(1) For the purposes of sections 71A to 76 “overseas permanent establishment” means , in relation to a company, a permanent establishment through which the company carries on a trade in a territory outside the United Kingdom.
(2) In subsection (1) “permanent establishment”—
(a) if the arrangements are double taxation arrangements which contain a relevant non-discrimination provision, has the meaning given by the arrangements, and
(b) if the arrangements are double taxation arrangements which do not contain a relevant non-discrimination provision, or if the arrangements are unilateral relief arrangements for a territory outside the United Kingdom, has the meaning given by the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development in July 2010 (“the OECD”) or such other document published by the OECD in place of it as is designated from time to time by order made by the Treasury.
(3) In subsection (2) “relevant non-discrimination provision” means a provision to the effect that the taxation on a permanent establishment of an enterprise of a state which is party to the arrangements (a “contracting state”) is not to be less favourably levied in any other contracting state than the taxation levied on enterprises of that other contracting state carrying on the same activities.
79 Time limits for action if tax adjustment makes credit excessive or insufficient
(1) Subsection (2) applies to a claim or assessment if—
(a) the amount of any credit given under the arrangements is reduced under section 34, or becomes excessive or insufficient by reason of any adjustment of the amount of any tax payable either in the United Kingdom or under the law of any other territory,
(b) the reduction or adjustment gives rise to the claim or assessment, and
(c) the claim or assessment is made not later than 6 years from the time when all material determinations have been made, whether in the United Kingdom or elsewhere.
(2) Nothing in—
(a) the Tax Acts, and
(b) the enactments relating to capital gains tax,
limiting the time for the making of assessments, or limiting the time for the making of claims for relief, applies to the assessment or claim.
(3) In subsection (1)(c) “material determination” means an assessment, reduction, adjustment or other determination that is material in determining whether any, and (if so) what, credit is to be given.
80 Duty to give notice that adjustment has rendered credit excessive
(1) This section applies if—
(a) any credit for foreign tax has been allowed to a person under the arrangements,
(b) later, the amount of that credit is reduced under section 34, or becomes excessive as a result of an adjustment of the amount of any tax payable under the law of a territory outside the United Kingdom, and
(c) the reduction or adjustment is not a Lloyd's adjustment (see subsection (5)).
(2) The person must give notice that a reduction has been made or that the amount of the credit has become excessive as a result of the making of an adjustment.
(3) Notice under subsection (2) is to be given—
(a) to an officer of Revenue and Customs, and
(b) within one year from when the reduction or adjustment is made.
(4) If the person fails to comply with the requirements imposed by subsections (2) and (3), the person is liable to a penalty not greater than the amount by which the credit has been reduced or has become excessive as a result of the adjustment.
(5) For the purposes of subsection (1)(c), the reduction or adjustment is a “Lloyd's adjustment” if the consequences of the reduction or adjustment in relation to the credit are to be given effect in accordance with regulations under—
(a) section 182(1) of FA 1993 (regulations about individual members of Lloyd's), or
(b) section 229 of FA 1994 (regulations relating to corporate members of Lloyd's).
(6) In this section so far as it relates to capital gains tax “notice” means notice in writing.
(1) This section applies if each of conditions A to D of section 82 is met in relation to a person.
(2) The effects of a scheme or arrangement that are referable to the purpose referred to in condition B of that section are to be counteracted by the making of such adjustments as are necessary.
(3) Any adjustments required to be made by this section (whether or not by an officer of Revenue and Customs) may be made by way of—
(a) an assessment,
(b) the modification of an assessment, or
(c) amendment or disallowance of a claim,
or otherwise.
(1) Conditions A to D are the conditions mentioned in section 81(1).
(2) Condition A is that, in respect of any income or chargeable gain—
(a) taken into account for the purposes of determining a person's liability to UK tax in a chargeable period, or
(b) to be taken into account for the purposes of determining a person's liability to UK tax in a chargeable period,
there is an amount of foreign tax for which, under the arrangements, credit is allowable against UK tax for the period.
(3) Condition B is that there is a scheme or arrangement the main purpose of which, or one of the main purposes of which, is to cause an amount of foreign tax to be taken into account in the person's case for the period.
(4) Condition C is that the scheme or arrangement is within section 83.
(5) Condition D is that T is more than a minimal amount, where T is the sum of—
(a) the total amount of the claims for credit that the person has made, or is in a position to make, for the period (“the counteraction period”), and
(b) the total amount of all connected-person claims.
