Taxation (International and Other Provisions) Act 2010 section 42

Amount of limit

Section 42 sets the maximum amount of foreign tax credit that a company can claim against its UK corporation tax liability on any particular item of income or chargeable gain.

• The foreign tax credit on any income or gain cannot exceed the UK corporation tax rate multiplied by the amount of that income or gain
• The income or gain figure used in this calculation must be reduced by any amounts allocated to it under provisions dealing with general deductions, loan relationship deficits and debits, and intangible fixed asset debits
• Special rules modify how the credit limit applies where the company has an overseas permanent establishment, or the credit relates to trade income, certain non-trading loan relationship credits, loan relationships, or intangible fixed assets
• An additional limit on credit applies in certain cases involving controlled foreign companies (CFCs)

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