Finance Act 1950

Section 36.

SIXTH SCHEDULE Double Taxation Relief

PART I Provisions for credit by way of unilateral relief

1 Credit for tax paid under the law of the territory outside the United Kingdom in respect of income arising in that territory shall be allowed against any United Kingdom income tax or profits tax chargeable in respect of that income:

Provided that—

(a) where the territory is the Isle of Man or any of the Channel Islands, the limitation to income arising in the territory shall not apply;

(b) where arrangements with the Government of the territory are for the time being in force by virtue of Part V of the Finance (No. 2) Act, 1945, credit for tax paid under the law of the territory shall not be allowable under this paragraph in the case of any income if any credit for that tax is allowable under those arrangements in the case of that income.

2 Profits from or remuneration for personal or professional services performed in the territory shall be deemed to be income arising in the territory for the purpose of the preceding paragraph.

3 Where a dividend paid by a company resident in the territory is paid to a company resident in the United Kingdom which controls, directly or indirectly, not less than one half of the voting power in the company paying the dividend, tax paid under the law of the territory by the first mentioned company in respect of its profits shall be taken into account in considering whether any, and if so what, credit is to be allowed in respect of the dividend.

4 The following provisions shall, without prejudice to the generality of the last preceding paragraph, have effect where the territory is within the Commonwealth territories—

(a) where the income arising in the territory is an ordinary dividend paid by a company which is resident in the territory, tax paid under the law of the territory by the company in respect of its profits shall be taken into account in considering whether any, and if so what, credit is to be allowed in respect of the dividend; and

(b) where the income arising in the territory is a dividend paid by a company resident in the territory on participating preference shares and represents both a dividend at the fixed rate to which the shares are entitled and an additional participation in profits, sub-paragraph (a) of this paragraph shall apply in relation to so much of the dividend as represents the said additional participation in profits as if that part of the dividend were an ordinary dividend.

PART II Amendments of Ninth Schedule to the Finance Act, 1947, applicable to unilateral relief

1 Notwithstanding anything in paragraph 3 of Part I of the Ninth Schedule to the Finance Act, 1947 (which provides that relief by way of credit shall be given only where the person in question is resident in the United Kingdom),—

(a) credit by way of unilateral relief for tax paid under the law of the Isle of Man or any of the Channel Islands may be allowed if the person in question is, for the chargeable accounting period or year of assessment in question, resident either in the United Kingdom or in the Isle of Man or the Channel Islands, as the case may be;

(b) credit by way of unilateral relief for tax paid under the law of any territory in respect of income from an office or employment of profit the duties whereof are performed wholly or mainly in that territory may be allowed against income tax chargeable under Schedule E in respect of that income if the person in question is, for the year of assessment in question, resident either in the United Kingdom or that territory.

2 In sub-paragraph (3) of paragraph 7 of the said Part I (which provides that tax which can be allowed as a credit neither against income tax nor against the profits tax shall be allowed as a deduction in computing the amount of the income chargeable to the profits tax), after the words " the amount of the income," where they last occur, there shall, in relation to credit by way of unilateral relief, be deemed to be inserted the words " of the trade or business in question for the chargeable accounting period next following the period on the income of which the foreign tax was paid. "

PART III Transitional Provisions

1 Where tax is paid under the law of a territory outside the United Kingdom in respect of income which, for profits tax purposes, is or forms part of the profits for a chargeable accounting period ending at or before the end of March, nineteen hundred and fifty—

(a) credit for the tax so paid shall not be allowed by way of unilateral relief against the profits tax; and

(b) the tax so paid may be deducted in computing the amount of the profits for profits tax purposes notwithstanding that credit (being credit by way of unilateral relief) falls to be allowed therefor against income tax; and

(c) where the income is, for income tax purposes, income of the year 1950-51, sub-paragraph (3) of paragraph 7 of Part I of the Ninth Schedule to the Finance Act, 1947, as modified by paragraph 2 of Part II of this Schedule, shall apply or not apply in relation to so much of the tax so paid as cannot be allowed as a credit against income tax according as the next chargeable accounting period of the trade or business in question does or does not end after the said end of March:

Provided that where the said next chargeable accounting period falls partly before and partly after the said end of March, the tax which would, but for this proviso, go to reduce the amount of the profits for the said next chargeable accounting period shall be apportioned between the two parts of the said next chargeable accounting period, and so much only of that tax as is apportioned to the second part of the period shall go to reduce the profits for that period.

2 Where tax is paid under the law of a territory outside the United Kingdom in respect of income which, for profits tax purposes, is or forms part of the profits for a chargeable accounting period falling partly before and partly after the said end of March, the tax so paid shall be apportioned between the two parts of the period, and sub-paragraphs (a) and (b) of paragraph 1 of this Part of this Schedule shall apply in relation to the tax apportioned to the first part of the period as they apply in relation to income which, for profits tax purposes, is or forms part of the profits for a chargeable accounting period ending at or before the said end of March.

3 Profits tax for any chargeable accounting period ending at or before the said end of March shall be left out of account in ascertaining, under the proviso to subsection (2) of section thirty-six of this Act, the total amount of the credit by way of unilateral relief which may be allowed in respect of any tax.

4 Profits tax for any chargeable accounting period falling partly before and partly after the said end of March shall be apportioned between the two parts of the period and—

(a) the credit by way of unilateral relief to be applied in reducing the amount of the profits tax for that period shall not exceed so much of the profits tax as is apportioned to the second part of the period; and

(b) paragraph 3 of this Part of this Schedule shall apply in relation to so much of the profits tax as is apportioned to the first part of the period as it applies in relation to profits tax for a chargeable accounting period ending at or before the said end of March.

5 Any apportionment falling to be made under this Part of this Schedule of—

(a) tax which would, but for the proviso to paragraph 1 thereof, go to reduce profits for a chargeable accounting period falling partly before and partly after the said end of March; or

(b) tax paid under the law of a territory outside the United Kingdom in respect of income which, for profits tax purposes, is or forms part of the profits for any such chargeable accounting period; or

(c) profits tax for any such chargeable accounting period,

shall be made by reference to the number of months or fractions of a month in the two parts of the chargeable accounting period.