(6) In subsection (5) “connected-person claim” means a claim that any person connected to the person has made, or is in a position to make, for any chargeable period that overlaps the counteraction period by at least one day.
(7) In this section—
“chargeable period”, in relation to capital gains tax, means tax year (see section 288(1ZA) of TCGA 1992),
“foreign tax” includes any tax which for the purpose of allowing credit under the arrangements against corporation tax is treated by section 63(5) as if it were tax payable under the law of the non-UK territory, and
“UK tax” means income tax, corporation tax or capital gains tax.
(8) Section 286 of TCGA 1992 (meaning of “connected”) applies for the purposes of subsection (6) so far as applying in relation to capital gains tax.
83 Schemes and arrangements referred to in section 82(4)
(1) For the purposes of section 82(4), a scheme or arrangement is within this section if it is within subsection (2) or (4).
(2) A scheme or arrangement is within this subsection if—
(a) it is not an underlying-tax scheme or arrangement, and
(b) one or more of sections 84 to 88 apply to it.
(3) For the purposes of this section, a scheme or arrangement is an “underlying-tax” scheme or arrangement if its main purpose, or one of its main purposes, is to cause an amount of underlying tax allowable in respect of a dividend paid by an overseas-resident body corporate to be taken into account in a person's case.
(4) A scheme or arrangement is within this subsection if—
(a) it is an underlying-tax scheme or arrangement, and
(b) one or more of sections 84 to 88 would, on the assumption in subsection (5), apply to it.
(5) The assumption is that the body corporate is resident in the United Kingdom.
(6) Nothing in subsection (5) requires it to be assumed that there is any change in the place or places at which the body corporate carries on its activities.
(7) In subsection (3) “overseas-resident” means resident in a territory outside the United Kingdom.
84 Section 83(2) and (4): schemes enabling attribution of foreign tax
(1) This section applies to a scheme or arrangement if—
(a) the scheme or arrangement enables a participant to pay, in respect of a source of income or chargeable gain, an amount of foreign tax, and
(b) all or part of that amount of foreign tax is properly attributable to another source of income or chargeable gain.
(2) In subsection (1) “participant” means a person who is party to, or concerned in, the scheme or arrangement.
85 Section 83(2) and (4): schemes about effect of paying foreign tax
(1) This section applies to a scheme or arrangement if, under the scheme or arrangement, the condition in subsection (2) is met in relation to a person (“C”) who for a chargeable period has claimed, or is in a position to claim, any credit that under the arrangements is to be allowed for in respect of the payment of an amount of foreign tax (“the FT amount”).
(2) The condition is that, when C entered into the scheme or arrangement, it could reasonably be expected that the effect on the foreign-tax total of the FT amount being paid or payable would be to increase that total by less than amount X.
(3) In subsection (2)—
“the foreign-tax total” means the amount found by—
totalling the amounts of foreign tax paid or payable by the participants in respect of the transaction or transactions forming part of the scheme or arrangement, and
taking into account any reliefs that arise to the participants, including any reliefs arising to any one or more of the participants as a consequence of the FT amount being paid or payable ..., and
“amount X” means the amount allowable to C as a credit in respect of the payment of the FT amount.
(4) In subsection (3)—
“participant” means a person who is party to, or concerned in, the scheme or arrangement, and
“reliefs” means reliefs, deductions, reductions or allowances against or in respect of any tax.
(5) In subsection (1) so far as it relates to capital gains tax “chargeable period” means tax year (see section 288(1ZA) of TCGA 1992).
85A Section 83(2) and (4): schemes involving deemed foreign tax
(1) This section applies to a scheme or arrangement if in relation to a claimant—
(a) an amount (“amount X”) is treated by virtue of a provision of the Tax Acts as if it were an amount of foreign tax paid or payable by the claimant in respect of a source of income, and
(b) condition A or B is met.
(2) Condition A is met if, when the claimant entered into the scheme or arrangement, it could reasonably be expected that, under the scheme or arrangement, no real foreign tax would be paid or payable by a participant.
(3) Condition B is met if, when the claimant entered into the scheme or arrangement, it could reasonably be expected that, under the scheme or arrangement—
(a) an amount of real foreign tax (“the RFT amount”) would be paid or payable by a participant, but
(b) the effect on the foreign-tax total of the RFT amount being so paid or payable would be to increase the foreign-tax total by less than the amount allowable to the claimant as a credit in respect of amount X.
