What does section 51 of the Taxation (International and Other Provisions) Act 2010 do?

Section 51 explains how to calculate the corporation tax credit limit for double taxation relief when a company has non-trading credits on intangible fixed assets. It requires using the total gross non-trading credits rather than the net non-trading gain after deducting debits, ensuring the credit limit reflects the full income on which foreign tax was suffered.

Why does section 51 use gross non-trading credits instead of the net non-trading gain?

The intangible fixed assets regime nets credits and debits to produce a net non-trading gain, but credit relief rules assess individual income items separately. Section 51 reconciles these approaches by using the gross figure, ensuring a fairer credit limit based on the full income that generated the foreign tax liability rather than a reduced net amount.

When does section 51 of TIOPA 2010 apply to a company?

Section 51 applies only when a company has at least one non-trading credit on intangible fixed assets that is eligible for double taxation relief. This means there must be foreign tax on the relevant item for which credit is allowable under a double tax agreement. If no credits carry eligible foreign tax, normal netting rules apply without adjustment.

How does section 51 affect the credit relief limit in practice?

For example, if a company has gross non-trading credits of £200,000 and non-trading debits of £50,000, the net gain is £150,000. Without section 51, the credit limit references £150,000. With section 51, it references the gross £200,000, producing a higher credit relief limit that better reflects the income on which foreign withholding tax was actually suffered.

Taxation (International and Other Provisions) Act 2010 section 51

Tax for period on intangible fixed assets

Section 51 explains how to calculate the corporation tax credit limit for double taxation relief purposes when a company has non-trading credits on intangible fixed assets that qualify for relief under a double tax treaty.

This section applies when a company has at least one non-trading credit on intangible fixed assets in the period that qualifies for double taxation relief.
For the purposes of calculating the credit relief limit, corporation tax is treated as being charged on the total gross non-trading credits, rather than on the net non-trading gain (that is, after deducting non-trading debits) on intangible fixed assets.
A non-trading credit is eligible for double taxation relief if there is foreign tax on the underlying item for which credit is allowable against UK tax under the relevant double tax treaty.
Non-trading credits are those arising under Part 8 of the Corporation Tax Act 2009, which deals with intangible fixed assets.

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