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HMRC internal manual

International Manual

Foreign tax paid on trade income: limitation on credit: 1998 legislation: First credit limit

For all foreign interest ICTA88/S798 provides that the amount of foreign tax which may be credited against a bank’s liability to Corporation Tax is not to exceed 15 per cent of the gross foreign interest established as in INTM168090. The limit of 15 per cent applies both to tax withheld and tax `spared’. For loans within the 1982 legislation (except in the case of a UK branch of a non-resident bank to which further restrictions (see INTM168310 - INTM168340) apply) this is the only rule which operates to limit the amount of the credit relief available for set-off against the bank’s liability to Corporation Tax in respect of its trading income. For interest within the 1987 and/or the 1998 legislation there is a second rule (see INTM168130) which may operate to limit the available relief further.