(4) In this section—
“ claimant ” means a person who for a chargeable period has claimed, or is in a position to claim, for any credit that under the arrangements is to be allowed for foreign tax;
“ the foreign-tax total ” has the meaning given by section 85(3), except that the reference to “the FT amount being paid or payable by C” must be read as a reference to “the RFT amount being paid or payable by any of them”;
“ income ” includes a chargeable gain;
“ participant ” means a person who is party to, or concerned in, the scheme or arrangement;
“ real foreign tax ” means—
in a case involving section 10 (accrued income profits), the foreign tax chargeable in respect of the interest on the securities, as mentioned in subsection (1)(c) of that section,
...
in any other case, the foreign tax chargeable in respect of the source of income of which the source mentioned in subsection (1)(a) is representative.
86 Section 83(2) and (4): schemes about claims or elections etc
(1) This section applies to a scheme or arrangement if ...—
(a) a step is taken by a participant, or
(b) a step that could have been taken by a participant is not taken,
and that action or failure to act has the effect of increasing, or giving rise to, a claim by a participant for an allowance by way of credit under this Part.
(2) The steps mentioned in subsection (1) are steps that may be taken—
(a) under the law of any territory, or
(b) under double taxation arrangements made in relation to any territory.
(3) The steps mentioned in subsection (1) include—
(a) claiming, or otherwise securing the benefit of, reliefs, deductions, reductions or allowances, and
(b) making elections for tax purposes.
(3A) Reference in subsection (1) to a step that is taken or not taken by a participant includes one that was taken or not taken by a participant before the scheme or arrangement was made.
(3B) The reason for taking or not taking a step does not matter so long as it has the effect mentioned in subsection (1).
(4) In subsection (1) “participant” means a person who is party to, or concerned in, the scheme or arrangement.
87 Section 83(2) and (4): schemes that would reduce a person's tax liability
(1) This section applies to a scheme or arrangement if, under the scheme or arrangement, the condition in subsection (2) is met in relation to a person (“P”) who for a chargeable period has claimed, or is in a position to claim, any credit that under the arrangements is to be allowed for foreign tax.
(2) The condition is that amount A is less than amount B.
(3) Amount A is the total amount of UK tax payable by P and such persons (if any) as are connected with P in respect of income and chargeable gains arising in the chargeable period.
(4) Amount B is the total amount of UK tax that would be payable by P and such persons (if any) as are connected with P in respect of income and chargeable gains arising in the chargeable period if, in determining that amount, the transactions forming part of the scheme or arrangement were disregarded.
(5) In this section “UK tax” means income tax, corporation tax and capital gains tax.
(6) In this section so far as it relates to capital gains tax “chargeable period” means tax year (see section 288(1ZA) of TCGA 1992).
(7) For the purposes of this section, whether a person is connected with P is determined in accordance with section 1122 of CTA 2010.
88 Section 83(2) and (4): schemes involving tax-deductible payments
(1) This section applies to a scheme or arrangement if the scheme or arrangement includes—
(a) the making by a person (“P”) of a relevant payment or payments, and
(b) the giving, in respect of the payment or payments, of qualifying consideration.
(2) For the purposes of subsection (1), a payment is a “relevant payment” if all or part of it may be brought into account—
(a) in calculating P's income for the purposes of income tax or corporation tax, or
(b) in calculating P's chargeable gains for the purposes of capital gains tax.
(3) For the purposes of subsection (1), consideration is “qualifying consideration” if—
(a) all or part of it consists of a payment made to P or a person connected with P, and
(b) tax is chargeable in respect of the payment under the law of a territory outside the United Kingdom.
(4) In this section “payment” includes a transfer of money's worth.
(5) For the purposes of this section, whether a person is connected with another is determined in accordance with section 1122 of CTA 2010.
96 Companies with overseas branches: restriction of credit
(1) Subsection (4) applies if credit for foreign tax—
(a) which is payable in respect of insurance business carried on by a company through a permanent establishment in the non-UK territory, and
(b) which is calculated otherwise than wholly by reference to profits arising in the non-UK territory,
is to be allowed (in accordance with this Part) against corporation tax charged under section 35 of CTA 2009 ... in respect of the profits ... of non-BLAGAB long-term business carried on by the company in an accounting period (in this section called “the relevant UK-taxable profits”).
(2) For the purposes of subsection (1)(b), the cases in which foreign tax is “calculated otherwise than wholly by reference to profits arising in the non-UK territory” are those cases in which the charge to tax in the non-UK territory is within subsection (3).
