Introduction Details of the Schedule
2.Paragraph 1(2)(a) amends paragraph 3(2)(a) of Schedule 28AB to the Income and Corporation Taxes Act 1988 (ICTA) by expressly including amounts of foreign tax payable by the person claiming credit relief. This is to ensure consistency with the provisions which allow relief for double taxation by way of credit in respect of tax which is payable under the law of any territory outside the UK.
3.Paragraph 1(2)(b) and 1(3) introduce consequential amendments.
4.Paragraph 2(2)(a) amends section 85(2) of the Taxation and (International and Other Provisions) Act 2010 (TIOPA) by expressly including amounts of foreign tax payable by the person claiming credit relief. This is also to ensure consistency with the provisions which allow credit relief.
5.Paragraph 2(2)(b) and 2(3) introduce consequential amendments.
6.Paragraph 3 contains provision about commencement.
7.Paragraph 4(1) inserts into TIOPA new section 85A which prescribes a scheme or arrangement where there is an amount of deemed foreign tax and either condition A or condition B is met.
8.New section 85A(2) provides that condition A is met where it could reasonably be expected that, under the scheme or arrangement, no real foreign tax would be paid or payable by a participant in the scheme or arrangement.
9.New section 85A(3) provides that condition B is met where it could reasonably be expected that, under the scheme or arrangement, real foreign tax would be paid or payable by a participant in the scheme or arrangement but the foreign-tax total would be increased by less than the amount of credit allowable to the claimant in respect of the amount of deemed foreign tax.
10.New section 85A(4) contains a number of definitions. The “real foreign tax” definition sets out that, in relation to section 10 of TIOPA, account is taken of the foreign tax chargeable in respect of the interest payable on the securities referred to in section 10(1)(c) of TIOPA and, in relation to the manufactured overseas dividend (MOD) rules, account is taken of the foreign tax chargeable on the overseas dividend of which the MOD is representative. The definition also includes a sweep-up for other deeming provisions.
11.Paragraph 4(2) and (3) contain provision about commencement.
12.Paragraph 5(1)(b) replaces the existing section 85(2) of TIOPA with a new subsection which removes the condition that an amount of foreign tax is paid or payable by C. The new subsection looks to the effect of the “the FT amount” (now defined in section 85(1)) being paid or payable.
13.Paragraph 5(3) contains provision about commencement.
14.Paragraph 6(1)(a) deletes the words “under the scheme or arrangement” from section 86(1) of TIOPA, making clear that it is immaterial whether a pre-execution step was under a scheme or arrangement.
15.Paragraph 6(1)(b) inserts new sections 86(3A) and (3B) into TIOPA. New section 86(3A) confirms that a step taken or not taken by a participant in a scheme or arrangement can be a step taken or omitted from being taken before a scheme or arrangement comes into existence.
16.New section 86(3B) provides that the reason for taking or not taking the step does not matter provided the effect is to increase, or give rise to, a credit claim by a participant.
17.Paragraph 6(2) contains provision about commencement.
18.Paragraph 7(1) inserts new sections 112(2A) and 112(2B) into TIOPA. New section 112(2A) reduces the deduction from income for foreign tax by the difference between X and Y where X is less than Y.
19.New section 112(2B) defines X as the amount of the foreign income which the person would actually have to bring into account for the purposes of computing his tax liability (absent section 112), taking into account any deductions. Y is the amount of income arising outside the UK on which an amount of foreign tax has been paid.