Income and Corporation Taxes Act 1988

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

M1 (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 [F1 but allowing for the making of any other income tax reduction under the Income Tax Acts][F2 , 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.

[F3 (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, [F4 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

F1 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

F2 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)

F3 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)

F4 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

M1 Source—1970 s.504