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HMRC internal manual

International Manual

HM Revenue & Customs
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UK residents with foreign income or gains: corporation tax: Computation

In accordance with TIOPA10/S31 & S32, where credit for foreign tax is to be allowed in respect of any income or gain of a company, compute the amount of the income for the purposes of Corporation Tax as follows:

  1. do not deduct any direct foreign tax charged on the income;
  2. if the income is a dividend for which the company is entitled to relief for underlying tax (see INTM164060 and INTM164360) add the full amount of the underlying tax to the dividend;
  3. do not add any foreign tax `spared’ (see INTM161270) in the foreign country.

Where credit is allowable for foreign tax on interest (or dividends) on certain foreign loans where the interest is a trading receipt, the rules contained in TIOPA10/S37, modify the method of computing the UK measure of income. Details can be found in INTM168010 onwards.