Income and Corporation Taxes Act 1988

CHAPTER II U.K. RULES GOVERNING RELIEF BY WAY OF CREDIT

Modifications etc. (not altering text)

C15 Pt. 18 Chs. 1, 2 modified (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 277(1), 289 (with ss. 60, 101(1), 171, 201(3))

General U.K.

792 Interpretation of credit code. U.K.

M1 (1) In this Chapter, except where the context otherwise requires—

• “arrangements” means any arrangements having effect by virtue of section 788;

• “foreign tax” means, in relation to any territory, arrangements [F1 in relation to] which have effect by virtue of section 788, any tax chargeable under the laws of that territory for which credit may be allowed under the arrangements [F2 (other than special withholding tax within the meaning of Chapter 7 of Part 3 of the Finance Act 2004)];

• “the United Kingdom taxes” means income tax and corporation tax;

• “underlying tax” means, in relation to any dividend, tax which is not chargeable in respect of that dividend directly or by deduction; and

• “unilateral relief” means relief under section 790.

(2) For the purposes of this Chapter one company is a subsidiary of another if the other company controls, directly or indirectly, not less than 50 per cent. of the voting power in the first company.

(3) Any reference in this Chapter to foreign tax shall be construed in relation to credit to be allowed under any arrangements as a reference only to tax chargeable under the laws of the territory [F1 in relation to] which the arrangements were made.

Textual Amendments

F1 Words in s. 792(1)(3) substituted (with effect in accordance with s. 88(3) of the amending Act) by Finance Act 2002 (c. 23), s. 88(2)(a)

F2 S. 792(1): words in definition of "foreign tax" inserted (22.7.2004) by Finance Act 2004 (c. 12), s. 115(1)

Modifications etc. (not altering text)

C16 S. 792 applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

Marginal Citations

M1 Source—1970 s.500

793 Reduction of United Kingdom taxes by amount of credit due. U.K.

M2 (1) Subject to the provisions of this Chapter, where under any arrangements credit is to be allowed against any of the United Kingdom taxes chargeable in respect of any income or chargeable gain, the amount of the United Kingdom taxes so chargeable shall be reduced by the amount of the credit.

(2) Nothing in subsection (1) above authorises the allowance of credit against any United Kingdom tax against which credit is not allowable under the arrangements.

[F3 (3) Credit against income tax is given effect at Step 6 of the calculation in section 23 of ITA 2007.]

Textual Amendments

F3 S. 793(3) inserted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 192 (with Sch. 2)

Modifications etc. (not altering text)

C17 Ss. 793-795A applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

Marginal Citations

M2 Source—1970 s.501; 1972 s.100 (1).

[F4 793A No double relief etc. U.K.

(1) Where relief in respect of an amount of tax that would otherwise be payable under the law of a territory outside the United Kingdom may be allowed—

(a) under arrangements made [F5 in relation to] that territory, or

(b) under the law of that territory in consequence of any such arrangements,

credit may not be allowed in respect of that tax, whether the relief has been used or not.

(2) Where, under arrangements having effect by virtue of section 788, credit may be allowed in respect of an amount of tax, credit by way of unilateral relief may not be allowed in respect of that tax.

(3) Where arrangements made [F5 in relation to] a territory outside the United Kingdom contain express provision to the effect that relief by way of credit shall not be given under the arrangements in cases or circumstances specified or described in the arrangements, then neither shall credit by way of unilateral relief be allowed in those cases or circumstances.]

Textual Amendments

F4 S. 793A inserted (with effect in accordance with Sch. 30 para. 5(2)(3) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 5(1)

F5 Words in s. 793A(1)(a)(3) substituted (with effect in accordance with s. 88(3) of the amending Act) by Finance Act 2002 (c. 23), s. 88(2)(a)

Modifications etc. (not altering text)

C18 Ss. 793-795A applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

794 Requirement as to residence. U.K.

M3 (1) Subject to subsection (2) below, credit shall not be allowed under any arrangements against any of the United Kingdom taxes for any chargeable period unless the person in respect of whose income or chargeable gains the United Kingdom tax is chargeable is resident in the United Kingdom for that period.

(2) Credit may be allowed by way of unilateral relief—

(a) for tax paid under the law of the Isle of Man or any of the Channel Islands, if the person in question is, for the chargeable period in question, resident either in the United Kingdom or in the Isle of Man or any of the Channel Islands, as the case may be;

(b) for tax paid under the law of any territory and computed by reference to income from an office or employment the duties of which are performed wholly or mainly in that territory, against [F6 income tax on employment income] and computed by reference to that income, if the person in question is for the year of assessment in question resident either in the United Kingdom or that territory; and

[F7 (bb) for tax paid under the law of any territory outside the United Kingdom in respect of the income or chargeable gains of a branch or agency in the United Kingdom of a person who is not resident in the United Kingdom, where the following conditions are fulfilled, namely—

(i) that the territory under whose law the tax was paid is not one in which the person is liable to tax by reason of domicile, residence or place of management; and

(ii) that the amount of relief claimed does not exceed (or is by the claim expressly limited to) that which would have been available if the branch or agency had been a person resident in the United Kingdom and the income or gains in question had been income or gains of that person.]

(c) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 Words in s. 794(2)(b) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 103 (with Sch. 7)

F7 S. 794(2)(bb) inserted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(5)

F8 S. 794(2)(c) repealed (with effect in accordance with Sch. 30 para. 4(14) of the repealing Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(6), Sch. 40 Pt. 2(13)

Modifications etc. (not altering text)

C19 Ss. 793-795A applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

C20 S. 794(2)(bb) modified (with effect in accordance with s. 153(4) of the modifying Act) by Finance Act 2003 (c. 14), s. 153(2)(a)

Marginal Citations

M3 Source—1970 s.502; 1982 s.67; 1972 s.100(1).

795 Computation of income subject to foreign tax. U.K.

M4 (1) Where credit for foreign tax falls under any arrangements to be allowed in respect of any income and income tax is payable by reference to the amount received in the United Kingdom, the amount received shall be treated for the purposes of income tax as increased by [F9 —

(a)] the amount of the foreign tax in respect of the income, including in the case of a dividend any underlying tax which under the arrangements is to be taken into account in considering whether any and if so what credit is to be allowed in respect of the dividend [F10 , and

(b) the amount of any special withholding tax levied in respect of the income.]

(2) Where credit for foreign tax falls under any arrangements to be allowed in respect of any income or gain and subsection (1) above does not apply, then, in computing the amount of the income or gain for the purposes of income tax or corporation tax—

(a) no deduction shall be made for foreign tax [F11 or special withholding tax], whether in respect of the same or any other income or gain; and

(b) the amount of the income shall, in the case of a dividend, be treated as increased by—

[F12 (i)] any underlying tax which, under the arrangements, is to be taken into account in considering whether any and if so what credit is to be allowed in respect of the dividend [F13 , and

(ii) any underlying tax which, by virtue of section 799(1)(b) or section 799(1B)(b), does not fall to be so taken into account].

(3) The amount of any income or gain shall not be treated as increased under this section by reference to any foreign tax which, although not payable, falls to be taken into account for the purposes of section 788(5).

[F14 (3A) F15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F16 (4) Subsections (2) and (3) above have effect for the purposes of corporation tax notwithstanding anything in [F17 —

(a)] [F18 section 464(1) of CTA 2009] (matters to be brought into account in the case of loan relationships only under [F18 Part 5] of that Act) [F19 ; or

(b) [F20 section 906(1) of CTA 2009] (matters to be brought into account in respect of intangible fixed assets only under [F20 Part 8 of that Act]).]]

[F21 (5) In this section—

(a) “special withholding tax” has the same meaning as in Chapter 7 of Part 3 of the Finance Act 2004 (see section 107(3) of that Act); and

(b) references to special withholding tax are to special withholding tax in respect of which a claim has been made under that Chapter.]

Textual Amendments

F9 Words in s. 795(1) renumbered as s. 795(1)(a) (22.7.2004) by virtue of Finance Act 2004 (c. 12), s. 112(2)

F10 S. 795(1)(b) and preceding word inserted (22.7.2004) by Finance Act 2004 (c. 12), s. 112(2)

F11 Words in s. 795(2)(a) inserted (22.7.2004) by Finance Act 2004 (c. 12), s. 112(3)

F12 Words in s. 795(2)(b) renumbered as s. 795(2)(b)(i) (with effect in accordance with Sch. 27 para. 1(4) of the amending Act) by virtue of Finance Act 2001 (c. 9), Sch. 27 para. 1(2)

F13 S. 795(2)(b)(ii) and preceding word inserted (with effect in accordance with Sch. 27 para. 1(4) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 1(2)

F14 S. 795(3A) inserted (with effect in accordance with Sch. 27 para. 1(4) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 1(3)

F15 S. 795(3A) omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 7

F16 S. 795(4) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 41 (with Sch. 15)

F17 Words in s. 795(4) renumbered as s. 795(4)(a) (24.7.2002) by virtue of Finance Act 2002 (c. 23), Sch. 30 para. 5(2)

F18 Words in s. 795(4)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 245(a) (with Sch. 2 Pts. 1, 2)

F19 S. 795(4)(b) and preceding word inserted (24.7.2002) by Finance Act 2002 (c. 23), Sch. 30 para. 5(2)

F20 Words in s. 795(4)(b) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 245(b) (with Sch. 2 Pts. 1, 2)

F21 S. 795(5) inserted (22.7.2004) by Finance Act 2004 (c. 12), s. 112(4)

Modifications etc. (not altering text)

C21 Ss. 793-795A applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

C22 S. 795(1)(b) modified by Taxation of Chargeable Gains Act 1992 (c. 12), s. 277(1A)-(1C) (as inserted (22.7.2004) by Finance Act 2004 (c. 12), s. 112(6))

Marginal Citations

M4 Source—1970 s.503; 1972 s.100(1); 1987 Sch.15 2(18)

[F22 795A Limits on credit: minimisation of the foreign tax. U.K.

(1) The amount of credit for foreign tax which, under any arrangements, is to be allowed against tax in respect of any income or chargeable gain shall not exceed the credit which would be allowed had all reasonable steps been taken—

(a) under the law of the territory concerned, and

(b) under any arrangements made [F23 in relation to] that territory,

to minimise the amount of tax payable in that territory.

(2) The steps mentioned in subsection (1) above include—

(a) claiming, or otherwise securing the benefit of, reliefs, deductions, reductions or allowances; and

(b) making elections for tax purposes.

(3) For the purposes of subsection (1) above, any question as to the steps which it would have been reasonable for a person to take shall be determined on the basis of what the person might reasonably be expected to have done in the absence of relief under this Part against tax in the United Kingdom.]

Textual Amendments

F22 S. 795A inserted (with effect in accordance with Sch. 30 para. 6(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 6(1)

F23 Words in s. 795A(1)(b) substituted (with effect in accordance with s. 88(3) of the amending Act) by Finance Act 2002 (c. 23), s. 88(2)(a)

Modifications etc. (not altering text)

C23 Ss. 793-795A applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

796 Limits on credit: income tax. U.K.

M5 (1) The amount of the credit for foreign tax which, under any arrangements, is to be allowed to a person against income tax for any year of assessment shall not exceed the difference between the amounts of income tax which would be borne by him for the year (no credit being allowed for foreign tax [F24 but allowing for the making of any other income tax reduction under the Income Tax Acts][F25 , except a reduction under section 26 of FA 2005])—

(a) if he were charged to tax on his total income for the year, computed in accordance with section 795; and

(b) if he were charged to tax on the same income, computed in the same way, but excluding the income in respect of which the credit is to be allowed.

(2) Where credit for foreign tax is to be allowed in respect of income from more than one source, subsection (1) above shall be applied successively to the income from each source, but so that on each successive application, paragraph (a) shall apply to the total income exclusive of the income to which the subsection has already been applied.

[F26 (2A) See section 29(2) and (3) of ITA 2007 (tax reductions limited by reference to tax liability) for further limits on the total amount of credit for foreign tax to be allowed to a person against income tax.]

(3) Without prejudice to subsections (1) and (2) above, the total credit for foreign tax to be allowed to a person against income tax for any year of assessment under all arrangements having effect by virtue of section 788 shall not exceed the total income tax payable by him for that year of assessment, [F27 less the total amount of the tax treated under section 414 of ITA 2007 (gift aid) as deducted from gifts made by him in that year].

