Double taxation relief
5(1)Part 18 of the Taxes Act 1988 (double taxation relief) is amended as follows.
(2)In section 795 (computation of income subject to foreign tax), in subsection (4) (application of that section notwithstanding certain other provisions) after “notwithstanding anything in” insert “—(a)” and at the end insert— “, or
(b)paragraph 1(3) of Schedule 29 to the Finance Act 2002 (matters to be brought into account in respect of intangible fixed assets only under that Schedule).”.
(3)In the heading to section 797A (foreign tax on items giving rise to a non-trading credit), at the end add “: loan relationships”.
(4)After that section insert—
“797BForeign tax on items giving rise to a non-trading credit: intangible fixed assets
(1)This section applies for the purposes of any arrangements where, in the case of a company—
(a)a non-trading credit relating to an item is brought into account for the purposes of Schedule 29 to the Finance Act 2002 (intangible fixed assets) for an accounting period (“the applicable accounting period”), and
(b)there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that item.
(2)It shall be assumed that tax chargeable under Case VI of Schedule D on the profits and gains arising for the applicable accounting period from the company’s intangible fixed assets 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 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 this purpose the adjusted amount of a company’s non-trading debits for an accounting period is given by:
TotalDebits - Amount Carried Forward
where—
Total Debits is the aggregate amount of the company’s non-trading debits for that accounting period under Schedule 29 to the Finance Act 2002 (intangible fixed assets), and
Amount Carried Forward is the amount (if any) carried forward to the next accounting period of the company under paragraph 35(3) of that Schedule (carry-forward of non-trading loss in respect of which no claim is made for it to be set against total profits of current period).”.
(5)In section 811 (deduction for foreign tax where no credit available), in subsection (3) (application of that section notwithstanding certain other provisions) after “notwithstanding anything in” insert “—(a)” and at the end insert— “, or
(b)paragraph 1(3) of Schedule 29 to the Finance Act 2002 (matters to be brought into account in respect of intangible fixed assets only under that Schedule).”.