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17 1966

FINANCE ACT, 1966

FIRST SCHEDULE

Provisions as to Relief from Income Tax by way of Credit in respect of United Kingdom Corporation Tax

Section 4.

1. Subject to the provisions of this Schedule, where, under section 4 of this Act, credit is to be allowed against income tax chargeable by reference to any profits, the amount of income tax so chargeable shall be reduced by the amount of the credit.

2. For any year of assessment, the amount of the credit to be allowed against income tax for corporation tax in respect of any profits shall not exceed the income tax chargeable by reference to those profits.

3. (a) Where in respect of any source of profits income tax is chargeable by assessment, the tax chargeable by the assessment for any year of assessment shall be regarded as chargeable by reference to the profits of the basis period for that year and the amount of corporation tax payable in respect of any profits by reference to which income tax is chargeable for any year of assessment shall be determined accordingly:

Provided that where the assessment for any year of assessment is reduced under section 5 of the Finance Act, 1942 , the corporation tax payable in respect of the profits by reference to which income tax is chargeable thereby shall be taken to be the amount, if any, by which the aggregate amount of corporation tax payable in respect of the profits arising in that year of assessment and in the year preceding that year exceeds the amount of any corporation tax payable in respect of profits by reference to which income tax is chargeable for that preceding year.

(b) In relation to any source of profits the basis period for a year of assessment shall, for the purposes of the foregoing subparagraph, be taken to be the period on the profits of which income tax falls to be finally computed in respect of that source or, where, by virtue of any Act, the profits of any other period are to be taken to be the profits of the said period, that other period.

4. (a) Subject to the provisions of this paragraph, where credit for corporation tax in respect of any profits falls to be allowed against corporation profits tax or income tax, no deduction for corporation tax (whether in respect of those or any other profits) shall be made in computing the amount of those profits for the purposes of income tax.

(b) The amount of such a dividend as is mentioned in section 4 (3) of this Act shall, for the purposes of income tax, be treated as increased by the amount of corporation tax not chargeable directly in respect thereof which falls to be taken into account in computing the amount of the credit and, for the purpose of determining the said amount of corporation tax,

paragraph 6 of Part II of the Fifth Schedule to the Finance Act, 1949 , shall have effect as if a reference to the said section 4 were substituted for the reference to the agreement set forth in Part I of that Schedule and a reference to income tax for the reference to corporation profits tax.

(c) Notwithstanding anything in the preceding subparagraphs—

(i) where any part of the corporation tax in respect of any profits (including any corporation tax which under subparagraph (b) of this paragraph, falls to be treated as increasing the amount of a dividend) cannot be allowed as a credit against either corporation profits tax or income tax, the amount of the profits shall be treated for the purposes of income tax as reduced by that part of the corporation tax, and

(ii) where any part of the corporation tax in respect of any profits arising on or after the 1st day of April, 1966 (including any corporation tax which, under subparagraph (b) of this paragraph, falls to be treated as increasing the amount of a dividend) falls to be allowed as a credit against corporation profits tax, the amount of the profits shall be treated for the purposes of income tax as reduced by that part of the corporation tax.

5. (a) Where for any purpose of this Schedule it is necessary, in order to arrive at the amount of corporation tax payable in respect of the profits arising in any year of assessment or other period, to divide and apportion to specific periods the profits on which any assessment to corporation tax has been made, or to aggregate any such profits or any apportioned parts thereof, it shall be lawful to make such a division and apportionment or aggregation.

(b) Any apportionment under this paragraph shall be made in proportion to the respective lengths of the periods.

6. The provisions of paragraphs 6, 12, 13 and 14 of the Second Schedule to the Finance Act, 1958 , shall, with any necessary modifications, have effect in relation to the allowance of credit for corporation tax under section 4 of this Act as they have effect in relation to the allowance of credit for tax payable under the laws of a territory in regard to which arrangements are in force by virtue of section 44 of the said Finance Act, 1958 .