My UK Self Assessment shows one figure for the UK tax year. How do I split it across two US years?

You have to construct the split yourself, because neither HMRC nor the IRS produces it for you. Start by identifying each income stream inside the UK tax year and asking when it actually arose: employment income earned rateably can support a time-based apportionment, but a bonus, dividend, or disposal arises on a specific date that falls in one US calendar year only. Then attribute UK tax to each stream using a method that accounts for how allowances and rate bands interact across sources, and carry that tax into the correct US separate category. The essential requirement is that the method is principled, documented at the time, and applied consistently year after year rather than reshaped to suit whichever answer is more favourable.

Should I elect to accrue foreign taxes under section 905(a) or stay on the cash basis?

The honest answer is that it depends on the stability of your UK affairs, and the decision deserves more analysis than it usually gets. Accrual matches the UK tax to the US year of the underlying income, which generally produces a better limitation outcome and reduces the risk of stranded credits. The cost is that accrual is effectively permanent and brings a standing obligation to report redeterminations whenever the UK liability later moves. If you have an active UK business, meaningful payments on account, or any enquiry history, accrual imports a real and recurring compliance burden that should be weighed against the timing benefit before you commit.

Can I switch back to the cash basis if accrual turns out to be inconvenient?

You should plan on the answer being no. The election to claim foreign tax credits on the accrual basis is designed to bind subsequent years, not to be revisited annually depending on which basis produces a better result in a given year. This is precisely why the initial decision matters so much: it is a commitment to a method across your remaining filing life, and it carries the section 905(c) notification duty along with it. Treat the election as a strategic decision made once, with the client's full trajectory in view, and record the reasoning in writing at the time you make it.

HMRC settled an enquiry and reduced my UK liability for a year I already claimed a credit for. What now?

That is a foreign tax redetermination, and if you accrued the tax you have an affirmative duty to notify the IRS rather than a discretionary opportunity to amend. The US tax for the affected year or years must be recomputed to reflect the UK liability as settled, and interest can run from the original year. Because a UK enquiry settlement can restate multiple UK years, and each UK year touches two US years, one settlement can cascade across a surprising number of US returns. The procedure for reporting is set out on IRS.gov, and the practical priority is reconstructing your original apportionment quickly enough to correct it cleanly.

Do payments on account really trigger a reporting obligation every year?

Payments on account are estimated payments reconciled later by a balancing payment or repayment, so the amount you accrued and the amount ultimately paid will diverge as a matter of routine rather than exception. On an accrual basis, that divergence is exactly the kind of event section 905(c) contemplates. Whether any given divergence rises to a reportable redetermination depends on the facts and the specific rules that apply, which is why the position needs to be assessed each cycle rather than assumed away. The point for planning purposes is that the UK payment-on-account system is structurally designed to generate these events, so an accrual election in a UK context is not a one-time decision but a permanent monitoring commitment.

UK Tax Year Mismatch and the Foreign Tax Credit

Q: My UK accountant and my US accountant are different firms. Is that a problem here?

It is the single most common reason this failure occurs, and it is entirely preventable. HMRC correspondence adjusting a UK liability arrives in the UK adviser's file, and there is no natural mechanism that carries it to the US adviser who filed the return that claimed the credit. Nobody decides to omit anything; the information simply never crosses. If you have elected accrual, the handoff between the two engagements has to be explicitly designed, with the UK adviser understanding that a balancing payment, an amendment, or an enquiry settlement is a US reporting trigger, and someone owning the question of whether each accrued year has moved.

The trap is simple to state and expensive to discover late. The United Kingdom runs its tax year on a start date in April; the United States taxes individuals on the calendar year. The foreign tax credit under the Internal Revenue Code is computed year by year, against a limitation calculated year by year, on income sourced and characterised year by year. Those two facts cannot both be honoured by simply taking the UK tax shown on a Self Assessment return and entering it on a Form 1116 for the US year in which the return was filed. UK tax attributable to a period that straddles the US year end must be apportioned between US years, and the mechanism that governs when that tax is treated as paid or accrued is section 905(a) of the Code. The resolution is a choice, and it is a consequential one: a US taxpayer may claim the credit on the cash basis, taking UK tax into account in the US year of payment, or may elect to claim on the accrual basis, taking it into account in the US year to which the tax relates. The election to accrue is, once made, effectively permanent. It also changes which US year absorbs the UK tax, which changes the limitation calculation, which changes how much credit is actually usable. And it triggers a duty most advisers never mention: under section 905(c), when accrued foreign tax later changes, the taxpayer must notify the IRS. UK tax changes routinely, through payments on account, HMRC amendments, and settled enquiries. A client who accrues, claims, and then watches HMRC adjust the liability owes a redetermination that the IRS expects to be reported. The adviser who ignores that duty has converted a credit into a penalty exposure.

Why does the UK tax year create a problem the credit rules cannot absorb?

