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HMRC internal manual

General Insurance Manual

From
HM Revenue & Customs
Updated
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Double taxation relief: foreign tax on investment income: accounting periods beginning on or after 1 April 2000: section 804C ICTA 1988: the first limitation: example

:
Suppose there are two items of income on which foreign tax falls to be allowed as credit:

  * A 1000 from which foreign tax of 150 has been deducted; and 
  * B 2000 to which foreign tax including underlying tax of 800 (40%) is attributable.

The relevant items of incoming and outgoings are 

| Premiums                                           | 16000 |
||
| Investment income*                                 | 4000  |
| Acquisition costs & investment management expenses | 500   |
| Other expenses                                     | 1500  |
| Claims & incurred in technical provisions          | 15500 |
| Case I profit                                      | 2500  |

  


*Note - if the total income is nil, the fraction to be applied to the expenses in respect of item A of 1000 is 1000/3000, and the fraction to be applied to the expenses in respect of item B of 2000 is 2000/3000. 

  * Total income is 20000 (16000 + 4000)
  * The fraction to be applied to the expenses in respect of item A of 1000 is 1000/20000. The fraction to be applied to the expenses in respect of item B of 2000 is 2000/20000. 
  * Total relevant expenses are 16000 (500 + 15500). 
  * Fraction of total relevant expenses attributable to item A is 16000 x 1/20 = 800
  * Fraction of total relevant expenses attributable to item B is 16000 x 1/10 = 1600
  * Item A relevant income after applying the first limitation is 1000 – 800 = 200
  * Item B relevant income after applying the first limitation is 2000 – 1600 = 400