Finance Act, 2002

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Credit for certain withholding tax.

57.—Schedule 24 to the Principal Act (which is amended by section 38 ) is further amended—

(a) in paragraph 4(5)—

(i) in clause (a) by substituting “this paragraph, paragraph 9D” for “this paragraph”, and

(ii) in clause (b)—

(I) in subclause (ii) by deleting “and”,

(II) in subclause (iii) by inserting “and” after “that section,”, and

(III) by inserting the following after subclause (iii):

“(iv) the amount of income of a company treated for the purposes of paragraph 9D as referable to an amount of relevant interest (within the meaning of that paragraph)”,

(b) in paragraph 9A(5)(b) by substituting “section 449 or paragraph 9D” for “section 449”, and

(c) by inserting the following after paragraph 9C:

“9D.—(1) (a) In this paragraph—

‘relevant foreign tax’, in relation to interest receivable by a company, means tax—

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

(ii) which corresponds to income tax or corporation tax,

(iii) which has not been repaid to the company,

(iv) for which credit is not allowable under arrangements, and

(v) which, apart from this paragraph, is not treated under this Schedule as reducing the amount of income;

‘relevant interest’ means interest receivable by a company which interest falls to be taken into account in computing the trading income of a trade carried on by the company.

(b) For the purposes of this paragraph—

(i) the amount of corporation tax which apart from this paragraph would be payable by a company for an accounting period and which is attributable to an amount of relevant interest shall be an amount equal to—

(I) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2002, 16 per cent, and

(II) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2003 or any subsequent financial year, 12.5 per cent,

of the amount of the income of the company referable to the amount of the relevant interest, and

(ii) the amount of any income of a company referable to an amount of relevant interest in an accounting period shall, subject to paragraph 4(5), be taken to be such sum as bears to the total amount of the trading income of the company for the accounting period the same proportion as the amount of relevant interest in the accounting period bears to the total amount receivable by the company in the course of the trade in the accounting period.

(2) Where, as respects an accounting period of a company, the trading income of a trade carried on by the company includes an amount of relevant interest, the amount of corporation tax which, apart from this paragraph, would be payable by the company for the accounting period shall be reduced by so much of—

(a) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2002, 84 per cent, and

(b) in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2003 or any subsequent financial year, 87.5 per cent,

of any relevant foreign tax borne by the company in respect of relevant interest in that period as does not exceed the corporation tax which would be so payable and which is attributable to the amount of the relevant interest.

(3) (a) This paragraph shall not apply as respects any accounting period of a company which is a relevant accounting period within the meaning of section 442.

(b) Subsection (2) of section 442 shall apply for the purposes of this paragraph as it applies for the purposes of Part 14.”.