The foreign tax credit is not a rebate. It is a mechanism for allocating taxing rights between two sovereigns over the same income in the same period, and every one of its moving parts is period-bound. The credit limitation compares foreign source taxable income in a separate category against worldwide taxable income for the same taxable year. Excess credits carry back and forward in a defined sequence. Income is characterised as passive or general in the year it arises. Each of these determinations presupposes that you can say, with precision, which taxable year a given amount of foreign tax belongs to. That is exactly what the UK tax year prevents you from saying without doing work.

Consider the ordinary shape of the problem. A UK resident US citizen earns employment income that PAYE withholds against across a UK tax year beginning in April. That UK tax year contains portions of two US calendar years. The Self Assessment return, when filed, reports a single UK liability for a single UK year. There is no line on it that says how much of the tax relates to the earlier calendar year and how much to the later one. The taxpayer must construct that allocation. HMRC guidance on GOV.UK sets out the UK year and the Self Assessment cycle; it has no reason to help you split a UK figure across US years, because the split is a US requirement that HMRC has no interest in. Similarly, the IRS instructions on IRS.gov assume a foreign tax figure you can attribute to a US year; they do not tell you how to disaggregate a UK Self Assessment liability that was never assembled on that basis.

The gap is therefore structural, not administrative. Neither authority owns it. The taxpayer does, and the taxpayer's adviser is the only person in the chain who can see both calendars at once.

What does section 905(a) actually let you choose?

Section 905(a) permits a taxpayer who otherwise reports on the cash method to elect to take the foreign tax credit in the year the foreign tax accrues rather than the year it is paid. Understanding what this means in practice requires separating two things that are often conflated.

On the cash basis, the timing question is a question of fact about the movement of money. UK tax withheld under PAYE is paid as it is withheld. UK tax settled by balancing payment is paid on the date of that payment. Payments on account are paid on their due dates. Each of those payments lands in whatever US calendar year contains it. The virtue of this approach is that it is verifiable: bank statements and HMRC records will corroborate it. The vice is that it decouples the credit from the income. Tax paid in a later calendar year on income earned in an earlier one arrives in the wrong US year for limitation purposes, and if the limitation in that later year is thin, the credit is stranded.

On the accrual basis, the timing question becomes a question of legal liability. Foreign tax accrues when all events have occurred that fix the amount and the taxpayer's liability for it. This is a legal test, not a payment test. Applied to UK income tax, it points to the UK tax year in which the income arose and the liability was determined, not the date the money moved. The virtue is matching: the UK tax lands in the same US year, or years, as the income it relates to, which is precisely what the limitation calculation is built to reward. The vice is that legal liability, unlike a bank transfer, is provisional. It can change. And when it changes, section 905(c) engages.

Crucially, the accrual election is not an annual toggle. Once a taxpayer elects to claim credits on the accrual basis, that basis governs subsequent years. This is not a matter of administrative preference; it is the design of the provision. The practical consequence is that the decision must be made with a view to the client's whole trajectory, not to the return in front of you.

How should UK tax be apportioned across two US years?

There is no single mechanical answer, which is why this is where competent work separates itself from clerical work. The apportionment must be principled, documented, and consistent, and it must reflect the actual economics of the income rather than a convenient arithmetic split.

Identify the income streams inside the UK tax year separately, because they will not all behave the same way. Employment income earned rateably across the UK year is a candidate for a time-based split. A dividend, a bonus, or a disposal gain arises on a date, and that date falls in one US calendar year, not two. Splitting a bonus rateably because the surrounding salary was split rateably is an error of category, not merely of degree.
Characterise each stream for US separate category purposes before you allocate the tax. Passive and general category income are subject to separate limitations, and UK tax attributable to each must follow its income into the right basket. A blended UK effective rate applied indiscriminately across categories will produce a Form 1116 that is wrong in a way that survives casual review.
Reconstruct the UK liability by source rather than accepting the Self Assessment total as an indivisible number. UK personal allowances, rate bands, and reliefs interact across sources, so an attribution of UK tax to a given stream requires a considered method, applied the same way each year, and recorded at the time.
Reconcile PAYE withholding against the eventual Self Assessment outcome, because the two rarely agree. Under-withholding settled later and over-withholding repaid later both distort a naive cash-basis picture and both are redetermination events on an accrual basis.
Document the method contemporaneously and in enough detail that a successor adviser, or an examiner, can reproduce it years later. The apportionment is the taxpayer's construction, and its defensibility rests entirely on the reasoning being available when questioned.

The discipline point underneath all of this is consistency. An apportionment method that shifts year to year in whichever direction improves the current return is not a method. It is a pattern, and patterns are visible.

What is a foreign tax redetermination, and why does UK practice generate so many?

