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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 7

There are credits relating to interest which has suffered foreign tax but a Loan Relationship deficit overall, part of which the company surrenders as group relief or carries back or forwards to other accounting periods under CTA09/S459 or CTA09/S457:

The figures are as in example 5 (see INTM167290). The company claims to treat £400 of the deficit in one or more of the ways indicated and claims relief for the balance of £600 against other profits of the accounting period under CTA09/S459.

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 £2,500 (that is, the aggregate of the debits of £2,900 less £400 which is the amount of the deficit to which the claims for relief under CTA09/S459 and S457 relate) 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 (600)   500 1,000 2,900
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) (600)   (1,400) (500)   (2,500)
  1,400 500     1,000 2,900


i) see note (i) to example 1.

ii) see note (ii) to example 5. In this example debits of £600 must be set against the profits identified in the claim under CTA09/S459.