Section 183 Qualifying foreign tax credits (substitute loss carry forward assets)
United Kingdom
A qualifying foreign tax credit of a member of a multinational group is to be included in the member’s total deferred tax adjustment amount.
A foreign tax credit is qualifying if—
the territory in which the member is located—
requires that domestic losses are offset against relevant foreign income before foreign tax credits can be applied against tax on foreign income, and
permits foreign tax credits to be used to offset tax on domestic profits to the extent to which domestic losses have been offset against relevant foreign income in a previous taxable period,
the member has used a domestic loss to offset (in whole or in part) relevant foreign income, and
the foreign tax credit is in respect of tax imposed by another territory on that foreign income.
The amount that may be included in the total deferred tax adjustment amount of the member is the lesser of—
the foreign tax paid, and
the amount of domestic loss used to offset the relevant foreign income, multiplied by the tax rate F1in the territory in which the member is located.
Section 182(7) (adjustment where rate of tax exceeds 15%) applies to a qualifying F2foreign tax credit included in the member’s total deferred tax adjustment amount as it applies to the member’s deferred tax expense.
In this section F3and in section 183A “relevant foreign income”, in relation to a member of a multinational group, means—
income of a controlled foreign company of the member on which the member is taxed as a result of a controlled foreign company tax regime F5, and
other qualifying income.
For the purposes of subsection (5) “other qualifying income means”—
income identified as such for the purposes of this section in regulations made under section 262(1)(a), or
where no income is identified as other qualifying income in any such regulations, such income as is necessary to give effect to the substitute loss carry-forward guidance.
The “substitute loss carry-forward guidance” means Chapter 4.1 of Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), June 2024 published by the OECD on 17 June 2024.
Annotations
Textual amendments
- F1
Words in s. 183(3)(b) substituted (with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 20(2)
- F2
Word in s. 183(4) inserted (with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 20(3)
- F3
Words in s. 183(5) inserted (with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 20(4)
- F4
Words in s. 183(5) renumbered as s. 183(5)(a) (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 29(a)(i), 72(4)
- F5
S. 183(5)(b) and word inserted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 29(a)(ii), 72(4)
- F6
S. 183(6)(7) inserted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 29(b), 72(4)
Notes on Part 3
Modifications
- C1
Pt. 3 modified (2.12.2025) by Finance Act 2026 (c. 11), Sch. 8 paras. 32, 53(3)