Guidance

HS304 Non-residents — relief under double taxation agreements (2024)

Updated 6 April 2024

1. Overview

You may be able to claim part or full relief from UK tax on your UK income if you’re a non-resident and the country you live in has a double taxation agreement with the UK.

A double taxation agreement is an agreement between 2 countries. It’s there to make sure you do not pay tax twice on the same income.

To find out if you’re a resident in the UK or not, go to the guidance note for Statutory Residence Test (RDR3).

Check if your country has a double taxation agreement with the UK.

You may be able to claim relief on the following types of income:

• interest from bank and building societies
• royalties
• most work pensions
• annuities
• UK dividends

2. Types of relief

2.1 Full relief

You may be able to claim full relief to get back all of the UK tax you pay on your UK income. You may have to pay tax on the income to the country you live in, depending on its double taxation agreement with the UK.

2.2 Partial relief

You may be able to claim partial relief to get back some of the UK tax you pay on your UK income. For example, if the UK’s basic rate is 20% and your country’s double taxation agreement with the UK is 15%, you can claim 5% relief.

2.3 Credit relief

You can claim credit relief if your income is taxable in both the UK and the country you live in. Your country of residence will give you credit for the tax you’ve paid on your UK income, against its own tax. You need to make a claim to credit relief from the country in which you live.

2.4 Other types of relief

Your country’s double taxation agreement with the UK may have other conditions that you need to meet to claim UK tax relief. For example, it may say:

• you have to be the ‘beneficial owner’ of the income ― this means the income is not in your name, but you enjoy the benefits of it
• your income has to be ‘subject to tax’ ― this means it’s taxable in the country you live in, whether it’s for all your income or just the amount you get in your country

Before you claim relief from UK tax, you need to:

• check all the terms of the double taxation agreement that affects you
• collect enough evidence to show that you meet its conditions
• keep the evidence ― you may need it to support your claim

3. Certificate of overseas residence

You will need this certificate if you want to claim relief from UK tax on your UK income, and the country you live in has a double taxation agreement with the UK. To get one, contact your country’s tax authority.

The certificate of overseas residence must show:

• you pay taxes in the country you live in on all or part of the income you’re claiming relief for
• the amount of income you’ve paid tax on in that country

You must attach the certificate to your claim form and send it in with your tax return.

3.1 United States of America

The US taxes its residents on their worldwide income, wherever they live, so if you live in the US, you do not need a certificate of overseas residence.

You’re a US resident if:

• you’ve a substantial presence, permanent home or habitual abode in the US
• no country other than the UK treats you as a resident

3.2 Substantial presence test

This shows how often you’re in the US over a certain period. You will have a substantial presence if you’re in the US for:

• at least 31 days of the calendar year in question
• the year in question and the 2 years before that and all 3 years add up to at least 183 days

If you spend part of a day in the US, count it as a whole day.

For the purpose of this example, a day spent in the US in the following year under test, counts as one-third, and a day in the year before that counts as one-sixth.

3.3 Example

Geetha spends 48 days in the US in 2020, 250 days in 2019 and 365 days in 2018.

A day spent in the US in 2019 and 2018, counts as one-third and one-sixth respectively. In 2018, the calculation is as follows:

Year	Calculation for days	Total days
2020	48 days × 1 ÷ 1	= 48
2019	250 days × 1 ÷ 3	= 84
2018	365 days × 1 ÷ 6	= 61
	Total days	= 193

Geetha passes both parts of the substantial presence test. She’s a resident in the US, under the country’s domestic law.

4. How to claim relief

4.1 Vouchers

You need to keep all your original vouchers (not photocopies), showing the amount of UK tax or tax credit to support your claim.

If you want to make a claim for:

• full tax relief from the UK, fill in section 3(a) of the claim form
• partial tax relief from the UK, fill in section 3(b) of the claim form

4.2 UK Real Estate Investment Trusts

You may be able to claim relief if you get a property income dividend and you live in a country that has a double taxation agreement with the UK. To claim full relief, fill in section 3(a) of the claim form and section 3(b), to claim partial relief.

4.3 UK dividends paid on or after 6 April 2016

From 6 April 2016 UK dividends no longer carry a tax credit, this has been replaced by a new tax-free dividend allowance.

Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £2,000 allowance. You will pay tax on any dividends you receive over £2,000 at the following rates:

• 8.75% on dividend income within the basic rate band
• 33.75% on dividend income within the higher rate band
• 39.35% on dividend income within the additional rate band

If you have not paid tax because you’re within the dividend allowance, then you cannot claim Foreign Tax Credit Relief on that income.

Depending upon the terms of the particular double taxation agreement, the dividend article of a double taxation agreement might restrict the maximum rate of UK tax applicable (usually 15%).