Legalize / United Kingdom / Income and Corporation Taxes Act 1988 / History

Reform history

Income and Corporation Taxes Act 1988

100 versions · 1988-02-09

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2013-04-06

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Changes on 2013-04-06

@@ -2080,7 +2080,7 @@

- (a) the payments are made to —

- (i) a person who has permission under Part 4 of the Financial Services and Markets Act 2000 or under paragraph 15 of Schedule 3 to that Act (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to effect or carry out contracts of long-term insurance; or

- (i) a person who has permission under Part 4A of the Financial Services and Markets Act 2000 or under paragraph 15 of Schedule 3 to that Act (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to effect or carry out contracts of long-term insurance; or

- (ii) a member of the Society who effects or carries out contracts of long-term insurance in accordance with Part 19 of the Financial Services and Markets Act 2000;

@@ -3124,7 +3124,7 @@

- (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (e) a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to effect or carry out contracts of long-term insurance;

- (e) a person who has permission under Part 4A of the Financial Services and Markets Act 2000 to effect or carry out contracts of long-term insurance;

- (f) any company to which property and rights belonging to a trustee savings bank were transferred by section 3 of the Trustee Savings Bank Act 1985;

@@ -6066,877 +6066,732 @@

##### 774

- (1) Subject to the provisions of this section, where—

- (a) a dealing company becomes entitled to a deduction, in computing the profits or gains of the company for tax purposes for any period, in respect of the depreciation in the value of any right subsisting against an associated company, being a non-dealing company; or

- (b) a dealing company makes any payment to such an associated company, being a payment in respect of which the dealing company is entitled to a deduction in computing its profits or gains for tax purposes for any period;

and the depreciation or payment is not brought into account in computing the profits or gains of the non-dealing company, that company shall be deemed to have received on the last day of the period income of an amount equal to the amount of the deduction and shall be chargeable to tax in respect thereof (in the case of corporation tax, under the charge to corporation tax on income).

- (2) Where the non-dealing company is carrying on a trade, the income referred to in subsection (1) above shall, if the company so elects, not be so chargeable but shall be deemed to have been a receipt of the trade, or, if the company is carrying on more than one trade, to have been a receipt of such one of the trades as the company may choose.

- (3) Where the non-dealing company is carrying on, or was formed to carry on a trade, then if—

- (a) either—

- (i) the right subsisting against it was a right to the repayment of moneys lent for meeting expenditure which has proved (in whole or in part) abortive, or

- (ii) the payment to the company was made for meeting such expenditure, and

- (b) that expenditure is such that the company is not entitled in respect of it to any allowance or deduction in computing losses or gains,

subsection (1) above shall not apply in so far as the expenditure proved abortive.

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### Other provisions

#### Sale by individual of income derived from his personal activities

##### 775

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#### Transactions in land: taxation of capital gains

##### 776

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#### Provisions supplementary to sections 775 and 776

##### 777

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#### Power to obtain information

##### 778

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#### Sale and lease-back: limitation on tax reliefs

##### 779

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#### Sale and lease-back: taxation of consideration received

##### 780

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#### Assets leased to traders and others

##### 781

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#### Leased assets: special cases

##### 782

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#### Leased assets: supplemental

##### 783

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#### Leased assets subject to hire-purchase agreements

##### 784

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#### Meaning of “asset”, “capital sum” and “lease” for purposes of sections 781 to 784

##### 785

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#### Transactions associated with loans or credit

##### 786

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#### Restriction of relief for payments of interest

##### 787

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## PART XVIII — DOUBLE TAXATION RELIEF

### CHAPTER I — THE PRINCIPAL RELIEFS

#### Relief by agreement with other countries

##### 788

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#### Arrangements made under old law

##### 789

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#### Unilateral relief

##### 790

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#### Power to make regulations for carrying out section 788

##### 791

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### CHAPTER II — RULES GOVERNING RELIEF BY WAY OF CREDIT

### General

#### Interpretation of credit code

##### 792

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#### Reduction of United Kingdom taxes by amount of credit due

##### 793

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#### Requirement as to residence

##### 794

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#### Computation of income subject to foreign tax

##### 795

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#### Limits on credit: income tax

##### 796

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#### Limits on credit: corporation tax

##### 797

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#### Interest on certain overseas loans

##### 798

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### Tax underlying dividends

#### Computation of underlying tax

##### 799

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#### Dividends paid between related companies but not covered by arrangements

##### 800

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#### Dividends paid between related companies: relief for U.K. and third country taxes

