GIM12260 | Double taxation relief: foreign tax on investment income: accounting periods beginning on or after 1 April 2000: section 804C ICTA 1988: the second limitation: purpose of section 804C(4)

The main object of the expenses limitation in ICTA88/S804C is to ensure that foreign tax is only creditable against corporation tax chargeable on what might be seen as the part of the Case I profit which the relevant item of income has contributed to the overall amount. The first expenses limitation only reduces the income by what can be seen as direct expenses - primarily the outgoings represented by the technical provisions. In order to ensure that foreign tax on relevant income is not creditable at all against corporation tax where there is no, or a very limited amount of Case I profit, whether because of the deduction of indirect expenses or set off of losses brought forward, a second limitation is applied (GIM12270).