(3) A charge to tax is within this subsection if it is such a charge made otherwise than by reference to profits as (by disallowing their deduction in calculating the amount chargeable) to require sums payable and other liabilities arising under policies to be treated as sums or liabilities falling to be met out of amounts subject to tax in the hands of the company.
(4) If this subsection applies, the amount of the credit is not to exceed the greater of—
(a) any such part of the foreign tax as is charged by reference to profits arising in the non-UK territory, and
(b) the shareholders' share of the foreign tax.
(5) For the purposes of subsection (4), the shareholders' share of the foreign tax is so much of that tax as is represented by the fraction—
A
B
where—
A is an amount equal to the amount of the relevant UK-taxable profits before making any deduction authorised by subsection (7), and
B is an amount equal to the excess of—
the amount taken into account as receipts of the company in calculating those profits, apart from premiums and sums received by virtue of a claim under a reinsurance contract, over
the amount taken into account as expenses in calculating those profits.
(6) If there is no such excess, or if the profits are greater than any excess, the whole of the foreign tax is the shareholders' share; and, subject to that, if there are no profits, none of the foreign tax is the shareholders' share.
(7) If, by virtue of this section, the credit for any foreign tax is less than it otherwise would be, section 31(2)(a) does not prevent a deduction being made for the difference in calculating the relevant UK-taxable profits.
97 Companies with more than one category of business: restriction of credit
(1) This section applies if—
(a) an insurance company carries on more than one category of long-term business in an accounting period, and
(b) there arises to the company in that period any income or gain (“the relevant income”) in respect of which credit for foreign tax is to be allowed under the arrangements.
(2) The amount of the credit for foreign tax which, under the arrangements, is allowable against corporation tax in respect of so much of the relevant income as is referable, in accordance with Part 2 of FA 2012, to a particular category of business must not exceed the fraction of the foreign tax which, in accordance with subsection (3), is attributable to that category of business.
(3) The fraction of the foreign tax that is attributable to the category of business in question is the fraction given by—
RPRI TRI
where—
RPRI is the amount of the relevant income referable to the category of business in question in accordance with section 97A, and
TRI is the total amount of the relevant income.
97A Commercial allocation of relevant income to different categories of long-term business
(1) The amount of the relevant income that, for the purposes of section 97, is to be regarded as referable to a category of business is to be determined in accordance with an acceptable commercial method adopted by the company for the period of account in which the relevant income arises.
(2) A method is an “acceptable commercial method” if, in all the circumstances, it can reasonably be regarded as providing a fair method for the purposes of section 97 for determining for a period of account the amount of any income or gain arising in the period that is referable to a particular category of long-term business carried on by the company.
(3) The Treasury may make regulations for the purposes of this section—
(a) prescribing cases in which a method is, or is not, to be regarded as an acceptable commercial method, and
(b) prescribing cases in which the only acceptable commercial method is to be a method prescribed, or of a description prescribed, in the regulations.
(4) Subject to any provision made by regulations under subsection (3), the method adopted for the purposes of this section for a period of account must be consistent with the method adopted for the purposes of section 98 or 115 of FA 2012 for that period.
99 Allocation of expenses etc in calculations under section 35 of CTA 2009
(1) Subsection (2) has effect if—
(a) an insurance company carries on any category of insurance business in a period of account,
(b) a calculation in accordance with the provisions applicable for the purposes of section 35 of CTA 2009 (charge on trade profits) falls to be made in relation to that category of business for that period, and
(c) there arises to the company in that period any income or gain in respect of which credit for foreign tax is to be allowed under the arrangements.
(2) The amount of the credit for foreign tax which, under the arrangements, is to be allowed against corporation tax in respect of so much of that income or gain as is referable to the category of business concerned (“the relevant income”) is to be limited by treating the amount of the relevant income as reduced in accordance with sections 100 and 101.
(3) In determining the amount of credit for foreign tax which is to be allowed as mentioned in subsection (2), the relevant income is not to be reduced except in accordance with that subsection.
(4) If a 75% subsidiary of an insurance company is acting in accordance with a scheme or arrangement and—
(a) the purpose, or one of the main purposes, of the scheme or arrangement is to prevent or restrict the application of subsection (2) to the insurance company, and
(b) the subsidiary does not carry on insurance business of any description,
the amount of corporation tax attributable (apart from this subsection) to any item of income or gain arising to the subsidiary is to be found by setting off against that item the amount of expenses that would be attributable to it under section 100(1) if that item had arisen directly to the insurance company.
