Taxation (International and Other Provisions) Act 2010 section 24

Claw-back of relief under section 22(2)

Section 24 provides a mechanism for clawing back double taxation relief credit that was previously given under section 22(2) on overlap profits, when those overlap profits are later deducted on cessation of a trade or a change of accounting date.

• When foreign tax credit has been allowed on overlap profit under section 22(2), and that overlap profit is later deducted (on cessation or change of accounting date), an adjustment is required to prevent over-relief
• Two amounts are compared: amount A (the extra credit given because of the section 22(2) rules) and amount B (the credit that would be available in the later year from the same source, ignoring the overlap deduction)
• If amount A exceeds amount B, no credit is given for the later year and an additional income tax charge equal to the excess is imposed on the liable person
• If amount B exceeds amount A, the liable person receives a credit equal to the excess for the later year