Textual Amendments

F24 Words in s. 796(1) inserted (with effect in accordance with s. 77(7) of the amending Act) by Finance Act 1994 (c. 9), Sch. 8 para. 12

F25 Words in s. 796(1) inserted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 193(2) (with Sch. 1 para. 193(5) (as inserted by S.I. 2007/3506, arts. 1, 3(5) and as amended by S.I. 2009/2859, arts. 1, 4(6)(b)), Sch. 2)

F26 S. 796(2A) inserted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 193(3) (with Sch. 1 para. 193(5) (as inserted by S.I. 2007/3506, arts. 1, 3(5) and as amended by S.I. 2009/2859, arts. 1, 4(6)(b)), Sch. 2)

F27 Words in s. 796(3) substituted (6.4.2007 with effect in accordance with S.I. 2009/2859, art. 1(2)) by Income Tax Act 2007 (c. 3), Sch. 1 para. 193(4) (as substituted by S.I. 2009/2859, art. 4(6)(a)) (with Sch. 2)

Marginal Citations

M5 Source—1970 s.504

797 Limits on credit: corporation tax. U.K.

M6 (1) The amount of the credit for foreign tax which under any arrangements is to be allowed against corporation tax in respect of any income or chargeable gain (“the relevant income or gain”) shall not exceed the corporation tax attributable to the relevant income or gain, determined in accordance with [F28 the following provisions of this section] below.

(2) M7 Subject to [F29 subsections (2A) and (3)] below, the amount of corporation tax attributable to the relevant income or gain shall be treated as equal to such proportion of the amount of that income or gain as corresponds to the rate of corporation tax payable by the company (before any credit under this Part) on its income or chargeable gains for the accounting period in which the income arises or the gain accrues (“the relevant accounting period”).

[F30 (2A) The provisions of [F31 Chapter 4 of Part 2 of CTA 2009 (profits attributable to permanent establishment), and of any regulations made under section 24 of that Act], apply, with the necessary modifications, in determining for the purposes of this section how much of the chargeable profits of a company resident in the United Kingdom is attributable to a permanent establishment of the company outside the United Kingdom.]

(3) Where in the relevant accounting period there is any deduction to be made for charges on income, expenses of management [F32 expenses payable (within the meaning of section 76(1))] or other amounts which can be deducted from or set against or treated as reducing profits of more than one description—

(a) the company may for the purposes of this section allocate the deduction in such amounts and to such of its profits for that period as it thinks fit; and

(b) the amount of the relevant income or gain shall be treated for the purposes of subsection (2) above as reduced or, as the case may be, extinguished by so much (if any) of the deduction as is allocated to it.

[F33 (3A) Where, in a case to which section 797A does not apply, a company has a non-trading deficit on its loan relationships for the relevant accounting period, then for the purposes of subsection (3) above that deficit shall be treated, to the extent that it is an amount—

[F34 (a) which falls to be set off under section 388(1) of CTA 2009 (insurance companies: basic rule: deficit set off against income and gains of deficit period), or

(b) to which a claim under section 459(1)(a) of that Act (claim to set off deficit against profits of deficit period) relates,]

as an amount that can in that period be set against profits of any description but can be allocated in accordance with subsection (3) above only to the profits against which it is set off in pursuance of the claim.

(3B) For the purposes of subsection (3) above, where—

(a) section 797A does not apply in the case of any company, and

(b) any amount is carried forward to the relevant accounting period in pursuance of [F35 section 457(1) of CTA 2009]F36 . . . ,

then that amount must be allocated to non-trading profits of the company for that period (so far as they are sufficient for the purpose) and cannot be allocated to any other profits.]

(4) F37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) F37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F38 (6) In this section “non-trading profits” has the same meaning as in [F39 Chapter 16 of Part 5 of CTA 2009 (see section 457(5) of that Act)].]

Textual Amendments

F28 Words in s. 797(1) substituted (with effect in accordance with s. 154(5) of the amending Act) by Finance Act 2003 (c. 14), s. 154(2)

F29 Words in s. 797(2) substituted (with effect in accordance with s. 154(5) of the amending Act) by Finance Act 2003 (c. 14), s. 154(3)

F30 S. 797(2A) inserted (with effect in accordance with s. 154(5) of the amending Act) by Finance Act 2003 (c. 14), s. 154(4)

F31 Words in s. 797(2A) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 246(2) (with Sch. 2 Pts. 1, 2)

F32 Words in s. 797(3) inserted (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 2, Sch. para. 34(2)

F33 S. 797(3A)(3B) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 42(1) (with Sch. 15)

F34 Words in s. 797(3A) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 246(3) (with Sch. 2 Pts. 1, 2)

F35 Words in s. 797(3B)(b) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 246(4) (with Sch. 2 Pts. 1, 2)

F36 Words in s. 797(3B)(b) repealed (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(a)(4), Sch. 27 Pt. 3(17), Note

F37 S. 797(4)(5) repealed (with effect in accordance with Sch. 3 para. 35(3) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 35(2), Sch. 27 Pt. 3(2), Note

F38 S. 797(6) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 42(2) (with Sch. 15)

F39 Words in s. 797(6) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 246(5) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C24 Ss. 797-798C applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

Marginal Citations

M6 Source—1970 s.505; 1972 s.100(1), (3); 1984 s.53(1)

M7 Source—1972 s.100(4)-(6A); 1984 s.53(1); 1986 s.49; 1987 (No.2) s.77

[F42 797A Foreign tax on [F40 items giving rise to] a non-trading credit [F41 : loan relationships]. U.K.

(1) This section applies for the purposes of any arrangements where, in the case of any company—

(a) any non-trading credit relating to an [F43 item] is brought into account for the purposes of [F44 Part 5 of CTA 2009] (loan relationships) for any accounting period (“the applicable accounting period”); and

(b) there is in respect of [F45 that item] an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that interest.

(2) It shall be assumed that tax chargeable under [F46 section 299 of CTA 2009] on the profits F47 . . . arising for the applicable accounting period from the company’s loan relationships falls to be computed on the actual amount of its non-trading credits for that period, and without any deduction in respect of non-trading debits.

(3) Section 797(3) shall have effect (subject to subsection (7) below) as if—

(a) there were for the applicable accounting period an amount equal to the adjusted amount of the non-trading debits falling to be brought into account by being set against profits of the company for that period of any description; and

(b) different parts of that amount might be set against different profits.

(4) For the purposes of this section, the adjusted amount of a company’s non-trading debits for any accounting period is the amount equal, in the case of that company, to the aggregate of the non-trading debits given for that period for the purposes of [F48 Part 5 of CTA 2009] (loan relationships) less the aggregate of the amounts specified in subsection (5) below.

(5) Those amounts are—

(a) so much of any non-trading deficit for the applicable accounting period as is an amount to which a claim under [F49 section 389(1) or 459(1)(b) of CTA 2009][F50 (deficit carried back and set against profits)] relates; [F51 and]

[F52 (aa) so much of any non-trading deficit for that period as is surrendered as group relief by virtue of section 403 of the Taxes Act 1988; and]

(b) so much of any non-trading deficit for that period as falls to be carried forward to a subsequent period in accordance with [F53 section 391 or 457(1) of CTA 2009]; F54 . . .

(c) F54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F55 F56 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

(6) Section 797(3) shall have effect as if any amount [F57 carried forward to the applicable accounting period [F58 under [F59 section 457(1) of CTA 2009]]] were an amount capable of being allocated only to any non-trading profits of the company.

(7) Where—

(a) the company has a non-trading deficit for the applicable accounting period,

(b) the amount of that deficit exceeds the aggregate of the amounts specified in subsection (5) above, and

(c) [F60 as the result of—

(i) the application of section 388(1) of CTA 2009 (insurance companies: basic rule: deficit set off against income and gains of deficit period), or

(ii) a claim under section 459(1)(a) of that Act (claim to set off deficit against profits of deficit period),]

the excess falls to be set off against profits of any description,

section 797(3) shall have effect as if non-trading debits of the company which in aggregate are equal to the amount of the excess were required to be allocated to the profits against which they are set off in pursuance of the claim.

[F61 F62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(8) In this section “non-trading profits” has the same meaning as in [F63 Chapter 16 of Part 5 of CTA 2009 (see section 457(5) of that Act)].]

Textual Amendments

F40 Word in s. 797A sidenote substituted (with effect in accordance with Sch. 30 para. 7(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 7(3)

F41 Words in s. 797A sidenote added (24.7.2002) by Finance Act 2002 (c. 23), Sch. 30 para. 5(3)

F42 S. 797A inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 43 (with Sch. 15)

F43 Word in s. 797A(1)(a) substituted (with effect in accordance with Sch. 30 para. 7(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 7(2)(a)

F44 Words in s. 797A(1)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(2) (with Sch. 2 Pts. 1, 2)

F45 Words in s. 797A(1)(b) substituted (with effect in accordance with Sch. 30 para. 7(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 7(2)(b)

F46 Words in s. 797A(2) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(3)(a) (with Sch. 2 Pts. 1, 2)

F47 Words in s. 797A(2) repealed (1.4.2009 with effect in accordance with s. 1329(1) of the repealing Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(3)(b), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F48 Words in s. 797A(4) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(4) (with Sch. 2 Pts. 1, 2)

F49 Words in s. 797A(5)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(5)(a) (with Sch. 2 Pts. 1, 2)

F50 Words in s. 797A(5)(a) substituted (with effect in accordance with s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), Sch. 25 para. 55(2)(a)(ii)

F51 Word at the end of s. 797A(5)(a) inserted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(b)(4)

F52 S. 797A(5)(aa) inserted (with effect in accordance with s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), Sch. 25 para. 55(2)(b)

F53 Words in s. 797A(5)(b) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(5)(b) (with Sch. 2 Pts. 1, 2)

F54 S. 797A(5)(c) and preceding word repealed (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(b)(4), Sch. 27 Pt. 3(17), Note

F55 Words at the end of s. 797A(5) inserted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(c)(4)

F56 Words in s. 797A(5) repealed (with effect in accordance with s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), Sch. 40 Pt. 3(12), Note

F57 Words in s. 797A(6) substituted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(d)(4)

F58 Words in s. 797A(6) substituted (with effect in accordance with s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), Sch. 25 para. 55(3)

F59 Words in s. 797A(6) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(6) (with Sch. 2 Pts. 1, 2)

F60 Words in s. 797A(7)(c) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(7) (with Sch. 2 Pts. 1, 2)

F61 Words at the end of s. 797A(7) inserted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(e)(4)

F62 Words in s. 797A(7) repealed (with effect in accordance with s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), Sch. 40 Pt. 3(12), Note

F63 Words in s. 797A(8) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 247(8) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C25 Ss. 797-798C applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

[F64 797B Foreign tax on items giving rise to a non-trading credit: intangible fixed assets U.K.

(1) This section applies for the purposes of any arrangements where, in the case of a company—

(a) a non-trading credit relating to an item is brought into account for the purposes of [F65 Part 8 of CTA 2009] (intangible fixed assets) for an accounting period (“the applicable accounting period”), and

(b) there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that item.

(2) It shall be assumed that tax chargeable under [F66 that Part of that Act] on the profits and gains arising for the applicable accounting period from the company’s intangible fixed assets falls to be computed on the actual amount of its non-trading credits for that period, and without any deduction in respect of non-trading debits.

(3) Section 797(3) shall have effect as if—

(a) there were for the applicable accounting period an amount equal to the adjusted amount of the non-trading debits falling to be brought into account by being set against profits of the company for that period of any description, and

(b) different parts of that amount might be set against different profits.

(4) For this purpose the adjusted amount of a company’s non-trading debits for an accounting period is given by:

where—

Total Debits is the aggregate amount of the company’s non-trading debits for that accounting period under [F67 Part 8 of CTA 2009] (intangible fixed assets), and

Amount Carried Forward is the amount (if any) carried forward to the next accounting period of the company under [F67 section 753(3) of that Act] (carry-forward of non-trading loss in respect of which no claim is made for it to be set against total profits of current period).]

Textual Amendments

F64 S. 797B inserted (24.7.2002) by Finance Act 2002 (c. 23), Sch. 30 para. 5(4)

F65 Words in s. 797B(1)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 248(a) (with Sch. 2 Pts. 1, 2)

F66 Words in s. 797B(2) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 248(b) (with Sch. 2 Pts. 1, 2)

F67 Words in s. 797B(4) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 248(c) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C26 Ss. 797-798C applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

[F68 798 Section 796: trade income U.K.

(1) This section has effect in relation to the application of section 796(1) to the allowance of credit for foreign tax against income tax in respect of trade income.

[F69 (1A) The references in section 796 and this section to income in respect of which a credit for foreign tax is to be allowed are to be treated as referring only to income arising out of the transaction, arrangement or asset in connection with which the credit for foreign tax arises.]

