Taxation (International and Other Provisions) Act 2010

Credits where same income charged to income tax in more than one tax year

22Credit for foreign tax on overlap profit if credit for that tax already allowed

(1)Subsection (2) applies in relation to foreign tax (“FT”) paid in respect of any income if—

(a)the income is overlap profit, and

(b)credit for FT would have been allowed under section 18(2) against income tax chargeable for a tax year (“year L”) in respect of the income but for the fact that credit for FT had been allowed against income tax chargeable in respect of the income for a previous tax year.

(2)Credit for FT is allowed against income tax chargeable for year L in respect of the income.

(3)The amount of credit allowed for year L under subsection (2) in respect of the income must not exceed the difference between—

(a)T, and

(b)the amount of credit which was in fact allowed, under subsection (2) or section 18(2), in respect of the income for any earlier tax year or years.

(4)For the purposes of subsection (3)(a), T is the amount (“A”) of the foreign tax charged on the income, but this is subject to subsections (5) to (7).

(5)If Y exceeds FP—

(6)For the purposes of subsection (5), a tax year or foreign period of assessment for which part only of the income is charged to tax is counted not as one year or period but as a fraction of a year or period, the fraction being—

(7)If the same income is charged to different foreign taxes for different foreign periods of assessment—

(a)subsection (5) (read with subsection (6)) is to be applied separately to each of those taxes, and

(b)T is the sum of those taxes after subsection (5) has been applied to them in accordance with paragraph (a).

(8)In this section—

• “overlap profit” has the same meaning as in Chapter 15 of Part 2 of ITTOIA 2005 (see section 204 of that Act), and

• “foreign period of assessment”, in relation to any income, means a period for which the income is, under the law of the non-UK territory, charged to the foreign tax concerned.

23Time limits for claims for relief under section 22(2)

(1)Relief under section 22(2) requires a claim.

(2)Any claim for relief by way of credit under section 22(2) against income tax for any tax year must be made on or before the fifth anniversary of the 31 January following that tax year, subject to subsection (3).

(3)If there is more than one tax year in respect of which such relief may be given, any claim for the relief must be made on or before the fifth anniversary of the 31 January following the later of those tax years.

24Claw-back of relief under section 22(2)

(1)Subsections (4) and (5) apply if—

(a)credit against income tax for any tax year is allowed under section 22(2) in respect of any income (“the original income”), and

(b)the original income, or any part of it, contributes to an amount which, under section 205 or 220 of ITTOIA 2005, is deducted in calculating profits of a later tax year (“the later year”).

(2)For the purposes of subsections (4) and (5), amount A is the difference between—

(a)the amount of the credit which, as a result of the application of sections 18(2) and 22(2) and subsection (5) of this section, has been allowed against income tax in respect of so much of the original income as contributes as mentioned in subsection (1), and

(b)the amount of the credit which, ignoring sections 22 and 23 and this section, would have been allowed under section 18(2) against income tax in respect of so much of the original income as contributes as mentioned in subsection (1).

(3)For the purposes of subsections (4) and (5), amount B is the amount of credit which, on the assumption that no amount were deducted under section 205 or 220 of ITTOIA 2005, would be allowable under section 18(2) against income tax in respect of income arising in the later year from the same source as the original income.

(4)If amount A exceeds amount B—

(a)no credit is allowed for income arising from that source in the later year,

(b)an amount of income tax equal to the excess is charged for the later year, and

(c)the liable person is liable for the tax.

(5)If amount B exceeds amount A, the liable person is allowed for the later year an amount of credit equal to the excess.

(6)In subsections (4) and (5) “the liable person” means the person liable for income tax charged on the income (if any) arising in the later year from the same source as the original income.

(7)For the purposes of subsections (1) to (6), it is to be assumed that, where an amount is deducted under section 220 of ITTOIA 2005, each of the overlap profits added together at Step 1 of the calculation in subsection (3) of that section contributes to that amount in the proportion which that overlap profit bears to the total that is the result of that Step.

(8)In this section—

(a)“overlap profit” has the same meaning as in Chapter 15 of Part 2 of ITTOIA 2005 (see section 204 of that Act), and

(b)references to income arising in any year include income received in the year that is income on which income tax is to be calculated by reference to the amount of income received in the United Kingdom.