Foreign Tax Credit Relief

[afisch75]

Hi everyone, I'd really appreciate some help with how to declare the following slightly complicated situation in my self assessment:

I'm a UK resident in the higher tax band and was granted stock options while being employed in Ireland. Sold these earlier this year and paid tax in Ireland as I'm liable in the country where the options where granted. Even though Capital Gain was realised, the sale was taxed as income with about 27%.

If I was liable in the UK, my understanding is that I would have to pay 20% tax on the capital gain. Because Ireland already taxed me with a higher rate, I don't have to pay additional tax and can claim Foreign Tax Credit Relief. Is this correct and if so, how do I declare the sale and relief in my self assessment?

Or would the UK treat the sale as income as well and will I need to pay the difference to my current tax rate, let's say 45% - 27% = 18%. If so, can I substract the capital gain allowance of 12k?

Thanks a lot for any help with this!

[darthblingbling]

Were you also Irish tax resident at the time of sale of the shares?

Apart from in certain circumstances (typically shares that derive value from land and buildings), shares are typically only taxable in the country you are tax resident and this seems to be the case for the double tax agreement between the UK and Ireland. As such the UK may not be allow any foreign tax credit as they would have sole taxing rights and you would need to seek a refund in Ireland for tax paid on the disposal.

If you are dual tax resident at the time of disposal then you will need to look at the residence tie breaker in the tax treaty to determine which country you are 'treaty' resident in.

Further to this, when were the shares options granted and when did you exercise them?

[afisch75]

Thanks for your reply!

The options were granted in 2014 and I sold them in February of this year. I did confirm that I'm indeed liable for taxes in Ireland when exercising stock options, as they are attributed to my earlier employment there. It's confusing indeed, I didn't assume I was liable until I got a formal direction to pay taxes in Ireland. My employer also confirmed this.

This is not the case when selling stocks for example where I'm tax liable in the UK. I'm not an Irish tax resident anymore for a few years now.

Do you know how to report this scenario in my self assessment?

[darthblingbling]

On the face of it then it would seem likely that the gains are taxable only in the UK and you may need to look at obtaining a refund in Ireland if you have paid tax on the disposal.

Have you worked out what the taxable gain is yet? I am assuming that this may just be the gain in value since the shares were exercised.