(2) In making the computations required by section 796(1)(a) and (b) there shall be deducted from the amount of the income in respect of which the credit is to be allowed deductions, charges or expenses which would be allowable in a computation of the taxpayer's liability in respect of that income.

(3) The reference in subsection (2) to allowable deductions, charges or expenses includes a reference to a reasonable apportionment of allowable deductions or expenses which relate partly to the income [F70 in respect of which the credit is to be allowed] and partly to other matters.

(4) Where royalties (as defined in arrangements having effect by virtue of section 788) are paid in respect of an asset in more than one jurisdiction outside the United Kingdom, for the purposes of section 796(1)—

(a) royalty income arising in different jurisdictions (other than the United Kingdom) in a year of assessment in respect of that asset shall be treated as a single item of income, and

(b) credits available for foreign tax in respect of the royalty income shall be aggregated accordingly.

(5) In this section “trade income” means income chargeable to tax under—

(a) Chapter 2 or 18 of Part 2 of ITTOIA 2005 (trade profits and post-cessation receipts),

(b) Chapter 3 or 10 of Part 3 of ITTOIA 2005 (profits of property businesses and post-cessation receipts), or

(c) Chapter 11 of Part 3 of ITTOIA 2005 (overseas property income).]

Textual Amendments

F68 Ss. 798-798C substituted for ss. 798-798B (with effect in accordance with s. 86(3)-(5) of the amending Act) by Finance Act 2005 (c. 7), s. 86(1)

F69 S. 798(1A) inserted (with effect in accordance with s. 57(4) of the amending Act) by Finance Act 2008 (c. 9), s. 57(2)

F70 Words in s. 798(3) inserted (with effect in accordance with s. 57(4) of the amending Act) by Finance Act 2008 (c. 9), s. 57(3)

Modifications etc. (not altering text)

C27 Ss. 797-798C applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

[F71 [F72 798A Section 797: trade income U.K.

(1) This section has effect in relation to the application of section 797(1) to the allowance of credit for foreign tax against corporation tax in respect of trade income.

(2) The reference in section 797(1) to the relevant income or gain shall be treated as referring only to income arising or gains accruing out of the transaction, arrangement or asset in connection with which the credit for foreign tax arises.

(3) In determining for the purposes of section 797(1) the amount of corporation tax attributable to any income or gain, there shall be taken into account—

(a) deductions or expenses which would be allowable in the computation of the taxpayer's liability,

(b) a reasonable apportionment of allowable deductions or expenses which relate partly to the transaction, arrangement or asset from which the income or gain arises and partly to other matters, and

(c) expenses of a company connected (within the meaning given by section 839) with the taxpayer, in so far as reasonably attributable to the income or gain.

[F73 (3A) Subsection (3) is subject to subsection (3B) if—

(a) the taxpayer is a bank or a company connected with a bank, and

(b) the amount of the included funding costs is significantly less than the amount of the notional funding costs.

(3B) The amount of the notional funding costs is to be included in the subsection (3) total, but only to the extent that it exceeds the amount of the included funding costs.

(3C) In subsections (3A) and (3B) and this subsection—

• “bank” has the meaning given by section 840A;

• “connected” has the meaning given by section 839;

• “included funding costs” means the total of the funding costs that are—

  (a)

  incurred by the taxpayer, or any company connected with the taxpayer, in respect of capital used to fund the relevant transaction, and

  (b)

  included in the subsection (3) total (before the application of subsection (3B));

• “notional funding costs” means the funding costs that the relevant bank would incur (on the basis of its average funding costs) in respect of the capital that would be needed to wholly fund the relevant transaction if that transaction were funded in that way (and for this purpose “relevant bank” means the bank that is the taxpayer, or with which the taxpayer is connected);

• “relevant transaction” means the transaction, arrangement or asset from which the income or gain arises;

• “subsection (3) total” means the amount to be taken into account under subsection (3) for the purposes of section 797(1).]

(4) In this section and section 798B “trade income” means—

[F74 (a) income chargeable to tax under Chapter 2 or 15 of Part 3 of CTA 2009 (trade profits and post-cessation receipts),

(b) income chargeable to tax under Chapter 3 or 9 of Part 4 of CTA 2009 (profits of property businesses and post-cessation receipts),

(c) income which arises from a source outside the United Kingdom and is chargeable to tax under section 979 of CTA 2009 (charge to tax on income not otherwise charged), and

(d) any other income or profits which by a provision of this Act is or are—

(i) chargeable to tax under Chapter 2 of Part 3 of CTA 2009, or

(ii) calculated in the same way as the profits of a trade;]

but this section shall not apply in relation to income to which section 804C below applies.

[F75 (5) In subsection (4) the references—

(a) to income chargeable under Chapter 15 of Part 3 of CTA 2009, and

(b) to income chargeable under Chapter 9 of Part 4 of CTA 2009,

do not include income that would, but for the repeal by CTA 2009 of section 103 above, have been chargeable to corporation tax under that section.]]]

Textual Amendments

F71 S. 798A inserted (with effect in accordance with s. 103(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 104

F72 Ss. 798-798C substituted for ss. 798-798B (with effect in accordance with s. 86(3)-(5) of the amending Act) by Finance Act 2005 (c. 7), s. 86(1)

F73 S. 798A(3A)-(3C) inserted (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2009 (c. 10), s. 60(2)

F74 S. 798A(4)(a)-(d) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 249(2) (with Sch. 2 Pts. 1, 2)

F75 S. 798A(5) inserted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 249(3) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)

C28 Ss. 797-798C applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

[F76 [F77 798B Section 798A: special cases U.K.

(1) Where—

(a) a credit for foreign tax arises in connection with an asset, and

(b) the asset is in a hedging relationship with a derivative contract,

in the application of section 798A(2) the reference to the income arising out of the asset shall be taken as a reference to the income arising out of the asset and the derivative contract taken together (but taking account of the income or loss from the derivative contract only in so far as reasonably attributable to the hedging relationship).

(2) For the purposes of subsection (1)(b) an asset is in a hedging relationship with a derivative contract if—

(a) the asset is acquired as a hedge of risk in connection with the contract, or

(b) the contract is entered into as a hedge of risk in connection with the asset;

and if an asset or a contract is wholly or partly designated as a hedge for the purposes of a person's accounts, that shall be conclusive for the purpose of this subsection.

(3) Where royalties (as defined in arrangements having effect by virtue of section 788) are paid in respect of an asset in more than one jurisdiction outside the United Kingdom, for the purposes of section 798A(2)—

(a) royalty income arising in more than one jurisdiction (other than the United Kingdom) in a year of assessment in respect of that asset shall be treated as income arising from a single transaction, arrangement or asset, and

(b) credits available for foreign tax in respect of the royalty income shall be aggregated accordingly.

(4) If a person (“A”) carrying on a trade giving rise to trade income enters into a scheme or arrangement with another person (“B”) a main purpose of which is to alter the effect of section 798A in relation to A, income received in pursuance of the scheme or arrangement shall be treated for the purposes of section 798A as trade income of B (and not as income of A).

[F78 (4A) Income of a person (“D”) is to be treated for the purposes of section 798A as trade income (if it is not otherwise trade income) of D in a case where—

(a) the income is received by D as part of a scheme or arrangement entered into by D and a connected person (“C”),

(b) if C had received the income, it would be reasonable to assume that it would be trade income of C, and

(c) a main purpose of the scheme or arrangement is to produce the result that section 798A will not have effect in relation to the income because it is received by D.

(4B) For the purposes of subsection (4A)(b) it is to be assumed that, in the case of any relevant transaction to which a relevant person is a party, C were that party to that transaction.

(4C) In subsections (4A) and (4B) and this subsection—

• “connected person” means a person with whom D is connected (within the meaning of section 839);

• “relevant person” means—

  (a)

  D, or

  (b)

  any other connected person who is a party to the scheme or arrangement;

• “relevant transaction” means any of the transactions giving rise to the income.]

(5) Where—

(a) transactions, arrangements or assets are treated by a taxpayer as a series or group (the “portfolio”),

(b) a number of credits for foreign tax arise in respect of the portfolio, and

(c) either—

(i) it is not reasonably practicable to prepare a separate computation of income or gain for the purposes of section 798A(2) in respect of each transaction, arrangement or asset, or

(ii) a separate computation of income or gain in respect of each transaction, arrangement or asset for the purposes of section 798A(2) would not, compared with an aggregated computation, make a material difference to the amount of credit for foreign tax which is allowable,

the income or gains arising from the portfolio, or part of the portfolio, may be aggregated and apportioned for the purposes of section 798A(2) in a fair and reasonable manner.]]

Textual Amendments

F76 S. 798B inserted (with effect in accordance with s. 103(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 105

F77 Ss. 798-798C substituted for ss. 798-798B (with effect in accordance with s. 86(3)-(5) of the amending Act) by Finance Act 2005 (c. 7), s. 86(1)

F78 S. 798B(4A)-(4C) inserted (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2009 (c. 10), s. 60(3)

Modifications etc. (not altering text)

C29 Ss. 797-798C applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

[F79 798C Disallowed credit: use as deduction U.K.

(1) This section applies where the application of section 796(1) or 797(1) prevents an amount of credit for foreign tax from being allowable against income tax or corporation tax.

[F80 (2) The taxpayer's income shall be treated as reduced by the amount of disallowed credit.

(3) Subsection (2) applies only in so far as the amount of disallowed credit does not exceed the amount of any loss attributable to the income or gain in respect of which the foreign tax was paid.

(4) For the purpose of subsection (3), payment of the foreign tax is to be taken into account despite section 795(2).]]

Textual Amendments

F79 Ss. 798-798C substituted for ss. 798-798B (with effect in accordance with s. 86(3)-(5) of the amending Act) by Finance Act 2005 (c. 7), s. 86(1)

F80 S. 798C(2)-(4) substituted for s. 798C(2) (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 194 (with Sch. 2)

Modifications etc. (not altering text)

C30 Ss. 797-798C applied (31.12.2006 with effect in accordance with reg. 1(2) of the amending S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), reg. 4

Tax underlying dividends U.K.

799 Computation of underlying tax. U.K.

M8 (1) Where in the case of any dividend arrangements provide for underlying tax to be taken into account in considering whether any and if so what credit is to be allowed against the United Kingdom taxes in respect of the dividend, the tax to be taken into account by virtue of that provision shall be so much of the foreign tax borne on the relevant profits by the body corporate paying the dividend as—

[F81 (a)] is properly attributable to the proportion of the relevant profits represented by the dividend[F82 , and

(b) does not exceed the amount calculated by applying the formula set out in subsection (1A) below.]

[F83 [F84 (1A) The formula is—

where—

D is the amount of the dividend;

U is the amount of underlying tax that would fall to be taken into account as mentioned in subsection (1) above, apart from paragraph (b) of that subsection; and

M% is the maximum relievable rate;

and for the purposes of this subsection the maximum relievable rate is the rate of corporation tax [F85 applicable to profits of the company by which the dividend is received for the accounting period in which it is received or, where there is more than one such rate, the average rate over the whole of that accounting period].]]

[F86 (1B) Where, under any arrangements, a company makes a claim for an allowance by way of credit in accordance with this Chapter—

(a) the claim may be so framed as to exclude such amounts of underlying tax as may be specified for the purpose in the claim; and

(b) any amounts of underlying tax so excluded shall be left out of account for the purposes of this section.]

(2) Where under the foreign tax law the dividend has been increased for tax purposes by an amount to be set off against the recipient’s own tax under that law or, to the extent that it exceeds his own tax thereunder, paid to him, then, from the amount of the underlying tax to be taken into account under subsection (1) above there is to be subtracted the amount of that increase.

[F87 (2A) No underlying tax shall be taken into account under subsection (1) above in the case of a dividend if, under the law of any territory outside the United Kingdom, a deduction is allowed to a resident of that territory in respect of an amount determined by reference to the dividend.]

(3) For the purposes of subsection (1) above the relevant profits, subject to subsection (4) below, are—

[F88 (za) if the dividend is received in an accounting period of the recipient in which the recipient is not a small company, and the dividend is a relevant dividend, the profits in respect of which the dividend is paid;]

(a) [F89 in a case not falling under paragraph (za),] if the dividend is paid for a specified period, the profits of that period; [F90 and]

(b) F91 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) [F92 in a case not falling under paragraph (za),] if the dividend is [F93 not paid for a specified period], the profits of the last period for which accounts of the body corporate were made up which ended before the dividend became payable.

[F94 (3A) For the purposes of subsection (3)—

(a) “small company” has the same meaning as in Part 9A of CTA 2009 (company distributions),

(b) “relevant dividend” means a dividend that, for the purposes of section 931H of that Act (dividends derived from transactions not designed to reduce tax), is treated as paid in respect of profits other than relevant profits (see subsection (4) of that section), and

(c) the profits in respect of which a dividend is paid are the profits in respect of which the dividend is treated as paid for the purposes of that section.]

