Finance Act 1994

10 (1) Subject to paragraph 12(2) below, this paragraph applies in the case of— U.K.

(a) a trade, profession or vocation set up and commenced before 6th April 1994 and continuing after 5th April 1998; or

(b) income from a source arising before the former date and continuing after the latter date.

(2) Subject to sub-paragraph (3) below, the amount of foreign tax to be taken into account in determining whether and, if so, what credit is allowable under Part XVIII of the Taxes Act 1988 against income tax which, in respect of income from any source, is chargeable under Case I or II of Schedule D for the year 1996-97 shall be the appropriate percentage of the aggregate of—

(a) the amount of foreign tax paid on income from that source arising in the basis period for that year, and

(b) the amount of foreign tax paid on income from that source arising in the relevant period.

(3) Where the period on the profits or gains of which income tax is chargeable under Case I or II of Schedule D for the year 1995-96 is that year, sub-paragraph (2) above shall have effect as if for the words from “the appropriate percentage” to the end there were substituted the words “the amount of foreign tax paid on income arising in that year”.

(4) Where—

(a) the amount of the profits or gains on which income tax is chargeable under Case I or II of Schedule D for the year 1996-97 is given by paragraph 2(2) above, and

(b) that amount includes income from any source in respect of which credit is allowable under Part XVIII of the Taxes Act 1988,

the amount of income from that source to be taken into account in determining what credit is so allowable shall be the appropriate percentage of the aggregate of the full amount of the income of the basis period for that year and the full amount of the income of the relevant period.

(5) [F1 Subject to sub-paragraph (5A) below,] the amount of foreign tax to be taken into account in determining whether and, if so, what credit is allowable under Part XVIII of the Taxes Act 1988 against income tax which, in respect of income from any source, is chargeable for the year 1996-97 under Case IV or V of Schedule D shall be 50 per cent. of the aggregate of—

(a) the amount of foreign tax paid on income from that source arising, or (as the case may require) received in the United Kingdom, in that year; and

(b) the amount of foreign tax paid on income from that source arising, or (as the case may require) received in the United Kingdom, in the year 1995-96.

[F2 (5A) Where the period on the profits or gains of which income tax is chargeable under Case IV or V of Schedule D for the year 1995-96 is that year, sub-paragraph (5) above shall have effect as if for the words from “50 per cent.” to the end there were substituted the words “the amount of foreign tax paid on income arising, or (as the case may require) received in the United Kingdom, in that year”.]

(6) In this paragraph—

• “the appropriate percentage” and “the relevant period” have the same meanings as in paragraph 2 above;

• “double taxation arrangements” means arrangements having effect by virtue of section 788 of the Taxes Act 1988;

• “foreign tax” means tax chargeable under the law of a territory outside the United Kingdom for which credit may be allowed under double taxation arrangements or section 790(1) of that Act.

Textual Amendments

F1 Words in Sch. 20 para. 10(5) inserted (1.5.1995) by 1995 c. 4, s. 122(4)

F2 Sch. 20 para. 10(5A) inserted (1.5.1995) by 1995 c. 4, s. 122(5)