Commentary on Sections Overview Overview Section 6: The effect given by section 2 to double taxation arrangements
38.This section delimits the scope of the effect given by section 2 to DTAs. It is based on section 788(3) and (6) of ICTA, section 277(1) of TCGA, section 194(1) and (3) of FA 1993 and section 107(5) of FA 2004.
39.Subsections (2)(b) and (3)(b) reflect the view that section 788(3)(b) of ICTA is:
	about taxing non-UK residents on (a) income arising in the United Kingdom or (b) gains accruing on the disposal of assets in the United Kingdom; and
	not about taxing persons generally on (a) income arising in the United Kingdom that is received by non-UK residents or (b) gains accruing where assets are disposed of to non-UK residents.
40.Subsection (3) expands section 788(3) of ICTA in relation to capital gains tax with the modifications directed by section 277(1) of TCGA. Section 788(3)(b) refers to income “arising from sources”, but this income tax terminology is not used in the legislation on capital gains tax. Accordingly, subsection (3)(b) refers to gains “accruing on the disposal of assets”, as does subsection (2)(c), the corresponding provision in relation to corporation tax on chargeable gains.
41.Subsection (4) expands section 788(3) of ICTA in relation to PRT with the modifications directed by section 194(1) and (3) of FA 1993. On a literal interpretation, section 788(3) of ICTA, as thus modified, would enable DTAs to make provision about PRT generally. But this would run counter to the purpose expressed in section 194(1) of FA 1993. Accordingly, subsection (4) limits the effect of DTAs on PRT to the charge under section 12 of the Oil Taxation Act 1983. Furthermore, the requirement under section 194(1)(b) of FA 1993 to translate “income” in section 788 of ICTA as “consideration” is to be read in the context of section 194(1)(a) of FA 1993 and therefore does not extend to “income” in the phrase “corporation tax in respect of income or chargeable gains” in section 788(3)(a) of ICTA.
42.Subsections (5) and (8) refer to the provisions concerning special withholding tax. These provisions are rewritten in Part 3.
43.Subsection (6) expressly requires relief under subsection (2)(a), (3)(a) or (4) to be claimed. This requirement is implicit in section 788(6) of ICTA.
44.Unlike section 788(6) of ICTA, on which it is based, subsection (6) does not expressly state to whom a claim should be made. A claim must, therefore, be made in (or by amending) a return, or to an officer of Revenue and Customs. This is a minor change in the law, reflecting administrative reality. See Change 2 in Annex 1.