##### 801

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#### U.K. insurance companies trading overseas

##### 802

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#### Underlying tax reflecting interest on loans

##### 803

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### Miscellaneous rules

#### Relief against income tax in respect of income arising in years of commencement

##### 804

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#### Elections against credit

##### 805

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#### Time limit for claims etc

##### 806

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### CHAPTER III — MISCELLANEOUS PROVISIONS

#### Sale of securities with or without accrued interest

##### 807

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#### Restriction on deduction of interest or dividends from trading income

##### 808

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#### Relief in respect of discretionary trusts

##### 809

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#### Postponement of capital allowances to secure double taxation relief

##### 810

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#### Deduction for foreign tax where no credit allowable

##### 811

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#### Withdrawal of right to tax credit of certain non-resident companies connected with unitary states

##### 812

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#### Recovery of tax credits incorrectly paid

##### 813

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#### Arrangements to avoid section 812

##### 814

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#### Power to inspect documents

##### 815

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#### Disclosure of information

##### 816

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## PART XIX — SUPPLEMENTAL

### Miscellaneous

#### Deductions not to be allowed in computing profits or gains

##### 817

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#### Arrangements for payments of interest less tax or of fixed net amount

##### 818

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#### Old references to standard rate tax

##### 819

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#### Application of Income Tax Acts from year to year

##### 820

- In order to ensure the collection in due time of income tax which may be granted for any year commencing on 6th April, all such provisions contained in the Income Tax Acts as were in force on the preceding day shall have full force and effect with respect to tax which may be so granted, in the same manner as if that tax had been actually granted by Act of Parliament and those provisions had been applied thereto by the Act.

#### Under-deductions from payments made before passing of annual Act

##### 821

- (1) Where, in any year of assessment or accounting period, any half-yearly or quarterly payments (or half-periodic or quarterly payments) have been made on account of any interest, dividends or other annual profits or gains, previously to the passing of the Act imposing income or corporation tax for that year or period, and tax has not been charged thereon or deducted therefrom or has not been charged thereon or deducted therefrom at the rate ultimately imposed for that year or period—

- (a) the amount not so charged or deducted shall be charged in respect of those payments to income tax under Chapter 2 of Part 4 of ITTOIA 2005 (interest) or shall be charged to corporation tax. . . . . . ; and

- (b) the agents entrusted with the payment of the interest, dividends or other annual profits or gains shall furnish to the Board a list containing the names and addresses of the persons to whom payments have been made and the amount of those payments, upon a requisition made by the Board in that behalf.

- (2) Any person liable to pay any rent, interest or annuity, or to make any other annual payment—

- (a) shall be authorised—

- (i) to make any deduction on account of income tax for any year of assessment which he has failed to make previously to the passing of the Act imposing the tax for that year, or

- (ii) to make up any deficiency in any such deduction which has been so made,

on the occasion of the next payment of the rent, interest or annuity or making of the other annual payment after the passing of the Act so imposing the tax, in addition to any other deduction which he may be by law authorised to make; and

- (b) shall also be entitled, if there is no future payment from which the deduction may be made, to recover the sum which might have been deducted as if it were a debt due from the person as against whom the deduction could originally have been made if the Act imposing the tax for the year had been in force.

- (3) Subsection (2) above shall apply with respect to—

- (a) any payment to which section 906 of ITA 2007 applies (certain royalties etc where usual place of abode of owner is abroad), and

- (aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (b) any royalty or other sum paid in respect of the user of a patent; . . .

- (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

as it applies with respect to any rent, interest, annuity or other annual payment.

- (4) In this section “*interest*” and “*dividends*” do not include any interest or dividend which is a distribution.

#### Over-deductions from interest on loan capital etc. made before passing of annual Act

##### 822

- (1) If in any year of assessment (“*the year*”) a resolution having statutory effect under the Provisional Collection of Taxes Act 1968 provides for the charging of income tax at a lower rate less than that charged for the previous year, the following provisions of this section shall have effect with respect to deductions in respect of income tax by any body corporate, from payments of interest (not being a distribution) on any of its securities.

- (2) Any deduction which was made before the expiration of one month from the passing of the resolution and which would, if the tax had been renewed at the rate imposed for the previous year, have been a legal deduction, shall be deemed to be a deduction rendered legal by section 2 of the Provisional Collection of Taxes Act 1968 and that section shall, subject to this section, apply accordingly.

- (3) Any over-deduction to be made good under that section may be made good by a reduction of the amount of tax deducted from the next payment of like nature made on the security in question after the passing of the Act imposing the tax for the year.