(5) If the credit allowed for any foreign tax is, by virtue of subsection (2), less than it would be if the relevant income were not treated as reduced in accordance with that subsection, section 31(2)(a) does not prevent a deduction being made for the difference in calculating the profits of the category of business concerned.
(6) If, by virtue of subsection (4), the credit allowed for any foreign tax is less than it would be apart from that subsection, section 31(2)(a) does not prevent a deduction being made for the difference in calculating the income of the 75% subsidiary.
(7) For the purposes of the operation of this section in relation to any income or gain in respect of which credit is to be allowed under the arrangements, the amount of the income or gain that is referable to a category of insurance business is the same fraction of the income or gain as the fraction of the foreign tax that is attributable to that category of business in accordance with sections 97 and 97A.
100 First limitation for purposes of section 99(2)
(1) The first limitation for the purposes of section 99(2) is to treat the amount of the relevant income as reduced (but not below nil) for the purposes of this Chapter by the amount of expenses (if any) attributable to the relevant income.
(2) For the purposes of subsection (1), the amount of expenses attributable to the relevant income is the appropriate fraction of the total relevant expenses of the category of business concerned for the period of account in question.
(3) In subsection (2) “the appropriate fraction” means the fraction given by—
R
I
T
I
where—
RI is the amount of the relevant income before any reduction in accordance with section 99(2), and
TI is the total income of the category of business concerned for the period of account in question, but if that would result in TI being nil, TI is instead the amount described in subsection (4).
(4) That amount is so much in total of the income and gains—
(a) which arise to the company in the period of account in question, and
(b) in respect of which credit for foreign tax is to be allowed under any double taxation arrangements or under unilateral relief arrangements for any territory outside the United Kingdom,
as are referable to the category of business concerned (before any reduction in accordance with section 99(2)).
(5) Subsection (4) is to be read with section 104 (determining how much of any income or gain is referable to a category of business).
(6) In this section “the relevant income” has the meaning given by section 99(2).
101 Second limitation for purposes of section 99(2)
(1) If—
(a) the amount of the relevant income after any reduction under section 100(1),
exceeds—
(b) the relevant fraction of the profits of the category of business concerned for the period of account in question which are chargeable to corporation tax,
the second limitation is to treat the relevant income as further reduced (but not below nil) for the purposes of this Chapter to an amount equal to that fraction of those profits.
(2) In subsection (1) “the relevant fraction” means the fraction given by—
R
I
The referable share of total relievable income and gains
where—
“RI” is the amount of the relevant income before any reduction in accordance with section 99(2), and
“the referable share of total relievable income and gains” is so much in total of the income and gains—
which arise to the company in the period of account in question, and
in respect of which credit for foreign tax is to be allowed under any double taxation arrangements or under unilateral relief arrangements for any territory outside the United Kingdom,
as are referable to the category of business concerned (before any reduction in accordance with section 99(2)).
(3) In subsection (1), any reference to the profits of a category of business is a reference to those profits after the set off of any losses of that category of business which have arisen in any previous accounting period.
(4) Subsection (2) is to be read with section 104 (determining how much of any income or gain is referable to a category of business).
(5) In this section “the relevant income” has the meaning given by section 99(2).
(1) This section has effect for the interpretation of sections 99 to 101 ...
(2) The “total income” of the category of business concerned for any period of account is the amount (if any) by which—
(a) the sum of the amounts specified in subsection (3),
exceeds—
(b) the sum of the amounts specified in subsection (4).
(3) The amounts mentioned in subsection (2)(a) are—
(a) earned premiums, net of reinsurance,
(b) investment income and gains, and
(c) other technical income, net of reinsurance.
(4) The amounts mentioned in subsection (2)(b) are—
(a) acquisition costs,
(b) the change in deferred acquisition costs, and
(c) losses on investments.
(5) The “total relevant expenses” of the category of business concerned for any period of account is the sum of—
(a) the claims incurred, net of reinsurance,
(b) the changes in other technical provisions, net of reinsurance,
(c) the change in the equalisation provision, and
(d) investment management expenses,
unless that sum is a negative amount, in which case the total relevant expenses is to be taken to be nil.
(6) The amounts to be taken into account for the purposes of the paragraphs of subsections (3) to (5) are the amounts taken into account for the purposes of corporation tax.
(7) Expressions used—
(a) in the paragraphs of subsections (3) to (5), and
(b) in the provisions of section B of Part 1 of Schedule 3 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (S.I. 2008/410) which relate to the profit and loss account format (within the meaning of paragraph 1(1) and (2) of that Schedule),
have the same meaning in those paragraphs as they have in those provisions.