Section 905(c) addresses what happens when foreign tax that was accrued and credited turns out not to be the foreign tax ultimately owed. If accrued tax is not paid within the period the statute contemplates, if the amount paid differs from the amount accrued, or if any foreign tax previously credited is refunded, a foreign tax redetermination has occurred. The consequence is that the US tax liability of the affected year or years must be redetermined, and the taxpayer has an affirmative obligation to notify the IRS. This is not a passive right to amend if convenient. It is a duty, and the IRS sets out the notification procedure and the relevant reporting mechanics on IRS.gov.

What makes this acute for UK-facing clients is that the UK system is built to produce exactly these events as a matter of ordinary course, not exception.

Payments on account mean that a substantial portion of a UK liability is paid on an estimated basis before the final figure is known, and is then reconciled by a balancing payment or repayment. The estimate and the outcome differ as a matter of routine, and each divergence between accrued and paid amounts is a candidate redetermination.
Self Assessment amendments, whether initiated by the taxpayer within the amendment window or prompted by HMRC correspondence, revise a liability that has already been accrued and credited on a US return that has already been filed.
An HMRC enquiry that settles at a different number, whether higher or lower, restates the UK liability for a year for which the US credit position was fixed long ago. Settlements of this kind can reach back across multiple UK years, which means they can reach across a larger number of US years once the mismatch is applied.
Repayments arising from relief claims, loss reliefs, or corrections to PAYE coding return money the taxpayer previously treated as creditable foreign tax. A refund of credited foreign tax is squarely within the redetermination concept.
Currency is a further layer. The dollar amount of an accrued foreign tax and the dollar amount ultimately paid can diverge on translation, and the treatment of that divergence has to be worked through rather than ignored.
Treaty-driven adjustments and competent authority outcomes, where they alter the UK liability, restate the very figure on which the credit was claimed.

Taken together, these are not edge cases. They are the normal metabolism of UK tax administration. Any adviser who elects accrual for a UK-resident client and then treats the resulting US filings as closed has misunderstood what the election commits the client to.

What is the real cost of ignoring the notification duty?

The failure mode is subtle because it does not feel like a failure. The credit was claimed. The return was accepted. The UK liability moved later, in a document that arrived from HMRC and went into a UK file, handled by a UK adviser who had no reason to think about a US return filed in another jurisdiction on another calendar. Nobody made a decision to omit anything. The information simply never crossed the desk of the person who needed it.

The exposure that accumulates is nevertheless real and layered. There is the redetermination itself, which may increase US tax for a prior year and carry interest running from that year. There is the penalty exposure attaching to failure to notify, which is a distinct default from any underpayment. There is the effect on the statute of limitations, which the redetermination rules address in ways that can extend the period during which the year remains open. And there is the compounding effect over time: an accrual election is permanent, so an unmanaged notification obligation is not a single lapse but a recurring one, repeated every year the client's UK liability moves and nobody tells the IRS.

There is also the quieter cost, which is the one that motivated the election in the first place. Credits that are not properly redetermined can be credits that are not properly usable. Excess credit carryovers computed from an accrued figure that later proved wrong are carryovers built on sand. A client who believes they hold a bank of usable foreign tax credits, and who plans a disposal or a distribution around that belief, may discover on examination that the bank was never as large as the working papers said.

How should this be handled in practice?

The first decision is whether to elect accrual at all. The matching benefit is genuine, particularly for clients whose UK tax and US limitation are broadly aligned and whose UK affairs are stable and simple. But stability is the operative word. A client with an active UK business, a live enquiry history, significant payments on account, or a pattern of amended returns is a client for whom accrual imports a permanent compliance burden in exchange for a timing benefit that may be modest. The cash basis is cruder, but it is self-documenting and it does not create a standing obligation to chase HMRC outcomes across borders. That trade should be made deliberately and explained to the client in writing, not defaulted into because a prior-year return happened to be prepared that way.

The second is process. Where accrual is elected, the UK and US engagements cannot run as separate silos. Someone must own the question of whether the UK liability for each accrued year has moved, and must ask it on a schedule rather than waiting for it to surface. That means the UK adviser knowing that a balancing payment, an amendment, or an enquiry settlement is a US reporting trigger, and the US adviser knowing what the UK cycle will deliver and when. Where the two advisers are in different firms, the handoff has to be designed rather than assumed, because the default is that nothing crosses.

The third is the working paper. The apportionment method, the accrual basis for each year, the figure accrued, the figure ultimately paid, and the date and content of any notification are a single continuous record, not a set of annual snapshots. When the redetermination arrives, and it will, the question is whether you can reconstruct the original position quickly enough to correct it cleanly. If the answer is no, the redetermination stops being an administrative task and becomes a project.

None of this is exotic. It is the ordinary consequence of a client living under two tax systems whose calendars do not agree and whose rules were not written with each other in mind. The credit is there to be claimed. It is claimed correctly by treating the mismatch as a fact to be worked through rather than a detail to be smoothed over, and by treating section 905(c) as what it is: a continuing duty that begins, rather than ends, when the return is filed.