Taxation (International and Other Provisions) Act 2010 section 22

Credit for foreign tax on overlap profit if credit for that tax already allowed

Section 22 provides a mechanism for granting additional foreign tax credit relief where the same trading income is taxed in more than one UK tax year as overlap profit, and foreign tax credit has already been claimed on that income in an earlier year.

• When a person starts trading, the same income can be subject to UK income tax in more than one tax year — this duplicated income is known as overlap profit, and this section ensures that foreign tax credit relief is also given twice to match.
• If foreign tax credit on the overlap profit would have been available under the normal credit rules (section 18(2)) but was denied because credit had already been given in an earlier year, this section allows credit to be given again in the later year ("year L").
• The total credit allowed across all years for the same income cannot exceed the foreign tax actually charged on that income, subject to an adjustment where the number of UK tax years exceeds the number of foreign assessment periods.
• Where only part of the income is taxed in a given UK or foreign period, or where the income is subject to different foreign taxes for different foreign periods, the calculation is adjusted proportionately to ensure a fair allocation of credit.