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HMRC internal manual

General Insurance Manual

Double taxation relief: foreign tax on investment income: accounting periods beginning on or after 1 April 2000: section 804C ICTA 1988

Foreign tax on investment income and gains taken into account in a Case I computation

ICTA88/S804C and ICTA88/S804E (inserted by FA00/SCH30/PARA18) set out explicit rules for setting expenses and other deductions against items of income to calculate the measure of income, and therefore of corporation tax in respect of it, against which the creditability of foreign tax is to measured. They do not apply to tax on overseas branch profits.

Section 804C ICTA 1988 – basic principles

ICTA88/S804C applies to all categories of insurance business, including general business. Where a company has both general business and long-term business which is not life assurance business, such as permanent health insurance (PHI), the businesses are a single category for this purpose. ICTA88/S804C is limited to cases where a computation in accordance with the provisions of Case I of Schedule D falls to be made. Thus it does not apply to a general insurer carrying on business on a mutual basis.

The section applies where the company has any item of income or gain where credit for foreign tax falls to be allowed. It applies on an item by item basis, but there may be scope for shortcuts in calculating the restriction by looking at the total foreign income with creditable tax referable to a category - see GIM12250. It does not apply where the company does not claim, or disclaims, credit, and expenses the foreign tax under ICTA88/S811.