(4) If, in a case falling under paragraph (a) or (c) of subsection (3) above, the total dividend exceeds the profits available for distribution of the period mentioned in that paragraph the relevant profits shall be the profits of that period plus so much of the profits available for distribution of preceding periods (other than profits previously distributed or previously treated as relevant profits for the purposes of this section or section 506 of the 1970 Act) as is equal to the excess; and for the purposes of this subsection the profits of the most recent preceding period shall first be taken into account, then the profits of the next most recent preceding period, and so on.

[F95 (5) For the purposes of paragraphs (a) and (c) of subsection (3) above, “profits”, in the case of any period, means the profits available for distribution.

(6) In subsections (4) and (5) above, “profits available for distribution” means, in the case of any company, the profits available for distribution as shown in accounts relating to the company—

(a) drawn up in accordance with the law of the company’s home State, and

(b) making no provision for reserves, bad debts [F96 , impairment losses] or contingencies other than such as is required to be made under that law.

(7) In this section, “home State”, in the case of any company, means the country or territory under whose law the company is incorporated or formed.]

Textual Amendments

F81 Words in s. 799(1) renumbered as s. 799(1)(a) (with effect in accordance with Sch. 30 para. 8(5)(6) of the amending Act) by virtue of Finance Act 2000 (c. 17), Sch. 30 para. 8(2)

F82 S. 799(1)(b) and preceding word inserted (with effect in accordance with Sch. 30 para. 8(5)(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 8(2)

F83 S. 799(1A) inserted (with effect in accordance with Sch. 30 para. 8(5)(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 8(3)

F84 S. 799(1A) substituted (with effect in accordance with Sch. 27 para. 2(4)(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 2(2)

F85 Words in s. 799(1A) substituted (with effect in accordance with s. 57(6) of the amending Act) by Finance Act 2009 (c. 10), s. 57(1)

F86 S. 799(1B) inserted (with effect in accordance with Sch. 27 para. 2(4)(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 2(3)

F87 S. 799(2A) inserted (with effect in accordance with s. 85(2) of the amending Act) by Finance Act 2005 (c. 7), s. 85(1)

F88 S. 799(3)(za) inserted (with effect in accordance with Sch. 14 para. 31 of the amending Act) by Finance Act 2009 (c. 10), Sch. 14 para. 8(2)(a)

F89 Words in s. 799(3)(a) inserted (with effect in accordance with Sch. 14 para. 31 of the amending Act) by Finance Act 2009 (c. 10), Sch. 14 para. 8(2)(b)

F90 Word at the end of s. 799(3)(a) inserted (with effect in accordance with Sch. 30 para. 8(5)(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 8(4)(a)

F91 S. 799(3)(b) repealed (with effect in accordance with Sch. 30 para. 8(5)(6) of the repealing Act) by Finance Act 2000 (c. 17), Sch. 30 para. 8(4)(b), Sch. 40 Pt. 2(13), Note

F92 Words in s. 799(3)(c) inserted (with effect in accordance with Sch. 14 para. 31 of the amending Act) by Finance Act 2009 (c. 10), Sch. 14 para. 8(2)(c)

F93 Words in s. 799(3)(c) substituted (with effect in accordance with Sch. 30 para. 8(5)(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 8(4)(c)

F94 S. 799(3A) inserted (with effect in accordance with Sch. 14 para. 31 of the amending Act) by Finance Act 2009 (c. 10), Sch. 14 para. 8(3)

F95 S. 799(5)-(7) added (with effect in accordance with Sch. 30 para. 9(3) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 9(2)

F96 Words in s. 799(6)(b) inserted (with effect in accordance with s. 80(3)(4) of the amending Act) by Finance Act 2005 (c. 7), Sch. 4 para. 7

Marginal Citations

M8 Source—1970 s.506; 1976 s.50(3)

800 Dividends paid between related companies but not covered by arrangements. U.K.

F97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F97 S. 800 repealed (with effect in accordance with Sch. 30 para. 10(2) of the repealing Act) by Finance Act 2000 (c. 17), Sch. 30 para. 10(1), Sch. 40 Pt. 2(13), Note

801 Dividends paid between related companies: relief for U.K. and third country taxes. U.K.

M9 (1) Where a company resident outside the United Kingdom (“the overseas company”) pays a dividend to a [F98 company falling within subsection (1A) below (“the relevant company”)] and the overseas company is related [F99 to the relevant company], then for the purpose of allowing credit under any arrangements against corporation tax in respect of the dividend, there shall be taken into account, as if it were tax payable under the law of the territory in which the overseas company is resident—

(a) any United Kingdom income tax or corporation tax payable by the overseas company in respect of its profits; and

(b) any tax which, under the law of any other territory, is payable by the overseas company in respect of its profits.

[F100 (1A) A company falls within this subsection if—

(a) it is resident in the United Kingdom; or

(b) it is resident outside the United Kingdom but the dividend mentioned in subsection (1) above forms part of the profits of a [F101 permanent establishment] of the company’s in the United Kingdom.]

(2) Where the overseas company has received a dividend from a third company and the third company is related to the overseas company, then, [F102 subject to subsection (4)] below, there shall be treated for the purposes of subsection (1) above as tax paid by the overseas company in respect of its profits any underlying tax payable by the third company, to the extent that it would be taken into account under this Part if the dividend had been paid [F103 (at the time when the dividend mentioned in subsection (1) above is received)] by a company resident outside the United Kingdom to a company resident in the United Kingdom and arrangements had provided for underlying tax to be taken into account.

[F104 (2A) Section 799(1)(b) applies for the purposes of subsection (2) above only—

(a) if the overseas company and the third company are not resident in the same territory; or

[F105 (aa) F106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(b) in such other cases as may be prescribed by regulations made by the Treasury.]

[F107 (2B) F106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(3) Where the third company has received a dividend from a fourth company and the fourth company is related to the third company, then, subject to subsection (4) below, tax payable by the fourth company shall similarly be treated for the purposes of subsection (2) above as tax paid by the third company; and so on for successive companies each of which is related to the one before.

(4) Subsections (2) and (3) above are subject to the following limitations—

(a) no tax shall be taken into account in respect of a dividend paid by a company resident in the United Kingdom except United Kingdom corporation tax and any tax for which that company is entitled to credit under this Part; and

(b) no tax shall be taken into account in respect of a dividend paid by a company resident outside the United Kingdom to another such company unless it could have been taken into account under the other provisions of this Part had the other company been resident in the United Kingdom.

[F108 (4A) F109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4B) F109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4C) F109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4D) F109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(5) For the purposes of this section a company is related to another company if that other company—

(a) controls directly or indirectly, or

(b) is a subsidiary of a company which controls directly or indirectly,

not less than 10 per cent. of the voting power in the first-mentioned company.

[F110 (5A) For the purposes of subsections (2) and (3) above (including any determination of the extent to which underlying tax paid by the third, fourth or subsequent company in question would be taken into account under this Part if the conditions specified for the purpose in subsection (2) above were satisfied) a company is also related to another company if that other company—

(a) controls directly or indirectly, or

(b) is a subsidiary of a company which controls directly or indirectly,

not less than 10% of the ordinary share capital of the first-mentioned company.]

[F111 (6) F106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) F106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F98 Words in s. 801(1) substituted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(8)(a)

F99 Words in s. 801(1) substituted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(8)(b)

F100 S. 801(1A) inserted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(9)

F101 Words in s. 801(1A)(b) substituted (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(1)(a)

F102 Words in s. 801(2) substituted (with effect in accordance with s. 91(8) of the amending Act) by Finance Act 2005 (c. 7), s. 91(5)

F103 Words in s. 801(2) inserted (with effect in accordance with s. 57(5) of the amending Act) by Finance Act 2009 (c. 10), s. 57(3)

F104 S. 801(2A) inserted (with effect in accordance with Sch. 30 para. 11(3)(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 11(2)

F105 S. 801(2A)(aa) inserted (with effect in accordance with s. 89(5) of the amending Act) by Finance Act 2005 (c. 7), s. 89(2)

F106 S. 801(2A)(aa)(2B)(6)(7) omitted (with effect in accordance with Sch. 16 para. 6 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 16 para. 2(3) (with Sch. 16 paras. 7, 8)

F107 S. 801(2B) inserted (with effect in accordance with s. 89(5) of the amending Act) by Finance Act 2005 (c. 7), s. 89(3)

F108 S. 801(4A)-(4D) inserted (with effect in accordance with Sch. 27 para. 3(4)(5) of the amending Act) by Finance Act 2001 (c. 9), Sch. 27 para. 3(3)

F109 S. 801(4A)-(4D) repealed (with effect in accordance with s. 91(8) of the repealing Act) by Finance Act 2005 (c. 7), s. 91(6), Sch. 11 Pt. 2(9), Note

F110 S. 801(5A) inserted (with effect in accordance with s. 43(3) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), s. 43(2)

F111 S. 801(6)(7) inserted (with effect in accordance with s. 89(5) of the amending Act) by Finance Act 2005 (c. 7), s. 89(4)

Marginal Citations

M9 Source—1970 s.508; 1971 s.26(2)

[F112 801A Restriction of relief for underlying tax. U.K.

(1) This section applies where—

(a) [F113 a company (“the claimant company”)] makes a claim for an allowance by way of credit in accordance with this Part;

(b) the claim relates to underlying tax on a dividend paid to that company by a company resident outside the United Kingdom (“the overseas company”);

(c) that underlying tax is or includes an amount in respect of tax (“the high rate tax”) payable by—

(i) the overseas company, or

(ii) such a third, fourth or successive company as is mentioned in section 801,

at a rate in excess of the relievable rate; and

(d) the whole or any part of the amount in respect of the high rate tax which is or is included in the underlying tax would not be, or be included in, that underlying tax but for the existence of, or for there having been, an avoidance scheme.

(2) Where this section applies, the amount of the credit to which [F114 the claimant company] is entitled on the claim shall be determined as if the high rate tax had been tax at the relievable rate, instead of at a rate in excess of that rate.

(3) For the purposes of this section tax shall be taken to be payable at a rate in excess of the relievable rate if, and to the extent that, the amount of that tax exceeds the amount that would represent tax on the relevant profits at the relievable rate.

(4) In subsection (3) above “the relevant profits”, in relation to any tax, means the profits of the overseas company or, as the case may be, of the third, fourth or successive company which, for the purposes of this Part, are taken to bear that tax.

(5) In this section “the relievable rate” means the rate of corporation tax in force when the dividend mentioned in subsection (1)(b) above was paid.

(6) In this section “an avoidance scheme” means any scheme or arrangement which—

(a) falls within subsection (7) below; and

(b) is a scheme or arrangement the purpose, or one of the main purposes, of which is to have an amount of underlying tax taken into account on a claim for an allowance by way of credit in accordance with this Part.

(7) A scheme or arrangement falls within this subsection if the parties to it include both—

(a) [F114 the claimant company], a company related to that company or a person connected with [F114 the claimant company]; and

(b) a person who was not under the control of [F114 the claimant company] at any time before the doing of anything as part of, or in pursuance of, the scheme or arrangement.

(8) In this section “arrangement” means an arrangement of any kind, whether in writing or not.

[F115 (9) For the purposes of this section, whether a person is connected with another is determined in accordance with section 839.]

(10) Subsection (5) of section 801 (meaning of “related company”) shall apply for the purposes of this section as it applies for the purposes of that section.

(11) For the purposes of this section a person who is a party to a scheme or arrangement shall be taken to have been under the control of [F114 the claimant company] at all the following times, namely—

(a) any time when that company would have been taken (in accordance with section 416) to have had control of that person for the purposes of Part XI;

(b) any time when that company would have been so taken if that section applied (with the necessary modifications) in the case of partnerships and unincorporated associations as it applies in the case of companies; and

(c) any time when that person acted in relation to that scheme or arrangement, or any proposal for it, either directly or indirectly under the direction of that company.]

Textual Amendments

F112 S. 801A inserted (with effect in accordance with s. 90(2) of the amending Act) by Finance Act 1997 (c. 16), s. 90(1)

F113 Words in s. 801A(1)(a) substituted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(11)

F114 Words in s. 801A(2)(7)(11) substituted (with effect in accordance with Sch. 30 para. 4(14) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 4(12)

F115 S. 801A(9) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 195 (with Sch. 2)

[F116 801B Dividends paid out of transferred profits. U.K.