- (4) Any amount made good under section 2 of the Provisional Collection of Taxes Act 1968 shall—

- (a) in the case of an over-deduction which is made good under subsection (3) above, enure to the benefit of the person entitled to the payment on the occasion of which the over-deduction is made good; and

- (b) in any other case, enure to the benefit of the person entitled to the security in question at the date when the amount is made good,

irrespective, in either case, of whether or not he is the person who was entitled to the payment, or to the security at the date when the original deduction was made.

- (5) Subsection (3) above shall not authorise the retention of any part of the amount over-deducted for more than one year from the passing of the Act imposing the tax for the year.

#### Adjustments of reliefs where given at different times

##### 823

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#### Repayment supplements: individuals and others

##### 824

- (1) Subject to the following provisions of this section, a repayment made by the Board or an officer of the Board of any of the following, namely—

- (a) an amount paid on account of income tax under section 59A of the Management Act;

- (b) any income tax paid by or on behalf of an individual for a year of assessment;

- (c) a penalty payable under any paragraph of Schedule 56 to the Finance Act 2009 in respect of an amount falling within any of the following items of the Table in paragraph 1 of that Schedule—

- (i) item 1, 12, 18 or 19; or

- (ii) insofar as the tax falls within item 1, item 17, 23 or 24; and

- (d) a penalty incurred by an individual under any of the provisions of that Act,

shall be increased under this section by an amount (a “*repayment supplement*”) equal to interest on the amount repaid at the rate applicable under section 178 of the Finance Act 1989 for the period (if any) between the relevant time and the date on which the order for the repayment is issued.

- (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (2) Subsections (1) . . . above shall with the necessary modifications apply to a payment of the whole or part of a tax credit as they apply to a repayment falling within subsection (1) of income tax paid in the year of assessment to which the tax credit relates.

- (2A) Subsection (1) above shall apply to a repayment made in consequence of a claim under section 228 of the Income Tax Act 1952 (relief in respect of income accumulated under trusts) as if the repayment were of income tax paid by the claimant for the year of assessment in which the contingency mentioned in that section happened.

- (2B) Subsection (1) above shall apply to a payment made by the Board under section 375(8) (payment of amount which borrower would have been able to deduct from interest payment under section 369(1)) as if the payment were a repayment falling within that subsection.

- (2C) Subsection (1) above shall apply to a repayment made by the Board as a result of a claim for relief under—

- (a) paragraph 2 of Schedule 1B to the Management Act (carry back of loss relief),

- (b) paragraph 3 of that Schedule (relief for fluctuating profits of farming etc.), or

- (c) Schedule 4A to this Act (relief for fluctuating profits of creative artists etc.),

as if it were a repayment falling within that subsection.

- (2D) Subsection (1) shall apply—

- (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (b) to a payment made under paragraph 6(1) of Schedule 14 (payment where entitlement to life assurance premium relief has not been given by deduction) as if the payment were a repayment of income tax paid for the tax year in which the entitlement to relief arose.

- (3) For the purposes of subsection (1) above—

- (aa) if the repayment is a payment made by the Board under section 375(8), the relevant time is—

- (i) if the interest payment was made in the year 1996-97 or a subsequent year of assessment, the 31st January next following that year;

- (ii) if the interest payment was made in an earlier year of assessment, the 5th April next following that year;

- (ab) if the repayment is a repayment as a result of a claim for relief under any of the provisions mentioned in subsection (2C) above, the relevant time is the 31st January next following the year that is the later year in relation to the claim;

- (ac) if the repayment is a repayment as a result of a claim under section 496B of ITA 2007 (relief for payments by discretionary trust taxable as employment income), the relevant time is the 31 January next following the end of the tax year to which the claim relates;

- (ad) if the repayment is a payment falling within subsection (2D)(b), the relevant time is 31 January next following the end of the tax year in which the entitlement to relief arose;

- (a) if the repayment is—

- (i) the repayment of an amount paid in accordance with the requirements of section 59A of the Management Act on account of income tax for a year of assessment, or

- (ii) the repayment of income tax for such a year which is not income tax deducted at source (other than a repayment within paragraph (ac)),

the relevant time is the date of the payment that is being repaid;

- (b) if the repayment is of income tax deducted at source for a year of assessment, the relevant time is the 31st January next following that year; and

- (c) if the repayment is of a penalty or surcharge, the relevant time is the date on which the penalty or surcharge was paid.

