Commentary on Sections Overview Overview Section 18: Entitlement to credit for foreign tax reduces UK tax by amount of the credit
77.This section gives credit relief. It is based on sections 788(4), 790(1) and (3), 792(1) and (3) and 793(1) to (3) of ICTA and section 277(1) of TCGA.
78.Section 793(1) of ICTA, in relation to income tax and corporation tax, refers to tax “chargeable in respect of any income or chargeable gain”. Subsection (1), in relation to income tax, corporation tax and capital gains tax, also refers to tax “chargeable in respect of any income or chargeable gain”. Taken literally, the substitution rule in section 277(1) of TCGA would require subsection (1) to refer to capital gains tax in respect of any “capital” gain.
79.Section 15(2) of TCGA provides: “every gain shall, except as otherwise expressly provided, be a chargeable gain.” There is no indication that the gains excepted by section 15(2) of TCGA are not capital gains. It is, therefore, possible for a capital gain not to be a chargeable gain, and “capital” gains and “chargeable” gains are not synonymous.
80.But capital gains tax in respect of a capital gain is tax in respect of a chargeable gain. Subsection (1) therefore refers to any “chargeable” gain in relation to both corporation tax and capital gains tax.
81.Subsection (6) is confined to income tax because section 23 of ITA applies only in relation to income tax and so section 793(3) of ICTA can apply only in relation to income tax, notwithstanding section 277(1) of TCGA.