104 Interpreting sections 100 and 101: amounts referable to category of business
(1) This section applies for the purposes of the operation of sections 100 and 101 in relation to any income or gain in respect of which credit is to be allowed under any double taxation arrangements or under unilateral relief arrangements for a territory outside the United Kingdom.
(2) The amount of the income or gain that is referable to a category of insurance business is the same fraction of the income or gain as the fraction found under subsection (3).
(3) Apply sections 97 and 97A in relation to—
(a) that category of business,
(b) the income or gain, and
(c) the double taxation arrangements, or unilateral relief arrangements, mentioned in subsection (1),
in order to find the fraction of the foreign tax that is attributable to that category of business.
In this Part so far as it relates to capital gains tax “chargeable gain” has the same meaning as in TCGA 1992 (see, in particular, section 15(2) of that Act).
106 Chapters 1 and 2 apply to capital gains tax separately from other taxes
(1) Subsection (2) applies if foreign gains tax may be brought into account under Chapters 1 and 2 so far as they apply for capital gains tax purposes.
(2) The foreign gains tax is not to be taken into account under those Chapters so far as they apply otherwise than for capital gains tax purposes.
(3) Subsection (2) applies whether or not relief in respect of the foreign gains tax is given under those Chapters so far as they apply for capital gains tax purposes.
(4) Foreign non-gains tax is not be taken into account under those Chapters so far as they apply for capital gains tax purposes.
(5) In this section—
“foreign gains tax” means any tax which—
is imposed by the law of a territory outside the United Kingdom, and
is of a similar character to capital gains tax, and
“foreign non-gains tax” means tax which—
is imposed by the law of a territory outside the United Kingdom, and
is not foreign gains tax.
107 Disregard of foreign tax referable to derivative contract
(1) In applying this Part for corporation tax purposes in relation to a company, disregard tax within subsection (2).
(2) Tax is within this subsection in relation to a company so far as the tax—
(a) is tax under the law of a territory outside the United Kingdom, and
(b) is attributable, on a just and reasonable apportionment, to so much of a notional interest payment as, on such an apportionment, is attributable to a time when the company is not a party to the derivative contract concerned.
(3) For the purposes of this section, a payment is a “notional interest payment” if—
(a) a derivative contract specifies—
(i) a notional principal amount,
(ii) a period, and
(iii) a rate of interest,
(b) the amount of the payment is determined (wholly or mainly) by applying a rate to the specified notional principal amount for the specified period, and
(c) the value of the rate is the same at all times as that of the specified rate of interest.
108 Disregard of foreign tax attributable to interest under a loan relationship
(1) In applying this Part for corporation tax purposes in relation to a company, disregard tax within subsection (2).
(2) Tax is within this subsection in relation to a company so far as the tax—
(a) is tax under the law of a territory outside the United Kingdom, and
(b) is attributable, on a just and reasonable apportionment, to interest accruing under a loan relationship at a time when the company is not a party to the relationship.
(3) Tax within subsection (2) is not to be disregarded under subsection (1) if the tax is also within section 109 or 110.
109 Repo cases in which no disregard under section 108
(1) Tax attributable to interest accruing to a company under a loan relationship is within this section if—
(a) at the time when the interest accrues, the company has ceased to be a party to the relationship by reason of having made the initial sale under or in accordance with any debtor repo relating to the relationship, and
(b) that time is in the period for which the repo has effect.
(2) In this section—
“debtor repo” has the meaning given by the repo-definition section,
“the initial sale”, in relation to a debtor repo, means the sale mentioned in condition C in the repo-definition section, and
“the repo-definition section” means section 548 of CTA 2009.
(3) In this section, a reference to the period for which a debtor repo has effect is to the period from the making of the initial sale until the earlier of—
(a) the time when the subsequent purchase mentioned in condition D in the repo-definition section takes place, and
(b) the time when it becomes apparent that that subsequent purchase will not take place.
110 Stock-lending cases in which no disregard under section 108
(1) Tax attributable to interest accruing to a company under a loan relationship is within this section if—
(a) at the time when the interest accrues, the company has ceased to be a party to the relationship by reason of having made the initial transfer under or in accordance with any stock lending arrangement relating to that relationship, and
(b) that time is in the period for which the arrangement has effect.
