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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: the first limitation: shortcut


Since both the numerator and denominator of the ICTA88/S804C (6) fraction are wholly independent of the amount or percentage of foreign tax, it is possible to apply the first limitation to the totality of income and gains on which any foreign tax falls to be allowed as credit. This is because the reduction to each item of relevant income will always be the same in percentage terms. It can be seen that in the example in GIM12230, the reduction to be applied to each of items A and B is 80%. However it may still be necessary to calculate the reduction for any particular item of income to test whether the foreign tax on that income exceeds the corporation tax attributable to the income as reduced by the first and second limitations.