R03 Double taxation relief, NICs abroad and offshore trusts: free practice questions

1. Question 1 of 5

   What happens if someone who must file a tax return doesn't complete the residence pages?

   Option A: They are treated as UK resident and must declare worldwide income and gainsOption B: Their return is rejected until the pages are addedOption C: They are treated as non-resident for the year, and taxed only on UK incomeOption D: HMRC decides their status from the days spent here

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   The answer is A: They are treated as UK resident and must declare worldwide income and gains

   Under self assessment, individuals decide their own residence. To be taxed as non-resident or under split-year treatment, they must complete the residence pages (SA109). There's no advance HMRC ruling.

   Why the other options are wrong

   B

   The return stands, treating them as resident.

   C

   The default is UK residence.

   D

   Individuals determine their own status; without the pages they're treated as resident.

2. Question 2 of 5

   A UK resident pays foreign CGT on a holiday home abroad that exceeds the UK CGT on the same gain. What happens to the excess?

   Option A: It can't be repaid by HMRC or used elsewhereOption B: It can be carried forward against future UK gainsOption C: HMRC repays the excess through self assessmentOption D: It can be set against UK income tax

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   The answer is A: It can't be repaid by HMRC or used elsewhere

   Treaties (or unilateral relief) usually allow foreign tax as a credit against UK tax on the same gain. This can wipe out the UK tax, but any excess foreign tax isn't refunded.

   Why the other options are wrong

   B

   There's no carry forward of excess foreign tax.

   C

   Excess foreign tax isn't repaid.

   D

   Relief is limited to the UK tax on the same gain.

3. Question 3 of 5

   How is double taxation relieved where foreign tax similar to IHT is charged on foreign property and there's no treaty?

   Option A: No relief is available without a treatyOption B: The foreign property is removed from the UK estateOption C: The foreign tax is deducted from the estate as a debtOption D: HMRC allows the foreign tax as a credit against UK IHT

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   The answer is D: HMRC allows the foreign tax as a credit against UK IHT

   Some treaties cover IHT, and there's also unilateral relief: where a tax similar to IHT is charged abroad on foreign property, HMRC credits it against the UK IHT.

   Why the other options are wrong

   A

   Unilateral relief is available.

   B

   The property stays in the estate, with credit for foreign tax.

   C

   Relief is a credit against UK tax.

4. Question 4 of 5

   An offshore trust has no UK-resident trustees. How can its income still be taxed in the UK?

   Option A: It is always taxed on the trust at 45%Option B: It can't be taxed in the UK at allOption C: It can be taxed on a UK-resident settlor who can benefitOption D: It is taxed only when the trust is eventually wound up

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   The answer is C: It can be taxed on a UK-resident settlor who can benefit

   Anti-avoidance rules attribute trust income to a UK-resident settlor who can benefit. Since 6 April 2025 this applies once the settlor is UK resident, although a qualifying new resident can claim under the FIG regime.

   Why the other options are wrong

   A

   With no UK trustee, the trust itself isn't within UK income tax.

   B

   Anti-avoidance rules can tax settlors or beneficiaries.

   D

   Income can be taxed as it arises on the settlor.

5. Question 5 of 5

   How did the changes from 6 April 2025 affect excluded property trusts holding overseas assets?

   Option A: The trusts are now taxed at 40% of their value each yearOption B: They became exempt from all UK taxesOption C: Assets come within IHT if the settlor becomes long-term residentOption D: Overseas assets stay excluded from IHT permanently

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   The answer is C: Assets come within IHT if the settlor becomes long-term resident

   Excluded property trusts no longer protect overseas assets: they come within IHT if the settlor becomes long-term resident, although charges are mitigated by a £5m cap over each ten-year cycle.

   Why the other options are wrong

   A

   Charges are mitigated, including a £5m cap per ten-year cycle.

   B

   The change brought assets into IHT, not out of it.

   D

   That planning is no longer effective.

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