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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Non-resident companies: double taxation agreements: tax deducted in computing gain

If the UK resident does not want to claim tax credit relief, the tax can be deducted in computing the gain, see INTM169010+. The foreign tax paid does not qualify for indexation allowance. Although it is an allowable deduction in computing the gain it is not a deduction within TCGA92/S38 (1)(a) or TCGA92/S38 (1)(b). This means it is not relevant allowable expenditure for indexation allowance purposes, see CG17240. In all other respects you compute and apportion the gain in the usual way allowing the foreign tax paid as a deduction. See the example in CG57384.