Quick overview of Foreign Tax Credit Relief (FTCR)
HMRC Tax Return extract:
In order to claim foreign tax credit relief (FTCR) on your Tax Return, you should follow these instructions:
You should enter your income into the relevant sections on the Foreign Income (SA106 page) and enter the foreign tax paid:
After entering all your entries, you should head to the HMRC website and access their 'Relief for foreign tax paid (HS263)' helpsheet and follow the instructions to calculate the available FTCR on your income using their calculation worksheets.
Be aware that the FTCR available is generally restricted to the lower of; UK tax due or foreign tax paid. You should be aware that there may be restrictions detailed in the Double Tax Agreements between the two countries (HMRC help article 'Tax Digest').
Once you have completed the calculation worksheet, you will have the available FTCR for you income and gains. The allowable amount should be entered in Box 2 on the Foreign income (SA106) page within the EDIT button:
Overview of Foreign Tax Credit Relief (FTCR)
FTCR can be claimed if you have paid foreign tax on income that is also subject to UK tax. The relief is capped at the lower of:
The foreign tax actually paid
The UK tax due on the same income
You must calculate the FTCR amount yourself using HMRC guidance (helpsheet HS263: Relief for foreign tax paid). Coconut does not calculate FTCR automatically.
Step-by-Step Guide to Claim FTCR in Coconut
Calculate Your FTCR Amount: - Use HMRC helpsheet HS263 to determine the maximum allowable FTCR.
Enter FTCR in Box 2: - Navigate to the SA106 (Foreign) section in Coconut. - Click "Edit" near the page title. - Locate Box 2 (Foreign Tax Credit Relief) and enter your calculated FTCR amount.
Submit Your Return: - If you prefer HMRC to calculate the FTCR, leave Box 2 blank. However, follow up with HMRC after submission to confirm the calculation.
Common Issues and Troubleshooting
1. FTCR Not Reflecting in Tax Computation
Ensure Box 2 is completed with the correct FTCR amount. Missing entries can prevent the relief from being applied.
If the tax due doesn’t change after entering FTCR, you may have reached the maximum allowable FTCR.
2. Yellow Alerts About Box 2
Yellow alerts are general notices. If you’ve already entered the correct FTCR amount, you can disregard the alert.
3. Foreign Income Not Included in Tax Due Calculation
Delete the affected foreign income entry and re-enter it to refresh the calculation logic.
4. Incorrect FTCR Calculation
Ensure the FTCR amount entered is less than or equal to the foreign tax paid. If the relief exceeds the foreign tax paid, the calculation will not update correctly.
5. Personal Allowance Applied Incorrectly
If claiming income under the Foreign Income (FIG) regime, include the SA109 Residency pages in your return and tick the appropriate box for FIG.
FAQs on FTCR
What is the difference between “Foreign tax paid” and “UK tax taken off”?
“Foreign tax paid” refers to tax paid to a foreign tax authority, while “UK tax taken off” refers to UK tax already deducted from the same income. Only complete the UK tax box if UK tax was actually paid or withheld.
Can I claim FTCR for US tax paid on foreign income?
Yes. Calculate the FTCR amount using HMRC helpsheet HS263 and enter it in Box 2 of the SA106 Foreign pages. Alternatively, leave Box 2 blank for HMRC to calculate the relief.
What should I do if I filed my return without claiming FTCR correctly?
Submit an amended return after correcting the Foreign pages. Include your bank details so HMRC can process any repayment due.
Additional Resources
Coconut Support Center
By following these steps and troubleshooting tips, you can ensure that your Foreign Tax Credit Relief is correctly applied in Coconut.