(1) This section applies where—

(a) a company (“company A”) resident outside the United Kingdom has paid tax under the law of a territory outside the United Kingdom in respect of any of its profits;

(b) some or all of those profits become profits of another company resident outside the United Kingdom (“company B”) otherwise than by virtue of the payment of a dividend to company B; and

(c) company B pays a dividend out of those profits to another company (“company C”), wherever resident.

(2) Where this section applies, this Part shall have effect, so far as relating to the determination of underlying tax in relation to any dividend paid—

(a) by any company resident outside the United Kingdom (whether or not company B),

(b) to a company resident in the United Kingdom,

as if company B had paid the tax paid by company A in respect of those profits of company A which have become profits of company B as mentioned in subsection (1)(b) above.

(3) But the amount of relief under this Part which is allowable to a company resident in the United Kingdom shall not exceed the amount which would have been allowable to that company had those profits become profits of company B by virtue of the payment of a dividend by company A to company B.]

Textual Amendments

F116 S. 801B inserted (with effect in accordance with Sch. 30 para. 12(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 12(1)

[F117 801C Separate streaming of dividend so far as representing an ADP dividend of a CFC. U.K.

F118 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F117 S. 801C inserted (with effect in accordance with Sch. 30 para. 13(2)(3) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 13(1)

F118 S. 801C omitted (with effect in accordance with Sch. 16 para. 6 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 16 para. 2(4) (with Sch. 16 paras. 7, 8)

802 U.K. insurance companies trading overseas. U.K.

F119 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F119 S. 802 repealed (with effect in accordance with Sch. 30 para. 14(2) of the repealing Act) by Finance Act 2000 (c. 17), Sch. 30 para. 14(1), Sch. 40 Pt. 2(13), Note

803 Underlying tax reflecting interest on loans. U.K.

M10 (1) This section applies in a case where—

(a) a bank or a company connected with a bank makes a claim for an allowance by way of credit in accordance with this Chapter; and

(b) the claim relates to underlying tax on a dividend [F120 (“the overseas dividend")] paid by the overseas company, within the meaning of section 801; and

(c) that underlying tax is or includes tax payable under the law of a territory outside the United Kingdom on or by reference to [F121 interest or dividends earned or received] in the course of its business by that overseas company or by such third, fourth or successive company as is referred to in subsection (2) or (3) of that section; and

[F122 (d) if the company which received the interest or dividends (“the company") had been resident in the United Kingdom, [F123 section 798A] would apply in relation to that company.]

(2) In a case where this section applies, the amount of the credit for that part of the foreign tax which consists of the tax referred to in subsection (1)(c) above shall not exceed an amount determined under subsection (3) below.

(3) The amount referred to in subsection (2) above is a sum equal to corporation tax, at the rate in force at the time the foreign tax referred to in paragraph (c) of subsection (1) above was chargeable, [F124 on so much of the interest or dividends as exceeds the amount of the company’s relevant expenditure which is properly attributable to the earning of the interest or dividends].

(4) F125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) F125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) F125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) F125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) F125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) F125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F126 (10) In subsection (1) above “bank” means a company carrying on, in the United Kingdom or elsewhere, any trade which includes the receipt of interest or dividends, and [F127 , for the purposes of that subsection, whether a company is connected with a bank is determined in accordance with section 839.]]

Textual Amendments

F120 Words in s. 803(1)(b) inserted (with effect in accordance with s. 106(11)(12) of the amending Act) by Finance Act 1998 (c. 36), s. 106(2)(a)

F121 Words in s. 803(1)(c) substituted (with effect in accordance with s. 106(11)(12) of the amending Act) by Finance Act 1998 (c. 36), s. 106(2)(b)

F122 S. 803(1)(d) substituted (with effect in accordance with s. 106(11)(12) of the amending Act) by Finance Act 1998 (c. 36), s. 106(2)(c)

F123 Words in s. 803(1)(d) substituted (with effect in accordance with s. 86(3)(4) of the amending Act) by Finance Act 2005 (c. 7), s. 86(2)(a)

F124 Words in s. 803(3) substituted (with effect in accordance with s. 106(11)(12) of the amending Act) by Finance Act 1998 (c. 36), s. 106(3)

F125 S. 803(4)-(9) repealed (with effect in accordance with s. 86(3)(4) of the repealing Act) by Finance Act 2005 (c. 7), s. 86(2)(b), Sch. 11 Pt. 2(8), Note

F126 S. 803(10) substituted for s. 803(10)(11) (with effect in accordance with s. 106(11)(12) of the amending Act) by Finance Act 1998 (c. 36), s. 106(10)

F127 Words in s. 803(10) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 196 (with Sch. 2)

Marginal Citations

M10 Source—1982 s.66; 1987 (No.2) s.68

[F128 803A Foreign taxation of group as a single entity. U.K.

(1) This section applies in any case where, under the law of a territory outside the United Kingdom, tax is payable by any one company resident in that territory (“the responsible company”) in respect of the aggregate profits, or aggregate profits and aggregate gains, of that company and one or more other companies so resident, taken together as a single taxable entity.

[F129 (1A) F130 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(2) Where this section applies, this Part shall have effect, so far as relating to the determination of underlying tax in relation to any dividend paid by any of the companies mentioned in subsection (1) above (the “non-resident companies”) to another company (“the recipient company”), as if—

(a) the non-resident companies, taken together, were a single company,

(b) anything done by or in relation to any of the non-resident companies (including the payment of the dividend) were done by or in relation to that single company, and

(c) that single company were related to the recipient company, if that one of the non-resident companies which actually pays the dividend is related to the recipient company,

(so that, in particular, the relevant profits for the purposes of section 799(1) is a single aggregate figure in respect of that single company and the foreign tax paid by the responsible company is foreign tax paid by that single company).

(3) For the purposes of this section a company is related to another company if that other company—

(a) controls directly or indirectly, or

(b) is a subsidiary of a company which controls directly or indirectly,

not less than 10 per cent. of the voting power in the first-mentioned company.]

Textual Amendments

F128 S. 803A inserted (with effect in accordance with Sch. 30 para. 15(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 15(1)

F129 S. 803A(1A) inserted (with effect in accordance with s. 90(3) of the amending Act) by Finance Act 2005 (c. 7), s. 90(2)

F130 S. 803A(1A) omitted (with effect in accordance with Sch. 16 para. 6 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 16 para. 2(5) (with Sch. 16 paras. 7, 8)

Miscellaneous rules U.K.

804 Relief against income tax in respect of income arising in years of commencement. U.K.

M11 (1) Subject to the provisions of this section, credit for overseas tax paid in respect of [F131 any income which is an overlap profit] shall be allowed under this Part against United Kingdom income tax chargeable for any year of assessment in respect of that income if it would have been so allowed but for the fact that credit for that overseas tax had been allowed against the United Kingdom income tax chargeable in respect of that income for a previous year of assessment.

(2) The amount of credit to be allowed in respect of any income by virtue of this section for any year of assessment shall not exceed the difference between—

(a) the total credit allowable against income tax in respect of that income under this Part (including this section) for all years of assessment for which credit is so allowable; and

(b) the amount of credit which was in fact so allowed in respect of that income for any earlier year or years of assessment.

(3) The total credit so allowable in respect of any income for all those years of assessment shall be taken to be the amount of the overseas tax charged on that income, adjusted where the number of the United Kingdom periods of assessment exceeds the number of foreign periods of assessment, in the proportion which the former number bears to the latter, a period for which part only of the income is charged to tax being counted not as one period but as a fraction equal to the proportion which that part of the income bears to the whole of the income.

(4) Where the same income is charged to different overseas taxes for different foreign periods of assessment, subsection (3) above, so far as it relates to the adjustment of overseas tax, shall be applied separately to each of the overseas taxes, and the total credit allowable shall be the aggregate of those taxes after the making of any adjustments in accordance with that subsection as so applied.

[F132 (5) Subsections (5A) and (5B) below apply where—

(a) credit against income tax for any year of assessment is allowed by virtue of subsection (1) above in respect of any income which is an overlap profit (“the original income”), and

(b) the original income or any part of it contributes to an amount which, by virtue of [F133 section 205 or 220 of ITTOIA 2005], is deducted in computing the profits or gains of a subsequent year of assessment (“the subsequent year”).

(5A) The following shall be set off one against the other, namely—

(a) the difference between—

(i) the amount of the credit which, under this Part (including this section), has been allowed against income tax in respect of so much of the original income as contributes as mentioned in subsection (5) above, and

(ii) the amount of the credit which, apart from this section, would have been so allowed; and

(b) the amount of credit which, on the assumption that no amount were deducted by virtue of [F133 section 205 or 220 of ITTOIA 2005], would be allowable under this Part against income tax in respect of income arising in the subsequent year from the same source as the original income.

(5B) The person chargeable in respect of the income (if any) arising in the subsequent year from the same source as the original income shall—

(a) if the amount given by paragraph (a) of subsection (5A) above exceeds that given by paragraph (b) of that subsection, [F134 be chargeable for that year to an amount of income tax equal to the excess][F135 and be liable for any tax so chargeable]; and

(b) if the amount given by paragraph (b) of subsection (5A) above exceeds that given by paragraph (a) of that subsection, be allowed for that year under this Part an amount of credit equal to the excess.

(5C) For the purposes of subsections (5) to (5B) above, it shall be assumed that, where an amount is deducted by virtue of [F136 section 220 of ITTOIA 2005], each of the overlap profits included in the aggregate of such profits contributes to that amount in the proportion which that overlap profit bears to that aggregate.]

(6) F137 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Any claim for relief by way of credit under subsection (1) above against income tax for any year of assessment shall be made [F138 on or before the fifth anniversary of the 31st January next following] that year or, where there is more than one year of assessment in respect of which such relief may be given, [F138 on or before the fifth anniversary of the 31st January next following] the later of them.

(8) In this section—

• [F139 “overlap profit” means an amount of profits or gains which, by virtue of [F140 Chapter 15 of Part 2 of ITTOIA 2005], is included in the computations for two successive years of assessment;]

• “overseas tax” means tax under the law of a territory outside the United Kingdom;

• F141 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “United Kingdom period of assessment” and “foreign period of assessment”, in relation to any income, mean respectively a year or other period for which under the relevant law the income falls to be charged to the relevant tax;

• F141 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F142 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .; and

• references to income arising in any year include, in relation to income the income tax on which is to be computed by reference to the amount of income received in the United Kingdom, references to income received in that year.

Textual Amendments

F131 Words in s. 804(1) substituted (with effect in accordance with s. 218 of the amending Act) by Finance Act 1994 (c. 9), s. 217(1) (with Sch. 20 para. 12(1))

F132 S. 804(5)-(5C) substituted for s. 804(5) (with effect in accordance with s. 218 of the amending Act) by Finance Act 1994 (c. 9), s. 217(2) (with Sch. 20 para. 12(1))

F133 Words in s. 804(5)(b)(5A)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 323(2) (with Sch. 2)

F134 Words in s. 804(5B)(a) substituted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 197(2) (with Sch. 2)

F135 Words in s. 804(5B)(a) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 323(3)(b) (with Sch. 2)

F136 Words in s. 804(5C) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 323(4) (with Sch. 2)

F137 S. 804(6) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 197(3), Sch. 3 Pt. 1 (with Sch. 2)

F138 Words in s. 804(7) substituted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 22

F139 S. 804(8): definition of "overlap profit" inserted (with effect in accordance with s. 218 of the amending Act) by Finance Act 1994 (c. 9), s. 217(3)(a) (with Sch. 20 para. 12(1))

F140 S. 804(8): words in definition of "overlap profit" substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 323(5) (with Sch. 2)

F141 S. 804(8): definitions of "non-basis period" and "years of commencement" repealed (with effect in accordance with s. 218 of the repealing Act) by Finance Act 1994 (c. 9), s. 217(3)(b), Sch. 26 Pt. 5(24), Note 7 (with Sch. 20 para. 12(1))

F142 Words in s. 804(8) repealed (with effect in accordance with s. 218 of the repealing Act) by Finance Act 1994 (c. 9), s. 217(3)(b), Sch. 26 Pt. 5(24), Note 7 (with Sch. 20 para. 12(1))

Marginal Citations

M11 Source—1970 s.510; 1971 Sch.6 75

[F143 804ZA Schemes and arrangements designed to increase relief U.K.

(1) If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied in relation to any income or chargeable gain taken or to be taken into account for the purposes of determining a person's liability to tax in a chargeable period, they may give the person a notice under this section.

(2) Condition A is that, in the case of the person, there is in respect of the income or gain an amount of foreign tax for which, under any arrangements, credit is allowable against United Kingdom tax for that chargeable period.

