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Withholding tax and offshore income

Author: Peter Fairchild, James Kirk (yBC.tv)

Categories: Getting advice, Tax Planning
Tags: Offshore Income, Withholding tax
I think the key there is actually capturing payments that are made from an offshore source, because sometimes they will have a withholding tax attached to the income itself. And usually you need to get a piece of paper from that jurisdiction’s tax authorities to say that this amount of withholding tax applies to this particular part of income.  And that can usually be offset against your UK liability for example, or possibly even reclaimed.  But you need the paperwork trail to get there. And sometimes that can be quite labour intensive, some people don’t bother.  Some people don’t even know you can offset offshore taxation against UK taxes. So it can be difficult to get hold of this.  But there are mechanisms also for minimising the withholding tax deductions upfront. So for example, we do have a reduced rate of withholding tax that applies for the UK, so visiting sports people and musicians can apply to the Revenue to say, “Please don’t take a flat rate 20% from my income, because I’m going to be receiving ... sorry, incurring all these initial expenses which is going to therefore reduce the amount of profit that’s then assessed to UK income tax.” And therefore we can do a projection of what that level of expenditure might be and then present a sort of a profit and loss account, if you like, to the Revenue to say, “Look, tax the net bit, not the gross.” But it can be quite labour intensive.
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