Employees Subject to Foreign Tax Credit Relief
You can offset the Pay As You Earn (PAYE) amount to reduce the UK tax liability for employees working abroad subject to foreign tax liability.
Here's how this is processed:
-
The PAYE deduction is reduced by the amount of Foreign Tax deduction
-
The tax liability for the employee is the total of UK tax and Foreign Tax deduction amounts
-
The net pay reflects both PAYE and Foreign Tax deductions used for calculation
Subclassifications
Use the subclassifications shown here for Foreign Tax Credit Relief (FTCR)
|
Primary Classification |
Subclassification |
|---|---|
|
Information |
Foreign Tax Credit Relief |
|
Tax Deduction |
Foreign Tax Credit |
Direct and Indirect Elements
Use the element Foreign Tax Deduction that holds the value of foreign tax that offsets the PAYE deduction. This is a nonrecurring element with Pay Value as the input.
Use the Element Entry page for the person to allocate this element to employees with a foreign tax liability, after you define the element eligibility.
Calculate and enter the value for each employee for each period as this is a nonrecurring element. The liability could also be different for each period.
The indirect element Foreign Tax Credit Relief from PAYE element holds the results of the actual amount. This is nonrecurring with the input values Pay Value and Calculation Card.
Balances and Balance Feeds
Here are the balances you can use:
-
Foreign Tax Credit Relief
-
Foreign Tax Credit
The new elements feed these balances:
|
Balance Name |
Element - Foreign Tax Deduction |
Element - Foreign Tax Credit Relief |
|---|---|---|
|
Foreign Tax Deduction |
Add |
Not Applicable |
|
Foreign Tax Credit Relief |
Not Applicable |
Add |
|
Total Deduction |
Add |
Not Applicable |
|
Tax Deductions (Total PAYE) |
Deduct |
Not Applicable |
|
Total Pay |
Deduct |
Not Applicable |
|
Net |
Deduct |
Not Applicable |
|
Net Pay |
Deduct |
Not Applicable |
Reporting
The P45 report and Full Payment Submission (FPS) process are updated to include the reporting of leavers with a positive balance of Foreign Tax Credit Relief. The leavers, in such cases, are reported with a tax basis of noncumulative regardless of the actual tax basis used.