Claim is not dual-purpose

The taxpayer received a dividend of £25 000 grossed up £31 250 from a company that was resident in Guernsey.

In the foreign pages of her 2003/04 self assessment tax return she included £31 250 as the amount chargeable in the box “foreign tax credit relief for foreign tax suffered” with £6 250 shown as the tax paid; she ticked the box to claim foreign tax credit relief.

After an enquiry HMRC amended her return increasing the tax payable and saying no foreign tax credit relief was due in the respect of the dividend on the basis the tax on the dividend represented tax paid by the company which it would have had to pay regardless of whether or not the dividend was issued (TA 1988 s 790 “unilateral relief”).

The taxpayer appealed. She accepted that s 790 meant she had no...