Part 2 U.K.Double taxation relief

Modifications etc. (not altering text)

C1 Pt. 2 modified by 1988 c. 1, Sch. 19ABA paras. 26-28 (as inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 34(3) (with Sch. 9 paras. 1-9, 22))

C2 Pt. 2 applied by 2010 c. 4, s. 269DL(6) (as inserted (with effect in accordance with Sch. 3 Pt. 3 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 3 para. 1)

CHAPTER 2 U.K.Double taxation relief by way of credit

Insurance companies U.K.

96 Companies with overseas branches: restriction of credit U.K.

(1) Subsection (4) applies if credit for foreign tax—

(a) which is payable in respect of insurance business carried on by a company through a permanent establishment in the non-UK territory, and

(b) which is calculated otherwise than wholly by reference to profits arising in the non-UK territory,

is to be allowed (in accordance with this Part) against corporation tax charged under section 35 of CTA 2009 F1 ... in respect of the profits F2 ... of [F3 non-BLAGAB long-term business] carried on by the company in an accounting period (in this section called “the relevant UK-taxable profits”).

(2) For the purposes of subsection (1)(b), the cases in which foreign tax is “calculated otherwise than wholly by reference to profits arising in the non-UK territory” are those cases in which the charge to tax in the non-UK territory is within subsection (3).

(3) A charge to tax is within this subsection if it is such a charge made otherwise than by reference to profits as (by disallowing their deduction in calculating the amount chargeable) to require sums payable and other liabilities arising under policies to be treated as sums or liabilities falling to be met out of amounts subject to tax in the hands of the company.

(4) If this subsection applies, the amount of the credit is not to exceed the greater of—

(a) any such part of the foreign tax as is charged by reference to profits arising in the non-UK territory, and

(b) the shareholders' share of the foreign tax.

(5) For the purposes of subsection (4), the shareholders' share of the foreign tax is so much of that tax as is represented by the fraction—

where—

A is an amount equal to the amount of the relevant UK-taxable profits before making any deduction authorised by subsection (7), and

B is an amount equal to the excess of—

(a)

the amount taken into account as receipts of the company in calculating those profits, apart from premiums and sums received by virtue of a claim under a reinsurance contract, over

(b)

the amount taken into account as expenses in calculating those profits.

(6) If there is no such excess, or if the profits are greater than any excess, the whole of the foreign tax is the shareholders' share; and, subject to that, if there are no profits, none of the foreign tax is the shareholders' share.

(7) If, by virtue of this section, the credit for any foreign tax is less than it otherwise would be, section 31(2)(a) does not prevent a deduction being made for the difference in calculating the relevant UK-taxable profits.

Textual Amendments

F1 Words in s. 96(1) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 235(a)

F2 Words in s. 96(1) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 235(b)

F3 Words in s. 96(1) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 235(c)

[F4 97Companies with more than one category of business: restriction of credit U.K.

(1) This section applies if—

(a) an insurance company carries on more than one category of long-term business in an accounting period, and

(b) there arises to the company in that period any income or gain (“the relevant income”) in respect of which credit for foreign tax is to be allowed under the arrangements.

(2) The amount of the credit for foreign tax which, under the arrangements, is allowable against corporation tax in respect of so much of the relevant income as is referable, in accordance with Part 2 of FA 2012, to a particular category of business must not exceed the fraction of the foreign tax which, in accordance with subsection (3), is attributable to that category of business.

(3) The fraction of the foreign tax that is attributable to the category of business in question is the fraction given by—

where—

RPRI is the amount of the relevant income referable to the category of business in question in accordance with section 97A, and

TRI is the total amount of the relevant income.

Textual Amendments

F4 Ss. 97, 97A substituted (17.7.2012) for s. 97 by Finance Act 2012 (c. 14), Sch. 16 para. 236

97A Commercial allocation of relevant income to different categories of long-term business U.K.

(1) The amount of the relevant income that, for the purposes of section 97, is to be regarded as referable to a category of business is to be determined in accordance with an acceptable commercial method adopted by the company for the period of account in which the relevant income arises.