- (4) For the purposes of subsection (3) above, where a repayment in respect of income tax for a year of assessment is made to any person, that repayment—

- (a) shall be attributed first to so much of any payment made by him under section 59B of the Management Act as is a payment in respect of income tax for that year;

- (b) in so far as it exceeds the amount (if any) to which it is attributable under paragraph (a) above, shall be attributed in two equal parts to each of the payments made by him under section 59A of the Management Act on account of income tax for that year;

- (c) in so far as it exceeds the amounts (if any) to which it is attributable under paragraphs (a) and (b) above, shall be attributed to income tax deducted at source for that year; and

- (d) in so far as it is attributable to a payment made in instalments shall be attributed to a later instalment before being attributed to an earlier one.

- (4A) In this section any reference to income tax deducted at source for a year of assessment is a reference to—

- (a) income tax deducted or treated as deducted from any income, or treated as paid on any income, in respect of that year, and

- (b) amounts which, in respect of that year, are tax credits to which section 397(1) or 397A(1) of ITTOIA 2005 applies,

but does not include a reference to amounts which, in that year, are deducted at source under PAYE regulations in respect of previous years.

- (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (6) . . . The Treasury may by order from time to time increase or decrease the rate of interestby reference to which—

- (a) repayment supplements are calculated under subsection (1) above; and

- (b) repayment supplements are calculated under section 47 of the Finance (No. 2) Act 1975.

- (7) A repayment supplement shall not be payable under this section in respect of a repayment or payment made in consequence of an order or judgment of a court having power to allow interest on the repayment or payment, or in respect of a repayment of a post-war credit within the meaning of the Income Tax (Repayment of Post-War Credits) Act 1959.

- (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (9) Subsections (1) to (7) above shall apply in relation to . . . the trustees of a settlement, scheme administrators of registered pension schemes sub-scheme administrators of sub-schemes which form part of a split scheme pursuant to the Registered Pensions (Splitting of Schemes) Regulations 2006or personal representatives . . . as they apply in relation to an individual.

- (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Repayment supplements: companies

##### 825

- (1) This section applies to the following payments made to a company in connection with any accounting period for which the company was resident in the United Kingdom (“*the relevant accounting period*”), that is to say—

- (a) a repayment of corporation tax paid by the company for that accounting period (including advance corporation tax paid in respect of distributions made by the company in that accounting period*and any sum paid in respect of that period on an assessment under section* 430(7)(a)) ; or

- (b) a repayment of income tax in respect of a payment received by the company in that accounting period on which the company bore income tax by deduction; or

- (c) a payment of the whole or part of the tax credit comprised in any franked investment income received by the company in that accounting period.

- (2) Subject to the following provisions of this section, where a payment . . . to which this section applies is made by the Board or an inspector after the end of the 12 months beginning with the material date, the payment shall be increased under this section by an amount (a “*repayment supplement*”) equal to interest on the amount paid at the rate applicable under section 178 of the Finance Act 1989 for each complete tax month contained in the period (if any) beginning with the relevant date and ending at the end of the tax month in which the order for the payment is issued.

- (2A) *In relation to any complete tax month beginning before* 6th*April* 1974*which is contained in the last-mentioned period, subsection* (2)*above shall have effect as if the rate of interest specified in it were* 6*per cent. per annum (instead of the rate so specified or any other rate in force by virtue of subsection* (5)*below or section* 48(6)*of the Finance* (No.2) Act 1975).

- (3) For the purposes of subsection (2) above—

- (a) if the payment is a repayment of corporation tax that was paid on or after the first anniversary of the material date, the relevant date is the anniversary of the material date that occurs next after the date on which that tax was paid;

- (b) in any other case, the relevant date is the first anniversary of the material date;

and where a payment to which this section applies is a repayment of corporation tax paid by a company on different dates, the payment shall as far as possible be treated for the purposes of this subsection as a repayment of tax paid on a later rather than an earlier date among those dates.

- (4) For the purposes of this section—

- (a) “*company*” includes any body corporate;

- (b) “*dealing company*” means a company dealing in securities, land or buildings and includes any company whose profits on the sale of securities, land or buildings are part of its trading profits;

- (c) “*non-dealing company*” means any company which is not a dealing company;

- (d) two or more companies shall be treated as associated companies if one has control of the other or others, or any person has control of both or all of them;

- (e) references to a company (“the first company”) having control of another company (“the second company”) shall be construed as references to the first company having control of the second company either by itself or in conjunction with any person having control over the first company, and “*control*” has the meaning given by section 1124 of CTA 2010;

- (f) “*securities*” includes shares and stock.

