Taxation (International and Other Provisions) Act 2010 section 34

Reduction in credit: payment by reference to foreign tax

Section 34 requires a reduction in foreign tax credit relief where a tax authority makes a payment linked to the foreign tax that was paid.

• Where a person is entitled to foreign tax credit relief under a double taxation arrangement, any payment made by a tax authority that is calculated by reference to that foreign tax will reduce the credit by an equal amount.
• The payment triggers a reduction whether it is made to the taxpayer themselves, to a person connected with the taxpayer, or to any other person as a direct or indirect consequence of a scheme.
• "Connected persons" are determined using the standard definition in section 1122 of the Corporation Tax Act 2010.
• "Scheme" is given a very wide meaning, covering any scheme, arrangement, or understanding of any kind — whether or not legally enforceable — and whether it involves a single transaction or multiple transactions.