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HMRC internal manual

Lloyd's Manual

Double taxation relief: corporate members: Regulations: calculating the foreign tax pool: adjustments of foreign amounts of tax

The Regulations define a number of terms and put them into formulae.

  1. Where
  • ERFT is the effective rate of foreign tax
  • F is the total foreign territory tax payable for the corresponding foreign period of accounting (FPA)
  • P is the profit arising in the territory for the FPA in respect of which the foreign tax is payable.

Then ERFT = F/P x 100.

  1. Where
  • ASFT is the amount of the adjusted sum of foreign tax
  • CTR is the average main UK corporation tax rate for the accounting period (AP) corresponding to the FPA in question
  • FT is the foreign amount of tax that may need to be restricted before adding to the pool.

Then, where ERFT is greater than CTR, ASFT = CTR/ERFT x FT.

The first formula calculates an average foreign tax rate for the FPA. The second formulacalculates the limit on the foreign tax added to the pool where the average foreign taxrate for the FPA exceeds the average main UK CT rate for the corresponding AP.