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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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UK residents with foreign income or gains: corporation tax: Loan relationships: relief for foreign tax: identification of UK tax: Example 3

The loan relationship profit equals the amount of the credits relating to interest which has suffered foreign tax:

The figures are as in example 1 (see INTM167250) except that debits total £1,400 so the taxable profit is £500.

For the purpose of allowing credit relief in respect of the foreign interest of £500 the computation is restated to show UK tax chargeable on the credits of £500 + £600 + £800 and to show separately debits of £1,400 which are then treated as available to be set against profits of any description for that accounting period under TIOPA10/S52. Taking account of other profits for the accounting period the result would be as follows

  Trade Loan Relationship   Property Income Foreign dividend Total
             
Profits 2,000 500   500 1,000 4,000
Restated as Trade Loan Relationship (i) Other Loan Relationship Property Income Foreign dividend Total
Profits 2,000 500 1,400 500 1,000 5,400
less Loan relationship debits (ii)     (1,400)     (1,400)
  2,000 500   500 1,000 4,000

Notes:

i) see note (i) to example 1.

ii) see note (ii) to example 1.