Finance Act 2014

292 Amounts allowed by way of double taxation relief

(1) TIOPA 2010 is amended as follows.

(2) For section 34(1)(b) (reduction in credit: payment by reference to foreign tax) substitute—

“(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.”

(3) In section 34, after subsection (3) insert—

“(4) In subsection (1)(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.”

(4) For section 112(3)(b) (deduction from income for foreign tax (instead of credit against UK tax)) substitute—

“(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,”.

(5) In section 112, after subsection (7) insert—

“(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.”

(6) In section 42(4) (provisions relating to the limit imposed by section 42(2) on credit against corporation tax) for the “and” after “(as defined in section 44),” substitute—

• “section 49B, which requires subsection (2) to be applied separately to certain non-trading credits, and”.

(7) After section 49A insert—

“49B Applying section 42(2) to non-trading credits from loan relationships etc

(1) Subsection (2) applies for the purposes of section 42(2) if—

(a) the company has a non-trading credit relating to an item, 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.

(2) Credit for the foreign tax in respect of that item must not exceed—

R × (NTC – D)

where—

• R has the same meaning as in section 42(2),

• NTC is the amount of the non-trading credit, and

• D is the amount given by subsection (3).

(3) D in the formula in subsection (2) is calculated as follows—

• Step 1

  Calculate the total amount (“TNTD”) of the non-trading debits which are to be brought into account by the company—

  (a)

  in the same accounting period, and

  (b)

  in respect of the same loan relationship, derivative contract or intangible fixed asset,

  as the non-trading credit.

• Step 2

  Calculate the total (“A”) of the amounts which, as amount D, have already been deducted under subsection (2) from other non-trading credits which are to be brought into account in the same period and in respect of the same relationship, contract or asset.

• Step 3

  Calculate the amount given by—

  TNTD – A

• Step 4

  If the amount calculated at step 3 is greater than or equal to NTC, then D equals NTC.

  Otherwise, D is the amount calculated at step 3.

(4) In this section—

• “intangible fixed asset” has the same meaning as in Part 8 of CTA 2009,

• “non-trading credit” means—

  (a)

  a non-trading credit for the purposes of Part 5 of CTA 2009 (which is about loan relationships but also has application in relation to deemed loan relationships and derivative contracts), or

  (b)

  a non-trading credit for the purposes of Part 8 of CTA 2009 (intangible fixed assets), and

• “non-trading debit” means—

  (a)

  a non-trading debit for the purposes of Part 5 of CTA 2009, or

  (b)

  a non-trading debit for the purposes of Part 8 of CTA 2009.”

(8) The amendments made by subsections (2), (3), (4) and (5) have effect in relation to payments made by a tax authority on or after 5 December 2013.

(9) The amendments made by subsections (6) and (7) have effect in relation to accounting periods beginning on or after 5 December 2013.

(10) For the purposes of subsection (9), an accounting period beginning before, and ending on or after, 5 December 2013 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.