Taxation (International and Other Provisions) Act 2010

248 The rule against deduction for untaxable payments

(1) The rule referred to in section 243(3)(b) is that the total deduction amount must be reduced.

(2) In this section “the total deduction amount” means the total of the amounts allowable as a deduction for the purposes of the Corporation Tax Acts in calculating any profits arising to the company from any transaction forming part of the deduction scheme.

(3) If the payee is not liable to tax for the purposes of section 245(4) in respect of the payment or payments that the payee receives or is entitled to receive, the total deduction amount must be reduced to nil.

(4) If the payee is liable to tax for those purposes in respect of part of that payment or those payments, the total deduction amount must be reduced by the same proportion of that amount as the proportion of the payment or payments on which the payee is not liable to tax.

(5) If the payee’s liability to tax is reduced as described in section 245(4)(b), the total deduction amount must be reduced by the same proportion of that amount as the reduction in the payee’s liability bears to that liability before reduction.