Taxation (International and Other Provisions) Act 2010 section 71B

Reduction of foreign tax paid on profits of overseas PE

Section 71B reduces the amount of foreign tax that can be credited or deducted in the UK where a company's overseas permanent establishment has used its losses to reduce tax in the foreign territory.

• Where an overseas PE's losses have reduced foreign tax on other income in that territory, the foreign tax eligible for UK credit relief or deduction must be reduced by a corresponding "relevant amount"
• The "relevant amount" consists of the decrease in foreign tax for the period plus any excess carried forward from previous periods where the reduction exceeded the foreign tax actually paid
• The reduction does not apply where the hybrid mismatch rules under Part 6A of TIOPA 2010 have already counteracted the relevant deduction or allowance
• HMRC or the company may make adjustments to the relevant amount at any time, even outside normal time limits, if circumstances change