GIM12200 onwards describes the way in
which credit against corporation tax for foreign tax suffered by a
general insurer is restricted by setting expenses against the
income. To prevent companies circumventing these restrictions by
arranging for overseas investments to be held in a company not
subject to them, ICTA88/S804C (10) provides a counter. If there is
a scheme or arrangement involving a 75% subsidiary of an insurance
company, and the purpose, or one of the main purposes, of the
scheme is to prevent the rules about expenses in section 804C from
working properly, then an amount of expenses is treated as set
against any income which has suffered foreign tax received by the
subsidiary. Where the DTR available to the subsidiary by way of
credit is restricted by this rule, the unrelieved tax can be set
off as an expense in accordance with ICTA88/S811 - section
804C(12).
To work out the restriction, it is assumed that the income
was received by the insurance company so that the provisions of
section 804C(2) to (4) will apply. The income accruing to any 75%
subsidiary subject to this rule will be included in the
“total income” of the general insurance company within
the meaning of section 804E(2) when working out the restriction.
This rule is similar in purpose and design to that in
ICTA88/S798 (5) - restriction of DTR where a bank or other
financial concern receives interest or certain dividends carrying
foreign tax.