(2) A method is an “acceptable commercial method” if, in all the circumstances, it can reasonably be regarded as providing a fair method for the purposes of section 97 for determining for a period of account the amount of any income or gain arising in the period that is referable to a particular category of long-term business carried on by the company.

(3) The Treasury may make regulations for the purposes of this section—

(a) prescribing cases in which a method is, or is not, to be regarded as an acceptable commercial method, and

(b) prescribing cases in which the only acceptable commercial method is to be a method prescribed, or of a description prescribed, in the regulations.

(4) Subject to any provision made by regulations under subsection (3), the method adopted for the purposes of this section for a period of account must be consistent with the method adopted for the purposes of section 98 or 115 of FA 2012 for that period.]

Textual Amendments

F4Ss. 97, 97A substituted (17.7.2012) for s. 97 by Finance Act 2012 (c. 14), Sch. 16 para. 236

F5 98Attribution for section 97 purposes if category is gross roll-up business U.K.

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Textual Amendments

F5 S. 98 omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 237

99 Allocation of expenses etc in calculations under section 35 of CTA 2009 U.K.

(1) Subsection (2) has effect if—

(a) an insurance company carries on any category of insurance business in a period of account,

(b) a calculation in accordance with the provisions applicable for the purposes of section 35 of CTA 2009 (charge on trade profits) falls to be made in relation to that category of business for that period, and

(c) there arises to the company in that period any income or gain in respect of which credit for foreign tax is to be allowed under the arrangements.

(2) The amount of the credit for foreign tax which, under the arrangements, is to be allowed against corporation tax in respect of so much of that income or gain as is referable to the category of business concerned (“the relevant income”) is to be limited by treating the amount of the relevant income as reduced in accordance with sections 100 and 101.

(3) In determining the amount of credit for foreign tax which is to be allowed as mentioned in subsection (2), the relevant income is not to be reduced except in accordance with that subsection.

(4) If a 75% subsidiary of an insurance company is acting in accordance with a scheme or arrangement and—

(a) the purpose, or one of the main purposes, of the scheme or arrangement is to prevent or restrict the application of subsection (2) to the insurance company, and

(b) the subsidiary does not carry on insurance business of any description,

the amount of corporation tax attributable (apart from this subsection) to any item of income or gain arising to the subsidiary is to be found by setting off against that item the amount of expenses that would be attributable to it under section 100(1) if that item had arisen directly to the insurance company.

(5) If the credit allowed for any foreign tax is, by virtue of subsection (2), less than it would be if the relevant income were not treated as reduced in accordance with that subsection, section 31(2)(a) does not prevent a deduction being made for the difference in calculating the profits of the category of business concerned.

(6) If, by virtue of subsection (4), the credit allowed for any foreign tax is less than it would be apart from that subsection, section 31(2)(a) does not prevent a deduction being made for the difference in calculating the income of the 75% subsidiary.

(7) For the purposes of the operation of this section in relation to any income or gain in respect of which credit is to be allowed under the arrangements, the amount of the income or gain that is referable to a category of insurance business is the same fraction of the income or gain as the fraction of the foreign tax that is attributable to that category of business in accordance with sections 97 and [F6 97A].

Textual Amendments

F6 Word in s. 99(7) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 238

100 First limitation for purposes of section 99(2) U.K.

(1) The first limitation for the purposes of section 99(2) is to treat the amount of the relevant income as reduced (but not below nil) for the purposes of this Chapter by the amount of expenses (if any) attributable to the relevant income.

(2) For the purposes of subsection (1), the amount of expenses attributable to the relevant income is the appropriate fraction of the total relevant expenses of the category of business concerned for the period of account in question.

(3) In subsection (2) “the appropriate fraction” means the fraction given by—

where—

RI is the amount of the relevant income before any reduction in accordance with section 99(2), and

TI is the total income of the category of business concerned for the period of account in question, but if that would result in TI being nil, TI is instead the amount described in subsection (4).

