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HMRC internal manual

International Manual

Corporation tax: foreign tax credit relief: corporation tax: Loan relationships: examples

Both double taxation agreements and TIOPA10/S9 require foreign tax paid on an item of income to be credited against the UK tax computed by reference to that income. Because it may be difficult to identify the amount of Corporation Tax which is computed by reference to particular credits relating to interest which have suffered foreign tax, TIOPA10/S50 creates an assumption that the tax is charged on the actual amount of the credits without any deduction for debits. This enables the figures in the ‘pot’ to be restated for the purposes of calculating credit relief. The credits and the debits are then dealt with separately. See the examples in INTM167250 onwards.