Income Tax (Trading and Other Income) Act 2005 section 608L

Exemption where foreign tax at least half of UK tax

Section 608L provides an exemption from the offshore receipts in respect of intangible property rules where the foreign tax paid on UK-derived amounts is at least half of the UK tax that would otherwise be due.

• If you are resident in a territory outside the UK and pay local tax on UK-derived amounts equal to at least 50% of the equivalent UK tax, you are exempt from the Chapter 2A charge on those amounts.
• The exemption does not apply if the local tax amount is determined under "designer tax provisions" — provisions that, in the view of the Commissioners, are designed to let taxpayers exercise significant control over the amount of tax payable on UK-derived amounts.
• The "corresponding UK tax" is the income tax that would be payable on your UK-derived amounts for the tax year under the Chapter 2A charge, calculated without any reliefs or allowances.
• The rules for calculating the "local tax amount" — the foreign tax actually suffered on UK-derived amounts — are set out separately in section 608M.

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