- (a) a repayment of corporation tax made in consequence of a claim by a company under section 239(3) to have the whole or any part of an amount of surplus advance corporation tax arising in the case of any accounting period treated as if it were advance corporation tax paid in respect of distributions made by the company in any earlier accounting period shall be treated as a repayment of corporation tax paid for the accounting period in the case of which that amount of surplus advance corporation tax arose; and

- (b) a repayment of income tax or corporation tax made on a claim under subsection (4) of section 419 shall be treated as if it were a repayment of corporation tax paid for the accounting period in which the repayment of, or of the part in question of, the loan or advance mentioned in that subsection was made. and

- (c) a repayment of corporation tax or income tax falling to be made as a result of a claim under section 393A(1) to have the whole or any part of a loss incurred in an accounting period set off against profits of an earlier accounting period (“*the earlier period*”)—

- (i) shall, in a case where the earlier period falls wholly within the period of twelve months immediately preceding the accounting period in which the loss was incurred, be treated as a repayment of tax paid for the earlier period; and

- (ii) in any other case, shall be treated as a repayment of tax paid for the accounting period in which the loss is incurred; and

- (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (5) *Without prejudice to subsection* (2A)*above* the Treasury may by order from time to time increase or decrease the rate of interest by reference to which repayment supplements are calculated under subsection (2) above.

- (6) A repayment supplement shall not be payable under this section in respect of a payment made in consequence of an order or judgment of a court having power to allow interest on the payment.

- (7) A repayment supplement paid under this section shall be disregarded for all purposes of income tax and corporation tax.

- (8) In this section—

- “*tax month*” means the period beginning with the 6th day of any calendar month and ending with the 5th day of the following calendar month;

- “*the material date*” in relation to a payment to which this section applies, means the last date on which corporation tax on any of the profits of the company in question arising in the relevant accounting period could have been paid—in a case where section 10(1) applies, within the nine months there mentioned;in a case where section 478 applies, within the time limit imposed by subsection (2)(a) of that section, but subject to subsection (6) of that section.

- (9) This section has effect subject to section 826(8).

#### Interest on tax overpaid

##### 826

- (1) In any case where—

- (a) a repayment falls to be made of corporation tax paid by a company for an accounting period which ends after the appointed day; or

- (aa) a repayment falls to be made under sections 246N and 246Q of advance corporation tax paid by a company in respect of distributions made by it in such an accounting period; or

- (b) a repayment of income tax falls to be made in respect of a payment received by a company in such an accounting period; or

- (c) a payment falls to be made to a company of the whole or part of the tax credit comprised in any franked investment income received by the company in such an accounting period ; or

- (d) a payment of R&D tax credit falls to be made to a company under Chapter 2 or 7 of Part 13 of CTA 2009 in respect of an accounting period; or

- (da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (e) a payment of land remediation tax credit or life assurance company tax credit falls to be made to a company under Part 14 of CTA 2009 in respect of an accounting period; or

- (f) a payment of film tax credit falls to be made to a company, or

- (g) a payment of first-year tax credit falls to be made to a company under Schedule A1 to the Capital Allowances Act,

then, from the material date until the order for repayment or payment is issued, the repayment or payment shall carry interest at the rate which, under section 89 of the Management Act, is for the time being the prescribed rate for the purposes of this section.

- (2) Subject to section 826A(2), in relation to corporation tax paid by a company for an accounting period, the material date for the purposes of this section is the date on which corporation tax was paid or, if it is later, the date on which corporation tax for that accounting period became (or, as the case may be, would have become) due and payable in accordance with section 59D of the Management Act (payment of corporation tax).

- (2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (3) In relation to a repayment of income tax falling within subsection (1)(b) above or a payment of the whole or part of a tax credit falling within subsection (1)(c) above, the material date is the day after the end of the accounting period in which the payment referred to in subsection (1)(b) above or, as the case may be, the franked investment income referred to in subsection (1)(c) above was received by the company.

- (3A) In relation to a payment of R&D tax credit falling within subsection (1)(d) above the material date is whichever is the later of—

- (a) the filing date for the company’s company tax return for the accounting period for which the R&D tax credit is claimed, and

- (b) the date on which the company tax return or amended company tax return containing the claim for payment of the R&D tax credit is delivered to the Inland Revenue.