(2) In this section—
“the initial transfer”, in relation to a stock lending arrangement, means the transfer mentioned in section 263B(1)(a) of TCGA 1992, and
“stock lending arrangement” has the meaning given by section 263B of TCGA 1992.
(3) In this section, a reference to the period for which a stock lending arrangement has effect is to the period from the making of the initial transfer until the earlier of—
(a) the time when the transfer mentioned in section 263B(1)(b) of TCGA 1992 takes place, and
(b) the time when it becomes apparent that that transfer will not take place.
111 When payment to beneficiary treated as arising from foreign source
(1) Subsection (6) applies if each of conditions A to D is met.
(2) Condition A is that a payment is made by trustees of a settlement.
(3) Condition B is that income tax is treated under section 494 of ITA 2007 (treatment of discretionary payments by trustees) as having been paid in relation to the payment.
(4) Condition C is that the income arising under the settlement includes taxed overseas income.
(5) Condition D is that the trustees certify—
(a) that the payment is one made out of income consisting of, or including, taxed overseas income of an amount, and from a source, stated in the certificate, and
(b) that that amount of taxed overseas income arose to the trustees not earlier than 6 years before the end of the tax year in which the payment is made.
(6) The person to whom the payment is made may claim that the payment, up to the certified amount, is to be treated for the purposes of this Part as income received by the person—
(a) from the certified source, and
(b) in the tax year in which the payment is made.
(7) In this section “taxed overseas income”, in relation to a settlement, means income in respect of which the trustees are entitled to credit under this Part for tax under the law of a territory outside the United Kingdom.
112 Deduction from income for foreign tax (instead of credit against UK tax)
(1) The amount of any income arising in any place outside the United Kingdom is reduced for the purposes of the Tax Acts—
(a) by any amount which has been paid in respect of non-UK tax on that income in the place where the income arose, or
(b) if subsection (2) applies, by the lesser amount mentioned in that subsection.
(2) This subsection applies if credit would, were it allowable in respect of the income, be reduced under section 39 (reduction by reference to accrued income losses) to the lesser amount given by section 39(5).
(2A) But if X is less than Y, an amount equal to the difference between X and Y must be subtracted from the amount by which any income of a person (“the relevant income”) is reduced under subsection (1)(a).
(2B) In subsection (2A)—
X is the amount of the relevant income that the person would (disregarding this section) be required to bring into account for income tax or corporation tax purposes, less any deduction that the person would be allowed to make for the amount paid in respect of non-UK tax, and
Y is the amount of the relevant income (that is to say, the amount on which the amount in respect of non-UK tax is paid).
(3) If—
(a) income of any person (“P”) is reduced under subsection (1) by an amount paid in respect of tax on that income in the place where the income arose, and
(b) a tax authority makes a payment by reference to that tax, and that payment—
(i) is made to P or a person connected with P, or
(ii) is made to some other person directly or indirectly in consequence of a scheme that has been entered into,
the amount of P's income is increased by the amount of the payment.
(3A) Subsection (3B) applies if—
(a) the requirements of section 49A(1)(a) to (c) are met,
(b) amounts have been paid in respect of non-UK tax on loan relationship credits falling within section 49A(1)(c) which arise in an accounting period of the relevant UK company, and
(c) apart from subsection (3B), Z would exceed
R × S
where—
Z is—
the total amount of any reductions under subsection (1) for amounts paid in respect of that non-UK tax, less
the total amount of any increases under subsection (3) for payments made by reference to that non-UK tax, and
R and S have the same meaning as in section 49A(2).
R and S have the same meaning as in section 49A(2).
(3B) The total amount of the reductions under subsection (1) is to be reduced so that Z equals
R
×
S
(4) Subsection (1)—
(a) has effect subject to section 31(2)(a) (no deduction for foreign tax if credit allowed and UK tax calculated otherwise than by reference to the amount received in the United Kingdom),
(aa) has effect subject to section 71B(2) (reduction of foreign tax paid on profits of overseas permanent establishment),
(b) has effect subject to section 143(5) and (6) (no deduction for special withholding tax if UK tax calculated otherwise than by reference to the amount received in the United Kingdom),
(c) does not apply to income the tax on which is to be calculated by reference to the amount of income received in the United Kingdom, and
(d) does not require any income to be reduced by an amount of underlying tax which, under section 60(3), is to be left out of account for the purposes of section 57.
(5) Subsection (1) has effect for corporation tax purposes despite—
(a) section 464(1) of CTA 2009 (matters to be brought into account in the case of loan relationships only under Part 5 of that Act), and
(b) section 906(1) of that Act (matters to be brought into account in respect of intangible fixed assets only under Part 8 of that Act).
