Finance Act, 1994

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Amendment of Chapter VI (Corporation tax: relief in relation to certain income of manufacturing companies) of Finance Act, 1980.

54.— Chapter VI of Part I of the Finance Act, 1980 , is hereby amended, as respects accounting periods ending on or after the 1st day of May, 1994—

(a) by the insertion after section 39B (inserted by the Finance Act, 1987 ) of the following section—

“Credit for foreign tax.

39C.—(1) (a) In this section—

‘an amount receivable from the sale of goods’ means an amount which—

(i) being an amount receivable from the sale of computer software, or

(ii) by virtue of subsection (1CC) (b) (ii) of section 39, subsection (7) (b) of section 39A or subsection (8) (b) of section 39B,

is regarded as receivable from the sale of goods for the purposes of relief under this Chapter;

‘relevant foreign tax’, where borne by a company in respect of an amount receivable from the sale of goods, means tax—

(i) which, under the laws of any foreign territory, has been deducted from that amount,

(ii) which has not been repaid to the company, and

(iii) for which credit is not allowable under arrangements within the meaning of Schedule 10 to the Income Tax Act, 1967 ;

‘the total amount receivable from the sale of goods’, in relation to a company in the course of a trade in a relevant accounting period, means the aggregate of amounts, receivable by the company in the course of the trade in the relevant accounting period, which are regarded by virtue of any provision of this Chapter as receivable from the sale of goods for the purposes of relief under this Chapter.

(b) For the purposes of this section—

(i) so much of the corporation tax which would, apart from this section, be payable by a company for a relevant accounting period shall be treated as attributable to an amount receivable from the sale of goods in the course of a trade as would not be so payable if that amount receivable, and the income referable to it, were to be disregarded for the purposes of the Corporation Tax Acts;

(ii) the amount of any income of a company referable to an amount receivable from the sale of goods in the course of a trade in a relevant accounting period shall be taken to be such sum as bears to the total amount of the income of the company from the sale of goods in the course of the trade for the relevant accounting period the same proportion as the

said amount receivable from the sale of goods bears to the total amount receivable by the company from the sale of goods in the course of the trade in the relevant accounting period;

(iii) the total amount of income of a company from the sale of goods in the course of a trade in a relevant accounting period shall be taken to be the sum referred to in subsection (3) of section 41 which is to be taken to be the income of the trade for the relevant accounting period referred to in the expression ‘the income from the sale of those goods’ in subsection (2) of the said section.

(2) The amount of corporation tax which would, apart from this subsection, be payable by a company for a relevant accounting period shall be reduced by nine-tenths of so much of any relevant foreign tax borne by the company in respect of an amount receivable from the sale of goods in that period in the course of a trade as does not exceed the corporation tax which would be so payable and which is attributable to the amount receivable from the sale of goods.”,

and

(b) in subsection (1) of section 41 (as amended by the Finance Act, 1992 ) by the insertion in paragraph (a) after “section” of “and section 39C”.