For this purpose “*the filing date*”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

- (3AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (3B) In relation to a payment of land remediation tax credit or life assurance company tax credit falling within subsection (1)(e) above the material date is whichever is the later of—

- (a) the filing date for the company’s company tax return for the accounting period for which the land remediation tax credit or the life assurance company tax credit is claimed, and

- (b) the date on which the company tax return or amended company tax return containing the claim for payment of the land remediation tax credit or the life assurance company tax credit is delivered to the Inland Revenue.

For this purpose “*the filing date*”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

- (3C) In relation to a payment of film tax credit the material date is whichever is the later of—

- (a) the filing date for the company's company tax return for the accounting period for which the tax credit is payable, and

- (b) the date on which the company tax return or amended company tax return containing the claim for payment is delivered to an officer of Revenue and Customs.

For this purpose “*the filing date*”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

- (3D) In relation to a payment of first-year tax credit falling within subsection (1)(g) above the material date is whichever is the later of—

- (a) the filing date for the company's company tax return for the accounting period for which the tax credit is claimed, and

- (b) the date on which the company tax return or amended company tax return containing the claim for payment of the tax credit is delivered to the Commissioners for Her Majesty's Revenue and Customs.

For this purpose “*the filing date*”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

- (4) For the purposes of this section a repayment of tax made on a claim under section 458 of CTA 2010 shall be treated as if it were a repayment of corporation tax for the accounting period in which the event giving rise to entitlement to relief under that section occurred but, in relation to such a repayment of tax, the material date for the purposes of this section is—

- (a) the date when the entitlement to relief in respect of the repayment accrued, that is to say—

- (i) where the repayment , or the release or writing off, of the loan or advance (or part thereof) occurred on or after the day mentioned in section 458(4) of CTA 2010, the date nine months after the end of that accounting period; and

- (ii) in any other case, the date nine months after the end of the accounting period in which the loan or advance was made;

- (b) if it is later, the date on which the tax which is to be repaid was in fact paid.

- (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

### Other provisions

#### Sale by individual of income derived from his personal activities

##### 775

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Transactions in land: taxation of capital gains

##### 776

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Provisions supplementary to sections 775 and 776

##### 777

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Power to obtain information

##### 778

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Sale and lease-back: limitation on tax reliefs

##### 779

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Sale and lease-back: taxation of consideration received

##### 780

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Assets leased to traders and others

##### 781

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Leased assets: special cases

##### 782

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Leased assets: supplemental

##### 783

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Leased assets subject to hire-purchase agreements

##### 784

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Meaning of “asset”, “capital sum” and “lease” for purposes of sections 781 to 784

##### 785

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Transactions associated with loans or credit

##### 786

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Restriction of relief for payments of interest

##### 787

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

## PART XVIII — DOUBLE TAXATION RELIEF

### CHAPTER I — THE PRINCIPAL RELIEFS

#### Relief by agreement with other countries

##### 788

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Arrangements made under old law

##### 789

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Unilateral relief

##### 790

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Power to make regulations for carrying out section 788

##### 791

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

### CHAPTER II — RULES GOVERNING RELIEF BY WAY OF CREDIT

### General

#### Interpretation of credit code

##### 792

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Reduction of United Kingdom taxes by amount of credit due

##### 793

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Requirement as to residence

##### 794

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Computation of income subject to foreign tax

##### 795

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Limits on credit: income tax

##### 796

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Limits on credit: corporation tax

##### 797

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Interest on certain overseas loans

##### 798

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

### Tax underlying dividends

#### Computation of underlying tax

##### 799

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Dividends paid between related companies but not covered by arrangements

##### 800

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Dividends paid between related companies: relief for U.K. and third country taxes

##### 801

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### U.K. insurance companies trading overseas

##### 802

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Underlying tax reflecting interest on loans

##### 803

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

### Miscellaneous rules

#### Relief against income tax in respect of income arising in years of commencement

##### 804

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Elections against credit

##### 805

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Time limit for claims etc

##### 806

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

### CHAPTER III — MISCELLANEOUS PROVISIONS

#### Sale of securities with or without accrued interest

##### 807

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Restriction on deduction of interest or dividends from trading income

##### 808

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Relief in respect of discretionary trusts

##### 809

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Postponement of capital allowances to secure double taxation relief

##### 810

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Deduction for foreign tax where no credit allowable

##### 811

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

#### Withdrawal of right to tax credit of certain non-resident companies connected with unitary states

##### 812

- (1) In any case where—

- (a) a company has, or is an associated company of a company which has, a qualifying presence in a unitary state, and

- (b) at any time when it or its associated company has such a qualifying presence, the company is entitled by virtue of arrangements having effect under section 2(1) of TIOPA 2010 to a tax credit in respect of qualifying distributions made to it by companies which are resident in the United Kingdom which is equal to one half of the tax credit to which an individual resident in the United Kingdom would be entitled in respect of such distributions,

then, notwithstanding anything to the contrary in the arrangements, the company shall not be entitled to claim under section 397(2)(a) of ITTOIA 2005 to have that tax credit set against the income tax chargeable on its income for the year of assessment in which the distribution is made nor, by virtue of section 30(9) of the Finance (No. 2) Act 1997, where the credit exceeds that income tax, to have the excess paid to it.

