Income and Corporation Taxes Act 1988

[F2 797A Foreign tax on [F1 items giving rise to] a non-trading credit. 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 [F3 item] is brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) for any accounting period (“the applicable accounting period”); and

(b) there is in respect of [F4 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 paragraph (a) of Case III of Schedule D on the profits and gains 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 Chapter II of Part IV of the Finance Act 1996 (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 subsection (2)(b), (c) or (d) of section 83 of the Finance Act 1996 or paragraph 4(3) of Schedule 11 to that Act (group relief and transfer to previous or subsequent period of deficits) relates; [F5 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 subsection (3) of that section or paragraph 4(4) of that Schedule; F6 . . .

(c) F6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F7 An amount carried forward to the applicable accounting period under section 83(3) of that Act shall not be treated as a non-trading deficit for that period for the purposes of paragraphs (a) and (b).]

(6) Section 797(3) shall have effect as if any amount [F8 carried forward to the applicable accounting period in pursuance of a claim under section 83(2)(d) of that Act] 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) in pursuance of a claim under—

(i) subsection (2)(a) of section 83 of the Finance Act 1996 (deficit set against current year profits), or

(ii) paragraph 4(2) of Schedule 11 to that Act (set-off of deficits in the case of insurance companies),

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.

[F9 An amount carried forward to the applicable accounting period under section 83(3) of the M1 Finance Act 1996 shall be disregarded for the purposes of paragraphs (a) and (b).]

(8) In this section “non-trading profits” has the same meaning as in paragraph 4 of Schedule 8 to the Finance Act 1996.]

Textual Amendments

F1 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)

F2 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)

F3 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)

F4 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)

F5 Word at the end of s. 797A(5)(a) inserted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(b)(4)

F6 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

F7 Words at the end of s. 797A(5) inserted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(c)(4)

F8 Words in s. 797A(6) substituted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(d)(4)

F9 Words at the end of s. 797A(7) inserted (retrospectively) by Finance Act 1998 (c. 36), s. 82(2)(e)(4)

Marginal Citations

M1 1996 c. 8.