(4) That amount is so much in total of the income and gains—

(a) which arise to the company in the period of account in question, and

(b) in respect of which credit for foreign tax is to be allowed under any double taxation arrangements or under unilateral relief arrangements for any territory outside the United Kingdom,

as are referable to the category of business concerned (before any reduction in accordance with section 99(2)).

(5) Subsection (4) is to be read with section 104 (determining how much of any income or gain is referable to a category of business).

(6) In this section “the relevant income” has the meaning given by section 99(2).

101 Second limitation for purposes of section 99(2) U.K.

(1) If—

(a) the amount of the relevant income after any reduction under section 100(1),

exceeds—

(b) the relevant fraction of the profits of the category of business concerned for the period of account in question which are chargeable to corporation tax,

the second limitation is to treat the relevant income as further reduced (but not below nil) for the purposes of this Chapter to an amount equal to that fraction of those profits.

(2) In subsection (1) “the relevant fraction” means the fraction given by—

where—

“RI” is the amount of the relevant income before any reduction in accordance with section 99(2), and

“the referable share of total relievable income and gains” is so much in total of the income and gains—

(a)

which arise to the company in the period of account in question, and

(b)

in respect of which credit for foreign tax is to be allowed under any double taxation arrangements or under unilateral relief arrangements for any territory outside the United Kingdom,

as are referable to the category of business concerned (before any reduction in accordance with section 99(2)).

(3) In subsection (1), any reference to the profits of a category of business is a reference to those profits after the set off of any losses of that category of business which have arisen in any previous accounting period.

(4) Subsection (2) is to be read with section 104 (determining how much of any income or gain is referable to a category of business).

(5) In this section “the relevant income” has the meaning given by section 99(2).

F7 102Interpreting sections 99 to 101 for life assurance or gross roll-up business U.K.

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Textual Amendments

F7 S. 102 omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 239

103 Interpreting sections 99 to 101 F8 ... U.K.

(1) This section has effect for the interpretation of sections 99 to 101 F9 ...

(2) The “total income” of the category of business concerned for any period of account is the amount (if any) by which—

(a) the sum of the amounts specified in subsection (3),

exceeds—

(b) the sum of the amounts specified in subsection (4).

(3) The amounts mentioned in subsection (2)(a) are—

(a) earned premiums, net of reinsurance,

(b) investment income and gains, and

(c) other technical income, net of reinsurance.

(4) The amounts mentioned in subsection (2)(b) are—

(a) acquisition costs,

(b) the change in deferred acquisition costs, and

(c) losses on investments.

(5) The “total relevant expenses” of the category of business concerned for any period of account is the sum of—

(a) the claims incurred, net of reinsurance,

(b) the changes in other technical provisions, net of reinsurance,

(c) the change in the equalisation provision, and

(d) investment management expenses,

unless that sum is a negative amount, in which case the total relevant expenses is to be taken to be nil.

(6) The amounts to be taken into account for the purposes of the paragraphs of subsections (3) to (5) are the amounts taken into account for the purposes of corporation tax.

(7) Expressions used—

(a) in the paragraphs of subsections (3) to (5), and

(b) in the provisions of section B of Part 1 of Schedule 3 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (S.I. 2008/410) which relate to the profit and loss account format (within the meaning of paragraph 1(1) and (2) of that Schedule),

have the same meaning in those paragraphs as they have in those provisions.

Textual Amendments

F8 Words in s. 103 heading omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 240(3)

F9 Words in s. 103(1) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 240(2)

104 Interpreting sections 100 and 101: amounts referable to category of business U.K.

(1) This section applies for the purposes of the operation of sections 100 and 101 in relation to any income or gain in respect of which credit is to be allowed under any double taxation arrangements or under unilateral relief arrangements for a territory outside the United Kingdom.

(2) The amount of the income or gain that is referable to a category of insurance business is the same fraction of the income or gain as the fraction found under subsection (3).

(3) Apply sections 97 and [F10 97A] in relation to—

(a) that category of business,

(b) the income or gain, and

(c) the double taxation arrangements, or unilateral relief arrangements, mentioned in subsection (1),

in order to find the fraction of the foreign tax that is attributable to that category of business.

Textual Amendments

F10 Word in s. 104(3) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 241