Taxation (International and Other Provisions) Act 2010 section 409

Double taxation relief

Section 409 adjusts a company's tax-EBITDA calculation where double taxation relief reduces the UK corporation tax payable on an amount of income, ensuring that the portion of income effectively sheltered by foreign tax credits is excluded from the tax-EBITDA figure.

• This section applies when an amount of income would normally count towards a company's tax-EBITDA (by meeting certain conditions in section 406) but the UK corporation tax on that income has been reduced by a foreign tax credit.
• The income is treated as not qualifying for inclusion in tax-EBITDA to the extent it represents "notional untaxed income" — that is, the portion of income effectively shielded from UK tax by the double taxation credit.
• The notional untaxed income is calculated as the foreign tax credit divided by the company's corporation tax rate (before any double taxation credits are applied) for the relevant accounting period.
• The effect is to reduce the company's tax-EBITDA, which in turn may reduce the amount of tax-deductible interest the corporate interest restriction rules allow.

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