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

Section 608L: the local tax amount

Section 608M defines how to calculate the "local tax amount" for the purposes of the foreign tax exemption in section 608L, which exempts offshore receipts from intangible property where sufficient foreign tax has been paid.

• Where foreign tax has been paid on both UK-derived amounts and other amounts, the total tax must be apportioned between them on a just and reasonable basis
• The local tax amount must be reduced by any tax repayment or tax credit payment received by any person under the foreign territory's laws, where that repayment or credit relates directly or indirectly to the tax on UK-derived amounts
• Where a tax repayment or tax credit relates partly to tax on UK-derived amounts and partly to other taxes, the repayment or credit must itself be apportioned on a just and reasonable basis, and only the portion relating to UK-derived amounts reduces the local tax amount
• Any reduction for tax repayments or credits is applied after the initial apportionment of total foreign tax between UK-derived amounts and other amounts