(6) In this section “non-UK tax” means tax under the law of a territory outside the United Kingdom.
(7) For the purposes of subsection (3), whether a person is connected with P is determined in accordance with section 1122 of CTA 2010.
(8) In subsection (3)(b)(ii) “scheme” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.
113 Deduction from capital gain for foreign tax (instead of credit against UK tax)
(1) Subsection (2) applies to tax if it is—
(a) chargeable under the law of any territory outside the United Kingdom on the disposal of an asset, and
(b) borne by the person making the disposal.
(2) The tax is allowable as a deduction in the calculation of the gain.
(3) Subsection (2) is subject to—
(a) Chapters 1 and 2 so far as they apply for corporation tax purposes (see, in particular, section 31),
(b) Chapters 1 and 2 so far as they apply for capital gains tax purposes (see, in particular, section 31), and
(c) section 143 (which includes provision about taking account of special withholding tax when calculating a gain for capital gains tax purposes).
(4) In subsection (1) “asset” and “disposal” have the same meaning as in TCGA 1992 (see, in particular, section 21 and the following provisions of TCGA 1992).
114 Time limits for action if tax adjustment makes reduction too large or too small
(1) Subsection (2) applies to a claim or assessment if—
(a) the amount of any reduction under section 112(1) or 113(2) becomes excessive or insufficient by reason of any adjustment of the amount of any tax payable either in the United Kingdom or under the law of any territory outside the United Kingdom, or a person's income is increased under section 112(3),
(b) the adjustment or increase gives rise to the claim or assessment, and
(c) the claim or assessment is made not later than 6 years from the time when all material determinations have been made, whether in the United Kingdom or elsewhere.
(2) No time-limit rule applies to the assessment or claim.
(3) In subsection (1)(c) “material determination” means (as the case may be)—
(a) an assessment, adjustment, increase or other determination that is material in determining whether any, and (if so) what, reduction is to be made under section 112(1) or increase is to be made under section 112(3), or
(b) an assessment, adjustment or other determination that is material in determining whether any, and (if so) what, reduction is to be made under section 113(2).
(4) In subsection (2) “time-limit rule” means anything—
(a) in TMA 1970,
(b) in ICTA,
(c) in TCGA 1992, or
(d) in any other provision of the Tax Acts,
limiting the time for the making of assessments or limiting the time for the making of claims for relief.
115 Duty to give notice that adjustment has rendered reduction too large
(1) This section applies if—
(a) the amount of any of a person's income is reduced under section 112(1),
(b) that reduction (“the original reduction”) later becomes excessive as a result of an adjustment of the amount of any tax payable under the law of a territory outside the United Kingdom or an increase under section 112(3), and
(c) the adjustment or increase is not a Lloyd's adjustment.
(2) This section also applies if—
(a) a deduction is allowed under section 113(2) in the case of a person making a disposal, and
(b) that deduction (“the original reduction”) later becomes excessive as a result of an adjustment of the amount of any tax payable under the law of a territory outside the United Kingdom.
(3) The person must give notice that the original reduction has become excessive as a result of the making of an adjustment or increase.
(4) Notice under subsection (3) is to be given—
(a) to an officer of Revenue and Customs, and
(b) within one year from when the adjustment or increase was made.
(5) If the person fails to comply with the requirements imposed by subsections (3) and (4), the person is liable to a penalty not greater than the amount given by—
A
—
B
where—
A is the amount of tax payable by the person for the reduction period after giving effect to the reduction that ought to be made under section 112(1) or (as the case may be) under section 113(2), and
B is the amount that would have been the tax payable by the person for that period after giving effect instead to the original reduction.
(6) In subsection (5) “the reduction period” means the tax year, or accounting period of a company for corporation tax purposes, for which the original reduction was made.
(7) For the purposes of subsection (1)(c), the adjustment or increase is a “Lloyd's adjustment” if the consequences of the adjustment or increase in relation to the reduction are to be given effect in accordance with regulations under—
(a) section 182(1) of FA 1993 (regulations about individual members of Lloyd's), or
(b) section 229 of FA 1994 (regulations relating to corporate members of Lloyd's).
(8) In subsection (2) “disposal” has the same meaning as in TCGA 1992 (see, in particular, section 21(2) and the following provisions of TCGA 1992).
(9) In this section so far as it relates to capital gains tax “notice” means notice in writing.