Income and Corporation Taxes Act 1988

[F1 Foreign source profit and distributable foreign profit] U.K.

Textual Amendments

F1 Pt. 6 Ch. 5A (ss. 246A-246Y) inserted (3.5.1994) by Finance Act 1994 (c. 9), Sch. 16 para. 1

246I Foreign source profit and distributable foreign profit. U.K.

(1) Where for an accounting period of a company there is any income, or any chargeable gain, in respect of which double taxation relief is afforded, then so much of that income or gain as forms part of the company’s chargeable profits for the period is a foreign source profit of the company for the period.

(2) Subsection (3) below applies where in the accounting period concerned there is any deduction to be made for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description.

(3) In finding for the purposes of this section whether, or how much of, any income or gain forms part of the company’s chargeable profits for the period the company may allocate the deduction in such amounts and to such of its profits for the period as it thinks fit.

(4) Where a company has a foreign source profit for an accounting period, such part of it as exceeds the relevant amount of tax is for the purposes of this Chapter a distributable foreign profit of the company for the period.

(5) Where the amount of foreign tax payable in respect of the foreign source profit exceeds the amount of corporation tax payable, before double taxation relief is afforded, in respect of that profit, the relevant amount of tax is the amount of foreign tax payable in respect of that profit.

(6) Where subsection (5) above does not apply, the relevant amount of tax is an amount equal to the aggregate of—

(a) the amount of foreign tax payable in respect of the foreign source profit, and

(b) the amount of corporation tax payable in respect of that profit after double taxation relief is afforded.

(7) In this section “double taxation relief” means—

(a) relief under double taxation arrangements which takes the form of a credit allowed against corporation tax, or

(b) unilateral relief under section 790(1) which takes that form;

and “double taxation arrangements” here means arrangements having effect by virtue of section 788.

(8) References in this section to a company’s chargeable profits for an accounting period are to the amount of its profits for that period on which corporation tax falls finally to be borne; and section 238(4) shall apply for the purposes of this subsection.

(9) For the purposes of this section foreign tax is any tax, imposed by the laws of a territory outside the United Kingdom, for which double taxation relief is afforded.

(10) Section 788(5) shall apply for the purposes of this section.