ACCA Advanced Taxation (ATX) Practice Exam

Which relief is used to maximize the Double Tax Relief (DTR) against UK income?

1. QCD relief and overseas losses

2. UK capital losses and QCD relief

3. QCD relief and losses

4. Foreign profits and losses

The correct answer is: QCD relief and losses

To maximize the Double Tax Relief (DTR) against UK income, the focus is on utilizing relief mechanisms that directly address the taxation of foreign income and the impact of losses. The concept of QCD (Qualifying Distributions of Foreign Income) relief is crucial here, as it enables taxpayers to offset their foreign income against tax paid in the UK, thereby mitigating the risk of dual taxation. Using QCD relief helps to ensure that any income earned overseas is not taxed twice — once in the foreign jurisdiction and then again in the UK. When combined with losses, such as those incurred from foreign income sources, the taxpayer can further reduce their taxable income in the UK. This combination of relief strategies allows for a more effective shield against high tax liabilities, thus maximizing the relief available under DTR. In contrast to other options, which may not effectively combine the necessary elements of QCD relief or fail to appropriately consider the impact of losses in the context of foreign income, this choice clearly identifies the synergy between QCD relief and foreign losses. By leveraging both QCD relief and losses, taxpayers can most effectively manage their overall tax obligations and effectively reduce their liability in the face of overseas income taxes.