Where a UK insurance company operates through a permanent establishment overseas a claim may be made for tax credit relief for foreign tax borne on the profits of the establishment.

Credit relief must not exceed the amount of UK corporation tax that is charged on the doubly-taxed profits. In order to calculate the amount of this limitation a separate calculation of the branch profits must be made, in accordance with UK tax rules. It follows that where equalisation reserves are maintained some method is needed of identifying the proportion of the transfers into or out of the reserve which relate to the profits of each of the company's foreign branches.

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