Section 42: Amount of limit
130.This section restricts the amount of credit which may be allowed against corporation tax. It is based on sections 797(1) to (3B), 797A(3), (6) and (7) and 797B(3) of ICTA.
131.Section 797(2) of ICTA is subject to subsections (2A) and (3) of that section (provisions about permanent establishments and general deductions). The rule in section 797(2) of ICTA is primarily rewritten in subsection (2).
132.Subsection (3) clarifies the relationship between the rewritten rule and (among others) the provisions based on section 797(3) of ICTA.
133.Subsection (4) then says that the rewritten rule is to be read with the provisions based on section 797(2A) of ICTA. In these ways, the section rewrites the words “Subject to subsections (2A) and (3)” that appear in section 797(2) of ICTA. Subsection (4) also says that the rewritten rule is to be read with the provisions based on sections 798A and 798B of ICTA (which qualify the rule so far as relating to trade income) and with the provisions based on sections 797A(1) and (2) and 797B(1) and (2) of ICTA (assumptions for the purposes of the rule about how tax is charged on loan relationships and intangible fixed assets).
134.The source legislation has the effect that the rule is to be read with those provisions, but does not expressly say that. The references in subsection (4) to the sections based on those provisions are therefore included as a drafting clarification.