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The short answer
A UK company can set Nigerian withholding tax against its Corporation Tax as a credit, but section 42 of TIOPA 2010 caps the credit at the UK tax on that same income, after the costs allocated to it, and section 33 limits it to what would have been due had all reasonable steps, including treaty claims, been taken to minimise the Nigerian tax. When margins are thin, part of the Nigerian tax often goes unrelieved.
Where the credit comes from
Section 18 of the Taxation (International and Other Provisions) Act 2010 (TIOPA) reduces UK Corporation Tax by credit for foreign tax, either under double taxation arrangements or as unilateral relief. For Nigeria, the arrangement is the 1987 UK-Nigeria Double Taxation Agreement: Article 22(1) allows Nigerian tax as a credit against UK tax on the same income, subject to UK law on foreign tax credits. So the treaty opens the door and TIOPA sets how far it opens.
Limit one: the UK tax on the same income
Section 42 of TIOPA caps the credit by a formula based on the company's Corporation Tax rate and the amount of the income or gain. Section 42(3) reduces that amount by deductions allocated to it under later sections, so the costs of earning a Nigerian fee shrink the limit. The practical rule: the credit can never be more than the UK tax charged on the net Nigerian income.
Limit two: reasonable steps to minimise Nigerian tax
Section 33 says the credit must not exceed what would have been allowed had all reasonable steps been taken, under Nigerian law and under the treaty, to minimise the Nigerian tax. Steps include claiming reliefs, deductions or allowances and making elections. Whether a step was reasonable is judged by what the company might reasonably have done if no UK credit were available.
This matters for fees. Under Article 7 of the treaty, business profits of a UK company are taxable only in the UK unless it has a permanent establishment in Nigeria. If a treaty claim could have removed or reduced the Nigerian tax and you did not make one, HMRC may restrict the credit. For dividends, interest and royalties, the treaty caps Nigerian tax at 12.5% (15% on dividends to holders of under 10% of the voting power), so tax withheld above those caps is not creditable and has to be pursued in Nigeria. The paperwork is covered in claiming reduced Nigerian WHT under the treaty.
Worked example: when the limit bites
This is an example only, assuming HMRC accepts the Nigerian tax as creditable in full. A UK company charges a Nigerian client £100,000 in consultancy fees. Nigeria withholds 10%, or £10,000, under the 2024 Withholding Regulations rate for non-residents. The company's costs of delivering the work are £70,000.
| Main rate (25%) | Small profits rate (19%) | |
|---|---|---|
| Net Nigerian income (£100,000 − £70,000) | £30,000 | £30,000 |
| UK tax on that income = credit limit | £7,500 | £5,700 |
| Nigerian WHT suffered | £10,000 | £10,000 |
| Credit allowed | £7,500 | £5,700 |
| UK tax left on that income | £0 | £0 |
| Nigerian tax not relieved | £2,500 | £4,300 |
Because Nigeria taxes the gross fee and the UK taxes the net profit, a low-margin contract can leave Nigerian tax unrelieved even when the credit is allowed in principle. Companies in marginal relief need their adviser to work out the effective rate; the formula uses the company's rate before credit.
Ways to reduce unrelieved tax
- Price with the withholding in mind. Some suppliers gross up their fee so the net received is the intended amount; whether the client accepts that is commercial.
- Use the treaty. Where Article 7 or the dividend, interest and royalty caps apply, claim the reduced rate rather than relying on the UK credit.
- Allocate costs carefully. Section 42(3) ties the limit to deductions allocated to the income, so how costs are allocated affects the result. Your adviser will apply the allocation rules.
- Keep the evidence. HMRC will want the Nigerian credit notes or receipts showing tax actually paid.
Nigerian WHT rates themselves (10% for non-residents on management, technical and professional fees under the 2024 Regulations, per PwC's summary reviewed 29 May 2026) are explained in the Nigeria library's guide to the UK-Nigeria double tax treaty. The Corporation Tax side is in Corporation Tax on management fees from Nigeria.
What to check first
- Is the income a business profit, a dividend, interest or a royalty under the treaty?
- Was the Nigerian tax deducted at or below the treaty rate, or should a claim have been made?
- What costs are allocated to the income, and what is the UK tax on the net figure?
- Do you have the Nigerian credit notes for every deduction?
Where Pryme fits
The Finance agent in a Pryme Business Account can keep a schedule of Nigerian receipts, the WHT deducted and the credit notes received, and prepare it for your accountant at year end; a person reviews it. The Compliance agent can diary the treaty claim deadlines you set.
Questions people ask
How much Nigerian WHT can a UK company credit?
No more than the UK Corporation Tax on the same income after allocated costs (TIOPA s.42), and no more than would be due had reasonable steps been taken to minimise it (s.33).
What happens to Nigerian tax above the credit limit?
It is not relieved as a credit in the UK. Tax withheld above treaty rates should be pursued with the Nigerian tax authority.
Does the UK-Nigeria treaty cap withholding tax?
Yes for dividends (12.5% or 15%), interest (12.5%) and royalties (12.5%). There is no separate article for management fees, which fall under business profits.
Can HMRC refuse a credit for Nigerian WHT?
It may restrict it under section 33 if the Nigerian tax could have been reduced by a reasonable step, such as a treaty claim.
Sources
- legislation.gov.uk: Taxation (International and Other Provisions) Act 2010, section 18 · accessed Oct 2026
- legislation.gov.uk: TIOPA 2010, section 42 (amount of limit) · accessed Oct 2026
- legislation.gov.uk: TIOPA 2010, section 33 (minimisation of the foreign tax) · accessed Oct 2026
- GOV.UK: 1987 UK-Nigeria Double Taxation Agreement, in force · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, withholding taxes (reviewed 29 May 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.