- (2) In this section and sections 813 and 814, “*unitary state*” means a province, state or other part of a territory outside the United Kingdom in relation to which the arrangements referred to in subsection (1) above have been made which, in taxing the income or profits of companies from sources within that province, state or other part, takes into account, or is entitled to take into account, income, receipts, deductions, outgoings or assets of such companies, or associated companies of such companies, arising, expended or situated, as the case may be, outside that territory and which has been prescribed under subsection (6) below as a unitary state for the purposes of this subsection.

- (3) A company shall be treated as having a qualifying presence in a unitary state if it is a member of a group and, in any period for which members of the group make up their accounts ending after the relevant date, 7½ per cent. or more in value of the property, payroll or sales of such members situated in, attributable to or derived from the territory outside the United Kingdom, of which that state is a province, state or other part, are situated in, attributable to or derived from that state.

- (4) For the purposes of subsection (3) above—

- (a) 7½ per cent. or more in value of such property, payroll or sales as are referred to in that subsection shall be treated as being situated in, attributable to or derived from the state there referred to, unless, on making any claim under section 231(3), the claimant proves otherwise to the satisfaction of the Board; and

- (b) the value of the property, payroll or sales of a company shall be taken to be the value as shown in its accounts for the period in question and for this purpose the value of any property consisting of an interest in another member of the group or of any sales made to another such member shall be disregarded.

- (5) Except where the context otherwise requires, in this section and sections 813 to 815—

- (a) “*arrangements*” means the arrangements referred to in subsection (1) above;

- (b) “*group*” and “*member of a group*” shall be construed in accordance with section 272(1) of the 1970 Act with the omission of the restriction in paragraph (a) of that subsection and the substitution of the words “ 51 per cent. ” for the words “75 per cent.” wherever they occur;

- (c) whether a person is connected with another is determined in accordance with section 1122 of CTA 2010;

- (d) sections 449 to 451 of CTA 2010 apply but with the substitution in section 449 of “6 years” for “12 months”.

- (e) “*the relevant date*” means the earliest of the following dates—

- (i) the date on which this section comes into force;

- (ii) the earliest date on which a distribution could have been made in relation to which the provisions of this section and sections 813 and 814 are applied by an order under this section;

- (iii) the earliest date on which a distribution could have been made in relation to which the provisions of section 54 of the Finance Act 1985 were applied by an order under that section.

- (6) The Treasury may by order prescribe those provinces, states or other parts of a territory outside the United Kingdom which are to be treated as unitary states for the purposes of subsection (2) above, but no province, state or other part of such a territory shall be so prescribed which only takes into account such income, receipts, deductions, outgoings or assets as are mentioned in that subsection—

- (a) if the associated company was incorporated under the law of the territory; or

- (b) for the purposes of granting relief in taxing dividends received by companies.

- (7) The Treasury may by order prescribe that for subsections (3) and (4) above (or for those subsections as they have effect at any time) there shall be substituted either the following subsection—

> (3) A company shall be treated as having a qualifying presence in a unitary state if it is liable in such a state to a tax charged on its income or profits by whatever name called for any period ending after the relevant date for which that state charges tax.

;

or the following subsections—

> (3) A company shall be treated as having a qualifying presence in a unitary state if it has its principal place of business in such a state at any time after the relevant date.

> (4) For the purposes of subsection (3) above the principal place of business of a company shall include both the place where central management and control of the company is exercised and the place where the immediate day-to-day management of the company as a whole is exercised.

- (8) The provisions of this section and sections 813 to 815 shall come into force on such date as the Treasury may by order appoint and the Treasury may in the order prescribe that those provisions shall apply in relation to distributions made, in accounting periods ending after 5th April 1988, before the date on which the order is made.

- (9) No order shall be made under this section unless a draft of it has been laid before and approved by a resolution of the House of Commons.

