Commentary on Sections Overview Overview Section 838: Expenses attributable to collection or payment of relevant foreign income
3119.This section is based on section 65(1) of ICTA. The source legislation makes deductions available only to income not received in the United Kingdom. But in practice the deductions are given whether or not the income in question has been received in the United Kingdom. This section reflects practice, so the words “subject in the case of income not received in the United Kingdom” are not rewritten. See Change 137 in Annex 1.
3120.The source legislation does not identify exactly what deductions are envisaged. The words used “the same deductions and allowances as if [the income] had been received [in the United Kingdom]” date from FA 1914 when taxpayers found their income taxed on the arising rather than the remittance basis. But it is an unhelpful analogy because the remittance basis does not allow any deductions (except in the case of trading income – see section 65(3) of ICTA). Rather than relying on an analogy, the section therefore specifies the deductions intended. This includes, for example, banking costs involved in the collection and forwarding of dividends. See Change 138 in Annex 1.
3121.The section applies to all relevant foreign income, including trading profits within the definition of that term. It does not rewrite the restriction in section 65(3) of ICTA denying these deductions to such trading profits. See Change 138 in Annex 1.
3122.See also Chapter 2 of Part 10 of this Act for further rules that may qualify the deductions available under this section.