(3) Condition B is that there is a scheme or arrangement the main purpose, or one of the main purposes, of which is to cause an amount of foreign tax to be taken into account in the case of the person for that chargeable period.

(4) Condition C is that the scheme or arrangement is a prescribed scheme or arrangement.

(5) Condition D is that the amount referred to in subsection (6) is more than a minimal amount.

(6) The amount is the aggregate of—

(a) the aggregate amount of the claims for credit that the person has made, or is in a position to make, for the chargeable period; and

(b) for all the persons connected to that person, the aggregate amount of the claims for credit that the connected person has made, or is in a position to make, for a corresponding chargeable period.

(7) A chargeable period of a person (“A”) corresponds to a chargeable period of another person (“B”) if at least one day of A's chargeable period falls within B's chargeable period.

(8) A notice under this section is a notice—

(a) informing the person of the Board's view under subsection (1),

(b) specifying the chargeable period in relation to which the Board formed that view,

(c) if the amount of foreign tax considered by the Board to satisfy condition B is an amount of underlying tax, specifying the body corporate F144 . . . whose payment of foreign tax is relevant to that underlying tax, and

(d) informing the person that as a consequence section 804ZB has effect in relation to him.

(9) A notice under this section may specify the adjustments of a person's tax return that, in the view of the Board, fall to be made by him under section 804ZB(2).

(10) The adjustments specified may, in a case where the notice given to a person specifies a body corporate resident outside the United Kingdom, include treating the body corporate as having paid or being liable to pay only so much foreign tax as would have been allowed to it as a credit if it were resident in the United Kingdom and a notice under this section had been given to it as regards an amount of foreign tax.

(11) Schedule 28AB makes provision about what constitutes a prescribed scheme or arrangement.

[F145 (11A) In this section “foreign tax” includes any tax which for the purpose of allowing credit under any arrangements against corporation tax is treated by section 801 as if it were tax payable under the law of any territory outside the United Kingdom.]

(12) In this section and sections 804ZB and 804ZC “tax return” means—

(a) a return under section 8, 8A or 12AA of the Management Act, or

(b) a company tax return;

and “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to the Finance Act 1998, as read with paragraph 4 of that Schedule.]

Textual Amendments

F143 Ss. 804ZA-804ZC inserted (with effect in accordance with s. 87(3)-(5) of the amending Act) by Finance Act 2005 (c. 7), s. 87(1)

F144 Words in s. 804ZA(8)(c) repealed (with effect in accordance with s. 35(4)-(7) of the repealing Act) by Finance Act 2007 (c. 11), s. 35(2), Sch. 27 Pt. 2(6), Note

F145 S. 804ZA(11A) inserted (with effect in accordance with s. 35(4)-(7) of the amending Act) by Finance Act 2007 (c. 11), s. 35(3)

[F143 804ZB Effect of notice under section 804ZA U.K.

(1) This section applies in relation to a person if—

(a) a notice under section 804ZA has been given to the person in respect of a chargeable period specified in the notice, and

(b) the chargeable period specified is a chargeable period in relation to which conditions A to D of section 804ZA are satisfied.

(2) The person must in his tax return for the period make (or must amend his return for the period so as to make) such adjustments as are necessary for counteracting the effects of the scheme or arrangement in that period that are referable to the purpose referred to in condition B of section 804ZA.]

Textual Amendments

F143 Ss. 804ZA-804ZC inserted (with effect in accordance with s. 87(3)-(5) of the amending Act) by Finance Act 2005 (c. 7), s. 87(1)

[F143 804ZC Notices under section 804ZA: further provision U.K.

(1) Subsection (2) applies if the Board give a notice to a person under section 804ZA before the person has made his tax return for the chargeable period specified in the notice.

(2) If the person makes a tax return for that period before the end of the period of 90 days beginning with the day on which the notice is given, he may—

(a) make a tax return that disregards the notice, and

(b) at any time after making the return and before the end of the period of 90 days, amend the return for the purpose of complying with the notice.

(3) If a person has made a tax return for a chargeable period, the Board may only give him a notice under section 804ZA in relation to that period if a notice of enquiry has been given to him in respect of his tax return for that period.

(4) After any enquiries into the person's tax return for that period have been completed, the Board may only give him a notice under section 804ZA in relation to that period if the requirements in subsections (5) and (7) are satisfied.

(5) The first requirement is that at the time the enquiries were completed, the Board could not have been reasonably expected, on the basis of the information made available to them or to an officer of theirs before that time, to have been aware that the circumstances were such that a notice under section 804ZA could have been given to the person in relation to that period.

(6) For the purposes of subsection (5)—

(a) section 29(6) and (7) of the Management Act (information made available) applies as it applies for the purposes of section 29(5), and

(b) paragraph 44(2) and (3) of Schedule 18 to the Finance Act 1998 applies as it applies for the purposes of paragraph 44(1).

(7) The second requirement is that—

(a) the person was requested to produce, provide or furnish information during an enquiry into the return for that period, and

(b) if the person had duly complied with the request, the Board could have been reasonably expected to give the person a notice under section 804ZA in relation to that period.

(8) If a person is given a notice under section 804ZA in relation to a chargeable period after having made a tax return for that period, the person may amend the return for the purpose of complying with the notice at any time before the end of the period of 90 days beginning with the day on which the notice is given.

(9) If the notice under section 804ZA is given to the person after he has been given a notice of enquiry in respect of his tax return for the period, no closure notice may be given in relation to his tax return until—

(a) the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or

(b) the earlier amendment of the return for the purpose of complying with the notice.

(10) If the notice under section 804ZA is given to the person after any enquiries into the return for the period are completed, no discovery assessment may be made as regards the income or chargeable gain to which the notice relates until—

(a) the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or

(b) the earlier amendment of the return for the purpose of complying with the notice.

(11) Subsections (2)(b) and (8) do not prevent a person's tax return for a chargeable period becoming incorrect if—

(a) a notice under section 804ZA is given to the person in relation to that period,

(b) the return is not amended in accordance with subsection (2)(b) or (8) for the purpose of complying with the notice, and

(c) the return ought to have been so amended.

(12) In this section—

• “closure notice” means a notice under—

  (a)

  section 28A or 28B of the Management Act, or

  (b)

  paragraph 32 of Schedule 18 to the Finance Act 1998;

• “discovery assessment” means an assessment under—

  (a)

  section 29 of the Management Act, or

  (b)

  paragraph 41 of Schedule 18 to the Finance Act 1998;

• “notice of enquiry” means a notice under—

  (a)

  section 9A or 12AC of the Management Act, or

  (b)

  paragraph 24 of Schedule 18 to the Finance Act 1998.]

Textual Amendments

F143 Ss. 804ZA-804ZC inserted (with effect in accordance with s. 87(3)-(5) of the amending Act) by Finance Act 2005 (c. 7), s. 87(1)

[F146 804A [F147 Life assurance companies with overseas branches etc: restriction of credit.] U.K.

[F148 (1) Subsection (2) below applies where credit for tax—

(a) which is payable under the laws of a territory outside the United Kingdom in respect of insurance business carried on by a company through a [F149 permanent establishment] in that territory, and

(b) which is computed otherwise than wholly by reference to profits arising in that territory,

is to be allowed (in accordance with this Part) against corporation tax charged under [F150 section 35 of CTA 2009 (charge on trade profits) or section 436A] in respect of the profits, computed in accordance with the provisions applicable [F151 for the purposes of section 35 of CTA 2009], of life assurance business or [F152 gross roll-up business] carried on by the company in an accounting period (in this section referred to as “the relevant profits”).

(1A) For the purposes of paragraph (b) of subsection (1) above, the cases where tax payable under the laws of a territory outside the United Kingdom is “computed otherwise than wholly by reference to profits arising in that territory” are those cases where the charge to tax in that territory falls within subsection (1B) below.

(1B) A charge to tax falls within this subsection if it is such a charge made otherwise than by reference to profits as (by disallowing their deduction in computing the amount chargeable) to require sums payable and other liabilities arising under policies to be treated as sums or liabilities falling to be met out of amounts subject to tax in the hands of the company.]

(2) Where this subsection applies, the amount of the credit shall not exceed the greater of—

(a) any such part of the tax payable under the laws of the territory outside the United Kingdom as is charged by reference to profits arising in that territory, and

(b) the shareholders’ share of the tax so payable.

(3) For the purposes of subsection (2) above the shareholders’ share of tax payable under the laws of a territory outside the United Kingdom is so much of that tax as is represented by the fraction

where—

• [F153 A is an amount equal to the amount of the relevant profits before making any deduction authorised by subsection (5) below;] and

• B is an amount equal to the excess of—

• (a) the amount taken into account as receipts of the company in computing those profits, apart from premiums and sums received by virtue of a claim under a reinsurance contract, over

• (b) the amounts taken into account as expenses F154 . . . in computing those profits.

(4) Where there is no such excess as is mentioned in subsection (3) above, or where the profits are greater than any excess, the whole of the tax payable under the laws of the territory outside the United Kingdom shall be the shareholders’ share; and (subject to that) where there are no profits, none of it shall be the shareholders’ share.

(5) Where, by virtue of this section, the credit for any tax payable under the laws of a territory outside the United Kingdom is less than it otherwise would be, section 795(2)(a) shall not prevent a deduction being made for the difference in computing [F155 the relevant profits].]

Textual Amendments

F146 S. 804A inserted (with effect in accordance with Sch. 7 para. 10 of the amending Act) by Finance Act 1990 (c. 29), Sch. 7 para. 5

F147 S. 804A sidenote substituted (with effect in accordance with Sch. 30 para. 16(6) of the amending Act) by virtue of Finance Act 2000 (c. 17), Sch. 30 para. 16(5)

F148 S. 804A(1)-(1B) substituted for s. 804A(1) (with effect in accordance with Sch. 30 para. 16(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 16(2)

F149 Words in s. 804A(1)(a) substituted (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(1)(a)

F150 Words in s. 804A(1) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 250(a) (with Sch. 2 Pts. 1, 2)

F151 Words in s. 804A(1) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 250(b) (with Sch. 2 Pts. 1, 2)

F152 Words in s. 804A(1) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 48 (with Sch. 7 Pt. 2)

F153 Words in s. 804A(3) substituted (with effect in accordance with Sch. 30 para. 16(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 16(3)

F154 Words in s. 804A(3) repealed (with effect in accordance with s. 105(1) of the repealing Act) by Finance Act 1996 (c. 8), Sch. 41 Pt. 5(3), Note

F155 Words in s. 804A(5) substituted (with effect in accordance with Sch. 30 para. 16(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 16(4)

[F156 804B Insurance companies carrying on more than one category of business: restriction of credit. U.K.

(1) Where—

(a) an insurance company carries on more than one category of [F157 long-term] business in an accounting period, and

(b) there arises to the company in that period any income or gain (“the relevant income”) in respect of which credit for foreign tax falls to be allowed under any arrangements,

subsection (2) below shall have effect.

(2) In any such case, the amount of the credit for foreign tax which, under the arrangements, is allowable against corporation tax in respect of so much of the relevant income as is referable (in accordance with the provisions of sections 432ZA to 432E F158 . . . ) to a particular category of business must not exceed the fraction of the foreign tax which, in accordance with the following provisions of this section, is attributable to that category of business.

[F159 (3) Where the relevant income arises from an asset which is linked solely to a category of business, the whole of the foreign tax is attributable to that category of business, unless the case is one where subsection (7) below applies.

(3A) Where the relevant income arises from foreign [F160 business] assets, the whole of the foreign tax is attributable to gross roll-up business, unless the case is one where subsection (7) below applies.]

(4) Where subsection (3) above does not apply and the category of business in question is—

(a) basic life assurance and general annuity business, or

(b) [F161 PHI] business,

the fraction of the foreign tax that is attributable to that category of business is the fraction whose numerator is the part of the relevant income which is referable to that category by virtue of any provision of section 432A F162 . . . and whose denominator is the whole of the relevant income.

(5) Subsections (6) and (7) below apply where the category of business in question is [F163 gross roll-up business.]

(6) Where—

(a) subsection (3) above does not apply, and

(b) some or all of the relevant income is taken into account in accordance with section 83 of the M12 Finance Act 1989 in an account in relation to which the provisions of section 432C F164 . . . apply,

the fraction of the foreign tax that is attributable to [F165 gross roll-up business] is the fraction whose numerator is the part of the relevant income which is referable to [F165 gross roll-up business] by virtue of any provision of section 432C F164 . . . and whose denominator is the whole of the relevant income.

