Taxation (International and Other Provisions) Act 2010 section 37

Credit against tax on trade income: further rules

Section 37 provides additional rules for calculating the maximum foreign tax credit that can be set against UK income tax when the income in question is trade income.

• When working out the credit limit for trade income, the relevant income is identified by reference to the specific transaction, arrangement or asset that gave rise to the foreign tax, rather than by reference to a general income source.
• The income figure used in the credit limit calculation must be reduced by any allowable deductions relating to that transaction, arrangement or asset, including a just and reasonable share of any expenses that relate partly to that income and partly to other matters.
• The overall cap on credit relief applies to trade income by reference to each transaction, arrangement or asset rather than to income from a source generally.
• Trade income for these purposes means income taxable as trading profits or post-cessation receipts, or as property business profits or post-cessation receipts, under the relevant chapters of ITTOIA 2005.