Finance Act 1994

Double taxation relief U.K.

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)

11 (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) Sub-paragraph (3) below applies where—

(a) credit against income tax for the year 1995-96 or any earlier year of assessment is or has been allowed by virtue of subsection (1) of section 804 of the Taxes Act 1988 in respect of any income (“the original income”), and

(b) the source of that income ceases in a subsequent year of assessment (“the subsequent year”).

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

(a) the amount of the credit which, under Part XVIII of the Taxes Act 1988 (including section 804), has been allowed against income tax in respect of the original income, and

(b) the aggregate of—

(i) the amount of the credit which, apart from that section, would have been so allowed, and

(ii) the difference between the amount of the credit which, on the assumptions mentioned in sub-paragraph (4) below, would have been allowable under Part XVIII of that Act for the year 1996-97 and the amount of credit which has been so allowed;

and if the amount given by paragraph (a) exceeds that given by paragraph (b) above, the person chargeable in respect of income (if any) arising in the subsequent year from the same source as the original income shall be treated as having received in that year a payment chargeable under Case VI of Schedule D of an amount such that income tax on it at the basic rate is equal to the excess.

(4) The assumptions are—

(a) that the words “the appropriate percentage of” were omitted from paragraph 2(2) above;

(b) that the words “50 per cent. of” were omitted from paragraphs (a), (b) and (c) of paragraph 6(2) above; and

(c) that paragraph 10 above had not been enacted.

(5) Where the period on the income of which income tax is chargeable for the year 1996-97 is that year, sub-paragraph (3) above shall have effect as if for paragraph (b) there were substituted the following paragraph—

“(b) the amount of the credit which, apart from that section, would have been so allowed;”.

(6) Any reference in sub-paragraph (2) or (3) above to section 804 or Part XVIII of the Taxes Act 1988 includes a reference to the corresponding provisions of any earlier enactments.

(7) Any payment which a person is treated by virtue of sub-paragraph (3) above as having received shall not on that account constitute income of his for any of the purposes of the Income Tax Acts other than that sub-paragraph and in particular no part of it shall constitute profits or gains brought into charge to income tax for the purposes of section 348 of the Taxes Act 1988.

12 (1) In the case of— U.K.

(a) a trade, profession or vocation set up and commenced before 6th April 1994 and ceasing before 6th April 1998, being a trade, profession or vocation in respect of which a direction has been given under paragraph 3(2) above, or

(b) income from a source arising before the former date and ceasing before the latter date, being income to which paragraph 7 above applies,

section 804 of the Taxes Act 1988 shall have effect as if section 217 of this Act and its associated repeals had not been enacted.

(2) In the case of a trade, profession or vocation set up and commenced before 6th April 1994 and ceasing on or after 6th April 1998 but before 6th April 1999, being a trade, profession or vocation in respect of which a direction has been given under paragraph 3(4) above—

(a) paragraphs 10 and 11 above shall not apply, and

(b) section 804 of the Taxes Act 1988 shall have effect as if section 217 of this Act and its associated repeals had not been enacted.

13 U.K. Paragraphs 2(2) and 6(2) above shall have effect as if any reference to the full amount of any profits or gains, or the full amount of any income, were a reference to that amount after any reduction which is treated as made by section 811 of the Taxes Act (deduction for foreign tax where no credit allowable).