(7) Where some or all of the relevant income falls to be taken into account in determining in accordance with section 83(2) of the Finance Act 1989 the amount referred to in section 432E(1) as the net amount, the fraction of the foreign tax that is attributable to [F166 gross roll-up business] is the fraction—

(a) whose numerator is the part of [F167 the investment income taken into account in that determination which would be referable to [F168 gross roll-up business] by virtue of section 432E if the investment income were the only amount included in the net amount]; and

(b) whose denominator is the whole of that [F169 investment income].

[F170 (7A) The Treasury may by regulations amend subsection (7) above; and the regulations may include amendments having effect in relation to accounting periods during which they are made.]

(8) No part of the foreign tax is attributable to any category of business except as provided by subsections (3) to (7) above.

[F171 (9) Where for the purposes of this section an amount of foreign tax is attributable to gross roll-up business, credit in respect of the foreign tax so attributable shall be allowed only against corporation tax in respect of profits chargeable under section 436A.]]

Textual Amendments

F156 S. 804B inserted (with effect in accordance with Sch. 30 para. 17(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 17(1)

F157 Words in s. 804B(1)(a) inserted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(2) (with Sch. 7 Pt. 2)

F158 Words in s. 804B(2) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(3), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F159 S. 804B(3)(3A) substituted for s. 804B(3) (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(4) (with Sch. 7 Pt. 2)

F160 Word in s. 804B(3A) substituted (with effect in accordance with Sch. 17 para. 10(6)(7) of the amending Act) by Finance Act 2008 (c. 9), Sch. 17 para. 10(3)(e)

F161 Words in s. 804B(4)(b) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(5)(a) (with Sch. 7 Pt. 2)

F162 Words in s. 804B(4) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(5)(b), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F163 Words in s. 804B(5) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(6) (with Sch. 7 Pt. 2)

F164 Words in s. 804B(6) repealed (with effect in accordance with s. 38(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(7)(a), Sch. 27 Pt. 2(7), Note (with Sch. 7 Pt. 2)

F165 Words in s. 804B(6) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(7)(b) (with Sch. 7 Pt. 2)

F166 Words in s. 804B(7) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(8)(a) (with Sch. 7 Pt. 2)

F167 Words in s. 804B(7)(a) substituted (with effect in accordance with Sch. 33 para. 11(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 11(1)(a)

F168 Words in s. 804B(7)(a) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(8)(b) (with Sch. 7 Pt. 2)

F169 Words in s. 804B(7)(b) substituted (with effect in accordance with Sch. 33 para. 11(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 11(1)(b)

F170 S. 804B(7A) inserted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 7 para. 7

F171 S. 804B(9) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 49(9) (with Sch. 7 Pt. 2)

Modifications etc. (not altering text)

C31 S. 804B modified (25.10.2000) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 30C (as inserted by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2000 (S.I. 2000/2710), regs. 1, 6; and as amended by S.I. 2004/822, regs. 1, 25)

C32 S. 804B modified (12.8.2005 with effect in accordance with reg. 1(2) of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 23 (as amended by: S.I. 2007/2134, regs. 1(1)(2), 22; S.I. 2008/1937, regs. 1(1)(2), 10)

Marginal Citations

M12 1989 c. 26.

[F173 804C Insurance companies: allocation of expenses etc in computations under [F172 section 35 of CTA 2009]. U.K.

(1) Where—

(a) an insurance company carries on any category of insurance business in a period of account,

(b) a computation in accordance with the provisions applicable [F174 for the purposes of section 35 of CTA 2009 (charge on trade profits)] falls to be made in relation to that category of business for that period, and

(c) there arises to the company in that period any income or gain in respect of which credit for foreign tax falls to be allowed under any arrangements,

subsection (2) below shall have effect.

(2) In any such case, the amount of the credit for foreign tax which, under the arrangements, is to be allowed against corporation tax in respect of so much of that income or gain as is referable to the category of business concerned (“the relevant income”) shall be limited by treating the amount of the relevant income as reduced in accordance with subsections (3) and (4) below.

(3) The first limitation is to treat the amount of the relevant income as reduced (but not below nil) for the purposes of this Chapter by the amount of expenses (if any) attributable to the relevant income.

(4) If—

(a) the amount of the relevant income after any reduction under subsection (3) above,

exceeds

(b) the relevant fraction of the profits of the category of business concerned for the period of account in question which are chargeable to corporation tax,

the second limitation is to treat the [F175 relevant income] as further reduced (but not below nil) for the purposes of this Chapter to an amount equal to that fraction of those profits.

In this subsection any reference to the profits of a category of business is a reference to those profits after the set off of any losses of that category of business which have arisen in any previous accounting period.

(5) In determining the amount of the credit for foreign tax which is to be allowed as mentioned in subsection (2) above, the [F175 relevant income] shall not be reduced except in accordance with that subsection.

(6) For the purposes of subsection (3) above, the amount of expenses attributable to the relevant income is the appropriate fraction of the total relevant expenses of the category of business concerned for the period of account in question.

(7) In subsection (6) above, the “appropriate fraction” means the fraction—

(a) whose numerator is the amount of the relevant income before any reduction in accordance with subsection (2) above, and

(b) whose denominator is the total income of the category of business concerned for the period of account in question,

unless the denominator so determined is nil, in which case the denominator shall instead be the amount described in subsection (8) below.

(8) That amount is so much in total of the income and gains—

(a) which arise to the company in the period of account in question, and

(b) in respect of which credit for foreign tax falls to be allowed under any arrangements,

as are referable to the category of business concerned (before any reduction in accordance with subsection (2) above).

(9) In subsection (4) above, the “relevant fraction” means the fraction—

(a) whose numerator is the amount of the relevant income before any reduction in accordance with subsection (2) above; and

(b) whose denominator is the amount described in subsection (8) above.

(10) Where a 75 per cent subsidiary of an insurance company is acting in accordance with a scheme or arrangement and—

(a) the purpose, or one of the main purposes, of that scheme or arrangement is to prevent or restrict the application of subsection (2) above to the insurance company, and

(b) the subsidiary does not carry on insurance business of any description,

the amount of corporation tax attributable (apart from this subsection) to any item of income or gain arising to the subsidiary shall be found by setting off against that item the amount of expenses that would be attributable to it under subsection (3) above if that item had arisen directly to the insurance company.

(11) Where the credit allowed for any tax payable under the laws of a territory outside the United Kingdom is, by virtue of subsection (2) above, less than it would be if the relevant income were not treated as reduced in accordance with that subsection, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the profits of the category of business concerned.

(12) Where, by virtue of subsection (10) above, the credit allowed for any tax payable under the laws of a territory outside the United Kingdom is less than it would be apart from that subsection, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the income of the 75 per cent subsidiary.

[F176 (13) For the purposes of the operation of this section in relation to any income or gain in respect of which credit falls to be allowed under any arrangements, the amount of the income or gain that is referable to a category of insurance business is the same fraction of the income and gain as the fraction of the foreign tax that is attributable to that category of business in accordance with section 804B.]

(14) This section shall be construed—

(a) in accordance with section 804D, where the category of business concerned is life assurance business or [F177 gross roll-up business]; and

(b) in accordance with section 804E, where the category of business concerned is not life assurance business or [F178 gross roll-up business].]

Textual Amendments

F172 Words in s. 804C heading substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 251(3) (with Sch. 2 Pts. 1, 2)

F173 Ss. 804C-804E inserted (with effect in accordance with Sch. 30 para. 18(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 18(1)

F174 Words in s. 804C(1)(b) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 251(2) (with Sch. 2 Pts. 1, 2)

F175 Words in s. 804C(4)(5) substituted (with effect in accordance with Sch. 33 para. 11(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 11(3)

F176 S. 804C(13) substituted (with effect in accordance with Sch. 33 para. 11(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 33 para. 11(4)

F177 Words in s. 804C(14)(a) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 50(a) (with Sch. 7 Pt. 2)

F178 Words in s. 804C(14)(b) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 50(b) (with Sch. 7 Pt. 2)

Modifications etc. (not altering text)

C33 S. 804C modified by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 52A(6)-(9) (as substituted (1.1.2009 with effect in accordance with reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) (Amendment No. 3) Regulations 2008 (S.I. 2008/3159), regs. 1(1), 16)

[F173 804D Interpretation of section 804C in relation to life assurance business etc. U.K.

(1) This section has effect for the interpretation of section 804C where the category of business concerned is life assurance business or [F179 gross roll-up business].

(2) The “total income" of the category of business concerned for the period of account in question is the amount (if any) by which—

(a) so much of the total income shown in the revenue account in the periodical return of the company concerned for that period as is referable to that category of business,

exceeds

(b) so much of any commissions payable and any expenses of management incurred in connection with the acquisition of the business, as shown in that return, so far as referable to that category of business.

(3) Where any amounts fall to be brought into account in accordance with section 83 of the M13 Finance Act 1989, the amounts that are referable to the category of business concerned shall be determined for the purposes of subsection (2) above in accordance with sections 432B to [F180 432G].

(4) The “total relevant expenses" of the category of business concerned for any period of account is the amount of the claims incurred—

(a) increased by any increase in the liabilities of the company, or

(b) reduced (but not below nil) by any decrease in the liabilities of the company.

(5) For the purposes of subsection (4) above, the amounts to be taken into account in the case of any period of account are the amounts as shown in the company’s periodical return for the period so far as referable to the category of business concerned.]

Textual Amendments

F173 Ss. 804C-804E inserted (with effect in accordance with Sch. 30 para. 18(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 18(1)

F179 Words in s. 804D(1) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 51(2) (with Sch. 7 Pt. 2)

F180 Words in s. 804D(3) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 51(3) (with Sch. 7 Pt. 2)

Modifications etc. (not altering text)

C34 S. 804D modified (25.10.2000) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 30D (as inserted by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2000 (S.I. 2000/2710), regs. 1, 6; and as amended by S.I. 2004/822, regs. 1, 26)

C35 S. 804D modified (12.8.2005 with effect in accordance with reg. 1(2) of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 24

Marginal Citations

M13 1989 c. 26.

[F173 804E Interpretation of section 804C in relation to other insurance business. U.K.

(1) This section has effect for the interpretation of section 804C where the category of business concerned is not life assurance business or [F181 gross roll-up business].

(2) The “total income" of the category of business concerned for any period of account is the amount (if any) by which—

(a) the sum of the amounts specified in subsection (3) below,

exceeds

(b) the sum of the amounts specified in subsection (4) below.

(3) The amounts mentioned in subsection (2)(a) above are—

(a) earned premiums, net of reinsurance;

(b) investment income and gains;

(c) other technical income, net of reinsurance;

(d) F182 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The amounts mentioned in subsection (2)(b) above are—

(a) acquisition costs;

(b) the change in deferred acquisition costs;

(c) losses on investments.

(5) The “total relevant expenses" of the category of business concerned for any period of account is the sum of—

(a) the claims incurred, net of reinsurance,

(b) the changes in other technical provisions, net of reinsurance,

(c) the change in the equalisation provision, and

(d) investment management expenses,

unless that sum is a negative amount, in which case the total relevant expenses shall be taken to be nil.

(6) The amounts to be taken into account for the purposes of the paragraphs of subsections (3) to (5) above are the amounts taken into account for the purposes of corporation tax.

(7) Expressions used—

(a) in the paragraphs of subsections (3) to (5) above, and

[F183 (b) in the provisions of section B of Part 1 of Schedule 3 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the required formats) which relate to the profit and loss account format (within the meaning of sub-paragraphs (1) and (2) of paragraph 1 of that Schedule),]

have the same meaning in those paragraphs as they have in those provisions.]

Textual Amendments

F173 Ss. 804C-804E inserted (with effect in accordance with Sch. 30 para. 18(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 18(1)

F181 Words in s. 804E(1) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 52 (with Sch. 7 Pt. 2)

F182 S. 804E(3)(d) repealed (with effect in accordance with Sch. 11 of the repealing Act) by Finance Act 2007 (c. 11), Sch. 27 Pt. 2(11), Note

F183 S. 804E(7)(b) substituted (6.4.2008 with effect in accordance with art. 1(2) of the amending S.I.) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 12

[F184 804F Interpretation of sections 804A to 804E. U.K.

F185 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F184 S. 804F inserted (with effect in accordance with Sch. 30 para. 19(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 19(1)

F185 S. 804F repealed (with effect in accordance with Sch. 10 para. 17(2) of the repealing Act) by Finance Act 2007 (c. 11), Sch. 10 para. 14(2)(e), Sch. 27 Pt. 2(10), Note

[F186 804G Reduction in credit: payment by reference to foreign tax U.K.

(1) This section applies if—

(a) credit for foreign tax falls to be allowed to a person (“P”) under any arrangements, and

(b) a payment is made by a tax authority to P, or any person connected with P, by reference to the foreign tax.