#### Recovery of tax credits incorrectly paid

##### 813

- (1) Where—

- (a) section 812 applies so as to withdraw the entitlement of a company to claim to have a tax credit in respect of a qualifying distribution set against the income tax chargeable on its income and to have the excess of the credit over that income tax paid to it; and

- (b) the company (“*the recipient company*”) has either had that excess paid to it, or has received an additional amount in accordance with arrangements made under Regulation 2(1) of the Double Taxation Relief (Taxes on Income) (General) (Dividend) Regulations 1973;

the recipient company shall be liable to a fine for the violation of the provisions of section 812 equal to twice the amount of the excess or the additional amount, as the case may be.

- (2) Any fine payable under subsection (1) above—

- (a) shall be payable to the Board;

- (b) shall be treated as having become payable at the date when the excess or additional amount was paid to the recipient company; and

- (c) may be recovered in accordance with subsections (3) to (7) below;

and any such fine is referred to below as “*the recoverable amount*”.

- (3) The recoverable amount may be assessed and recovered as if it were unpaid tax and section 30 of the Management Act (recovery of overpayment of tax etc.) shall apply accordingly.

- (4) Any amount which may be assessed and recovered as if it were unpaid tax by virtue of this section shall carry interest at the rate of 9 per cent. per annum from the date when it was payable in accordance with subsection (1) above until the date it is paid.

- (5) It is hereby declared that this section applies to a recoverable amount which is paid without the making of an assessment (but is paid after it is due) and that, where the recoverable amount is charged by any assessment (whether or not any part of it has been paid when the assessment is made), this section applies in relation to interest running before, as well as after, the making of the assessment.

- (6) Where the recoverable amount is not paid by the recipient company within six months from the date on which it became payable—

- (a) the recoverable amount may at any time within six years from the date on which it became payable be assessed and recovered as if it were unpaid tax due from any person who—

- (i) is or was at any time prior to the expiration of that six year period connected with the recipient company, or

- (ii) would have been connected on the assumption that all the facts and circumstances relating to the recipient company at the time the excess or additional amount, as the case may be, was paid continued to apply for six years thereafter,

and section 30 of the Management Act shall apply accordingly; and

- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- (7) Where a recoverable amount is assessed and recovered from a person connected with the recipient company in accordance with subsection (6)(a) above, that person shall be liable for the interest payable in accordance with subsection (4) above, and until the interest is so paid, subsection (6)(b) above shall apply as if the words “ the interest due in accordance with subsection (4) above is paid ” were substituted for the words “the recoverable amount is paid in accordance with the provisions of this section”.

- (8) Interest payable under this section shall be paid without any deduction of income tax and shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.

- (9) Where under the law in force in a territory outside the United Kingdom interest is payable subject to a deduction in respect of taxation and such deduction applies to an amount of interest paid in accordance with subsection (4) above, the reference to the rate of 9 per cent. per annum in that subsection shall be deemed to be a reference to such rate of interest as after such deduction shall be equal to the rate of 9 per cent. per annum.

#### Arrangements to avoid section 812

##### 814

- (1) In any case where arrangements are made, whether before or after the coming into force of this section, as a result of which interest is paid or a discount is allowed by or through a person who is resident in the United Kingdom, or carries on business in the United Kingdom through a branch or agency, and it is reasonable to suppose that, if such payment or allowance had not been made, a qualifying distribution would have been made by that person, or by another company resident in the United Kingdom to a company which has, or is an associated company of a company which has, a qualifying presence in a unitary state at the time when the payment or allowance is made, then—

- (a) no person who receives that payment or allowance shall be entitled to relief from income tax or corporation tax thereon by virtue of arrangements having effect under section 2(1) of TIOPA 2010; and

- (b) the payment or allowance shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.

- (2) Without prejudice to the generality of subsection (1) above, where a payment or allowance is not of itself a payment or allowance to which that subsection applies, but is made in conjunction with other payments of whatever nature and taken together with those payments has substantially similar effect to a distribution, then, for the purposes of subsection (1) above it shall be treated as a payment or allowance within that subsection.

- (3) Any company which has received such a payment of interest as is referred to in subsection (1) above, from which income tax has not been deducted by the person making the payment, and has a qualifying presence in a unitary state at the time of the payment, shall be treated for the purposes of section 813 as a company—

- (a) from which the entitlement to claim payment of the excess of a tax credit over the income tax chargeable on its income has been withdrawn by section 812(1), and

- (b) which has had paid to it such an excess in an amount equal to the income tax which should have been deducted from the payment of interest.