Taxation (International and Other Provisions) Act 2010 section 106

Chapters 1 and 2 apply to capital gains tax separately from other taxes

Section 106 ensures that foreign taxes similar to capital gains tax are kept separate from other taxes when claiming double taxation relief, preventing the same foreign tax from being relieved against both UK capital gains tax and UK income tax or corporation tax.

• Where a foreign tax is similar in character to capital gains tax, any double taxation relief available under Chapters 1 and 2 can only be set against UK capital gains tax — it cannot also be used against UK income tax or corporation tax.
• This ring-fencing applies regardless of whether relief for the foreign gains tax is actually claimed or given for capital gains tax purposes.
• Conversely, foreign taxes that are not similar in character to capital gains tax (such as foreign income taxes) cannot be brought into the double taxation relief rules as they apply for UK capital gains tax purposes.
• The section defines "foreign gains tax" as any tax imposed outside the UK that is of a similar character to capital gains tax, and "foreign non-gains tax" as any other tax imposed outside the UK.