Taxation (International and Other Provisions) Act 2010 section 96

Companies with overseas branches: restriction of credit

Section 96 restricts the amount of double taxation credit relief available to insurance companies that carry on long-term business through an overseas branch, where the foreign tax is not calculated solely by reference to the profits arising in that overseas territory.

• Where an insurance company operates through an overseas branch and the foreign tax on that branch is not based wholly on local profits, the credit relief against UK corporation tax is capped
• The cap is the greater of (a) any part of the foreign tax that is charged by reference to profits actually arising in the overseas territory, or (b) the "shareholders' share" of the foreign tax, calculated using a specific formula
• The shareholders' share is found by applying the fraction A/B to the foreign tax, where A is the relevant UK-taxable profits (before any permitted deduction) and B is the excess of receipts over expenses used in calculating those profits (excluding premiums and reinsurance recoveries from receipts)
• Where the credit relief is reduced by this restriction, the disallowed portion of the foreign tax may instead be deducted as an expense in calculating the company's UK-taxable profits