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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: Loan relationships: relief for foreign tax: identification of UK tax: Example 5

There are credits relating to interest which has suffered foreign tax but a loan relationship deficit overall, the whole of which the company sets off against other profits of the same accounting period under CTA09/S459:

The figures are as in example 1 (see INTM167250) except that debits total £2,900 so there is a Loan Relationship deficit of £1,000.

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 £2,900 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 (1,000)   500 1,000 2,500
Restated as Trade Loan Relationship (i)* Other Loan Relationship Proprety Income Foreign dividend Total
Profits 2,000 500 1,400 500 1,000 5,400
less Loan relationship debits (ii) (1,000)   (1,400) (500)   (2,900)
  1,000 500     1,000 2,500


i) see note (i) to example 1.

ii) see note (ii) to example 1. In this example the company does not set any part of the debits against the foreign dividend but has then to set some against the property income and the trade profits. In any event debits of £1,000 must be set against the profits identified in the claim under CTA09/S459.