(2) The amount of that credit is to be reduced by an amount equal to that payment.

(3) Section 839 applies for the purposes of determining whether or not a person is connected with P.]

Textual Amendments

F186 S. 804G inserted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(2)

805 Elections against credit. U.K.

M14 Credit shall not be allowed under any arrangements against the United Kingdom taxes chargeable in respect of any income or chargeable gains of any person if he elects that credit shall not be allowed in respect of that income or those gains

Modifications etc. (not altering text)

C36 See s.732(4)—dealers in securities.

C37 Ss. 805, 806 applied (31.12.2006 with effect in accordance with reg. 1(2) of the affecting S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), regs. 1(1), 4

Marginal Citations

M14 Source—1970 s.511; 1972 s.100(1)

806 Time limit for claims etc. U.K.

[F187 (1) Subject to subsection (2) below and section 804(7), any claim for an allowance under any arrangements by way of credit for foreign tax in respect of any income or chargeable gain—

(a) shall, in the case of any income or chargeable gain which falls to be charged to income tax for a year of assessment, be made on or before—

(i) the fifth anniversary of the 31st January next following that year of assessment, or

(ii) if later, the 31st January next following the year of assessment in which the foreign tax is paid;

(b) shall, in the case of any income or chargeable gain which falls to be charged to corporation tax for an accounting period, be made not more than—

(i) six years after the end of that accounting period, or

(ii) if later, one year after the end of the accounting period in which the foreign tax is paid.]

(2) Where the amount of any credit given under the arrangements [F188 is reduced under section 804G, or] is rendered excessive or insufficient by reason of any adjustment of the amount of any tax payable either in the United Kingdom or under the laws of any other territory, nothing in the Tax Acts limiting the time for the making of assessments or claims for relief shall apply to any assessment or claim [F189 to which the reduction or adjustment gives rise], being an assessment or claim made not later than six years from the time when [F190 all such assessments, reductions, adjustments] and other determinations have been made, whether in the United Kingdom or elsewhere, as are material in determining whether any and if so what credit falls to be given.

[F191 (3) Subject to subsection (5) below, where—

(a) any credit for foreign tax has been allowed to a person under any arrangements, and

(b) the amount of that credit is subsequently [F192 reduced under section 804G or] rendered excessive by reason of an adjustment of the amount of any tax payable under the laws of a territory outside the United Kingdom,

that person shall give notice in writing to an officer of the Board that [F193 a reduction has been made or that] an adjustment has been made that has rendered the amount of the credit excessive.

(4) A notice under subsection (3) above must be given within one year from the time of the making of [F194 the reduction or adjustment].

(5) Subsections (3) and (4) above do not apply where [F194 the reduction or adjustment] is one the consequences of which in relation to the credit fall to be given effect to in accordance with regulations made under—

(a) section 182(1) of the M15 Finance Act 1993 (regulations relating to individual members of Lloyd’s); or

(b) section 229 of the M16 Finance Act 1994 (regulations relating to corporate members of Lloyd’s).

(6) A person who fails to comply with the requirements imposed on him by subsections (3) and (4) above in relation to [F195 any reduction or adjustment] shall be liable to a penalty of an amount not exceeding the amount by which the credit allowed [F196 has been reduced or] has been rendered excessive by reason of the adjustment.]

Textual Amendments

F187 S. 806(1) substituted (with effect in accordance with Sch. 30 para. 20(3) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 20(2)

F188 Words in s. 806(2) inserted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(4)(a)

F189 Words in s. 806(2) substituted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(4)(b)

F190 Words in s. 806(2) substituted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(4)(c)

F191 S. 806(3)-(6) inserted (17.3.1998 with effect in accordance with s. 107(2) of the amending Act) by Finance Act 1998 (c. 36), s. 107(1)

F192 Words in s. 806(3)(b) inserted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(5)(a)

F193 Words in s. 806(3) inserted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(5)(b)

F194 Words in s. 806(4)(5) substituted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(6)

F195 Words in s. 806(6) substituted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(7)(a)

F196 Words in s. 806(6) inserted (with effect in accordance with s. 59(13) of the amending Act) by Finance Act 2009 (c. 10), s. 59(7)(b)

Modifications etc. (not altering text)

C38 See s.448—overseas life assurance companies.

C39 Ss. 805, 806 applied (31.12.2006 with effect in accordance with reg. 1(2) of the affecting S.I.) by The Lloyd's Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 (S.I. 2006/3262), regs. 1(1), 4

Marginal Citations

M15 1993 c. 34.

M16 1994 c. 9.

[F197 Foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax U.K.

Textual Amendments

F197 Ss. 806A-806H, 806J and cross-heading inserted (with effect in accordance with Sch. 30 para. 21(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 21(1)

806A Eligible unrelieved foreign tax on dividends: introductory. U.K.

F198 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F198 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9 (subject to amendment to s. 806A by: Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 114 (with Sch. 2); Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 20 (with Sch. 9))

806B The amounts that are eligible unrelieved foreign tax. U.K.

F199 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F199 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9 (subject to amendment to s. 806B by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 21 (with Sch. 9))

806C Onshore pooling. U.K.

F200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F200 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9 (subject to amendment to s. 806C by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 22 (with Sch. 9))

806D Utilisation of eligible unrelieved foreign tax. U.K.

F201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F201 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9 (subject to amendment to s. 806D by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 23 (with Sch. 9))

806E Rules for carry back of relievable tax under section 806D. U.K.

F202 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F202 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9

806F Credit to be given for underlying tax before other foreign tax etc. U.K.

F203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F203 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9 (subject to amendment to s. 806F by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 24 (with Sch. 9))

806G Claims for the purposes of section 806D(4) or (5). U.K.

F204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F204 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9 (subject to amendment to s. 806G by Finance Act 2008 (c. 9), s. 118(2), Sch. 39 para. 25; S.I. 2009/403, arts. 2(2), 10)

806H Surrender of relievable tax by one company in a group to another. U.K.

F205 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F205 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9

806J Interpretation of foreign dividend provisions of this Chapter. U.K.

F206 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F206 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9 (subject to amendment to s. 806J by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 25 (with Sch. 9))

[F207 Application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere U.K.

Textual Amendments

F207 S. 806K and cross-heading inserted (with effect in accordance with Sch. 30 para. 22(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 22(1)

806K Application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere. U.K.

F208 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F208 Ss. 806A-806K omitted (with effect in accordance with Sch. 14 para. 31 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 14 para. 9

[F209 Unrelieved foreign tax: profits of overseas branch or agency U.K.

Textual Amendments

F209 Ss. 806L, 806M and cross-heading inserted (with effect in accordance with Sch. 30 para. 23(2)(3) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 23(1)

806L Carry forward or carry back of unrelieved foreign tax. U.K.

(1) This section applies where, in any accounting period of a company resident in the United Kingdom, an amount of unrelieved foreign tax arises in respect of any of the company’s qualifying income from an overseas [F210 permanent establishment] of the company.

(2) The amount of the unrelieved foreign tax so arising shall be treated for the purposes of allowing credit relief under this Part as if it were foreign tax paid in respect of, and computed by reference to, the company’s qualifying income from the same overseas [F210 permanent establishment]—

(a) in the next accounting period (whether or not the company in fact has any such income from that source in that accounting period), or

(b) in such one or more preceding accounting periods, beginning not more than three years before the accounting period in which the unrelieved foreign tax arises, as result from applying the rules in subsection (3) below,

or partly in the one way and partly in the other.

(3) Where any unrelieved foreign tax is to be treated as mentioned in paragraph (b) of subsection (2) above, the rules for determining the accounting periods in question (and the amount of the unrelieved foreign tax to be so treated in relation to each of them) are that the unrelieved foreign tax must be so treated under that paragraph—

1. that—

(a) credit for, or for any remaining balance of, the unrelieved foreign tax is allowed against corporation tax in respect of income of a later one of the accounting periods beginning as mentioned in that paragraph,

before

(b) credit for any of the unrelieved foreign tax is allowed against corporation tax in respect of income of any earlier such period;

2. that, before allowing credit for any of the unrelieved foreign tax against corporation tax in respect of income of any accounting period, credit for foreign tax is allowed—

(a) first for foreign tax in respect of the income of that accounting period, other than unrelieved foreign tax arising in another accounting period; and

(b) then for unrelieved foreign tax arising in any accounting period before that in which the unrelieved foreign tax in question arises.

(4) For the purposes of this section, the cases where an amount of unrelieved foreign tax arises in respect of any of a company’s qualifying income from an overseas [F210 permanent establishment] in an accounting period are those cases where—

(a) the amount of the credit for foreign tax which under any arrangements would, apart from section 797, be allowable against corporation tax in respect of that income,

exceeds

(b) the amount of the credit for foreign tax which under the arrangements is allowed against corporation tax in respect of that income;

and in any such case that excess is the amount of the unrelieved foreign tax in respect of that income.

(5) For the purposes of this section, a company’s qualifying income from an overseas [F210 permanent establishment] is the profits of the overseas [F210 permanent establishment] which are—

[F211 (a) profits, chargeable under Chapter 2 of Part 3 of CTA 2009, of a trade carried on partly, but not wholly, outside the United Kingdom; or]

[F212 (b) included in the profits of gross roll-up business chargeable under F213 . . . section 436A.]

(6) Where (whether by virtue of this subsection or otherwise) an amount of unrelieved foreign tax arising in an accounting period falls to be treated under subsection (2) above for the purposes of allowing credit relief under this Part as foreign tax paid in respect of, and computed by reference to, qualifying income of an earlier accounting period, it shall not be so treated for the purpose of any further application of this section.

[F214 (7) In this section—

• “overseas permanent establishment” means a permanent establishment through which a company carries on a trade in a territory outside the United Kingdom; and

• “permanent establishment”—

  (a)

  if there are arrangements having effect under section 788 in relation to the territory concerned that define the expression, has the meaning given by those arrangements, and

  (b)

  if there are no such arrangements, or if they do not define the expression, has the meaning given by section 148 of the Finance Act 2003.]

Textual Amendments

F210 Words in s. 806L(1)(2)(4)(5) substituted (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(1)(a)

F211 S. 806L(5)(a) and word substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 255(a) (with Sch. 2 Pts. 1, 2)

F212 S. 806L(5)(b) substituted (with effect in accordance with s. 38(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 7 para. 53 (with Sch. 7 Pt. 2)

F213 Words in s. 806L(5)(b) repealed (1.4.2009 with effect in accordance with s. 1329(1) of the repealing Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 255(b), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F214 S. 806L(7) substituted (with effect in accordance with s. 155(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 27 para. 1(3)

806M Provisions supplemental to section 806L. U.K.

(1) This section has effect for the purposes of section 806L and shall be construed as one with that section.

(2) If, in any accounting period, a company ceases to have a particular overseas [F215 permanent establishment], the amount of any unrelieved foreign tax which arises in that accounting period in respect of the company’s income from that overseas [F215 permanent establishment] shall, to the extent that it is not treated as mentioned in section 806L(2)(b), be reduced to nil (so that no amount arises which falls to be treated as mentioned in section 806L(2)(a)).

(3) If a company—

(a) at any time ceases to have a particular overseas [F215 permanent establishment] in a particular territory (“the old [F215 permanent establishment]”), but

(b) subsequently again has an overseas [F215 permanent establishment] in that territory (“the new [F215 permanent establishment]”),

the old [F215 permanent establishment] and the new [F215 permanent establishment] shall be regarded as different overseas [F215 permanent establishments].

(4) If, under the law of a territory outside the United Kingdom, tax is charged in the case of a company resident in the United Kingdom in respect of the profits of two or more of its overseas [F215 permanent establishments] in that territory, taken together, then, for the purposes of—

(a) section 806L, and

(b) subsection (3) above,

those overseas [F215 permanent establishments] shall be treated as if they together constituted a single overseas [F215 permanent establishment] of the company.

(5) Unrelieved foreign tax arising in respect of qualifying income from a particular overseas [F215 permanent establishment] in any accounting period shall only be treated as mentioned in subsection (2) of section 806L on a claim.

(6) Any such claim must specify the amount (if any) of the unrelieved foreign tax—

(a) which is to be treated as mentioned in paragraph (a) of that subsection; and

(b) which is to be treated as mentioned in paragraph (b) of that subsection.

(7) A claim under subsection (5) above may only be made before the expiration of the period of—

(a) six years after the end of the accounting period mentioned in that subsection, or

(b) if later, one year after the end of the accounting period in which the foreign tax in question is paid.]

Textual Amendments

F215 Words in s. 806M(2)-(5) substituted (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(1)(a)