Corporation Tax Act 2010

[F1 CHAPTER 7 U.K. Northern Ireland profits and losses etc: [F2 SMEs that are not Northern Ireland employers and] large companies

Textual Amendments

F1 Pt. 8B inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), s. 1

F2 Words in Pt. 8B Ch. 7 heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 8

Introductory U.K.

357N Introductory U.K.

(1) This Chapter applies to a company that is a Northern Ireland company in an accounting period by virtue of [F3 the SME (election) condition or] the large company condition in section 357KA.

(2) In this Chapter—

(a) a reference to “the company” or “the accounting period” is to the company or accounting period mentioned in subsection (1);

(b) a reference to “the trade” is to any qualifying trade carried on by the company in the period.

(3) Section 357NA contains provision under which profits or losses of the trade for the accounting period are—

(a) Northern Ireland profits or losses of the trade,

(b) mainstream profits or losses of the trade, or

(c) a combination of—

(i) profits or losses within paragraph (a), and

(ii) profits or losses within paragraph (b).

(4) Further provision under which profits or losses of the trade may be Northern Ireland profits or losses of the trade, or mainstream profits or losses of the trade, is contained in—

(a) Chapters 8 to 15 of this Part, and

(b) CAA 2001 (see section 6E of that Act).

(5) This Chapter has effect for the purposes of this Part.

Textual Amendments

F3 Words in s. 357N(1) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 9

Northern Ireland profits or losses and mainstream profits or losses U.K.

357NA Northern Ireland profits or losses and mainstream profits or losses U.K.

(1) Where the trade is a qualifying trade by virtue of section 357KB(1) (trade other than excluded trade), the profits or losses of the trade for the accounting period are Northern Ireland profits or Northern Ireland losses of the trade for the period to the extent that they—

(a) do not arise from an excluded activity,

(b) arise directly or indirectly through or from the company's NIRE, or from property or rights used by, or held by, or for, the company's NIRE, and

(c) are attributable to the company's NIRE.

(2) Subsection (1)—

(a) does not apply in relation to any profits or losses of the trade that form part of the Northern Ireland profits or losses of the trade by virtue of any provision apart from this section, and

(b) is subject to any provision apart from this section under which profits or losses of the trade are mainstream profits or losses of the trade.

(3) Where the trade is a qualifying trade by virtue of section 357KB(2) (excluded trade with back-office activities), the profits, if any, determined under section 357NB as Northern Ireland back-office profits of the trade for the accounting period are Northern Ireland profits of the trade for the period.

(4) The profits or losses of the trade for the accounting period are mainstream profits or mainstream losses of the trade for the period to the extent that they are not Northern Ireland profits or Northern Ireland losses by virtue of subsection (1) or (3) or any provision apart from this section.

(5) Subsection (4) does not apply in relation to any profits or losses of the trade that form part of the mainstream profits or losses of the trade by virtue of any provision apart from this section.

(6) Sections 357NC to 357NI contain provision for determining the amount of profits or losses of a trade that are attributable to the company's NIRE.

(7) See also section 357LJ (investment managers: disregard of certain chargeable profits), which provides for profits of certain investment transactions to be disregarded in determining the amount of profits attributable to a NIRE.

357NB Profit imputed to Northern Ireland back-office activities U.K.

(1) To determine for the purposes of section 357NA(3) the Northern Ireland back-office profits of the trade for the accounting period, take the following steps—

• Step 1 Multiply each Northern Ireland back-office deduction by the relevant percentage.

• Step 2 Add together each amount calculated under step 1.

(2) In subsection (1)—

• “Northern Ireland back-office deduction” means a deduction—

  (a)

  to which the company is entitled in calculating the profits of the trade for the period, and

  (b)

  which is in respect of back-office activities carried on in Northern Ireland;

• “the relevant percentage” means 5%.

(3) The Treasury may by regulations amend subsection (2) so as to substitute a different percentage for the percentage for the time being specified there.

(4) Regulations under this section—

(a) may make different provision for different purposes (including, in particular, different trades or different back-office activities);

(b) may make incidental, supplemental, consequential and transitional provision and savings.

The separate enterprise principle U.K.

357NC The separate enterprise principle U.K.

(1) The profits of the company that are attributable to its NIRE are those that the NIRE would have made if it were a distinct and separate enterprise which—

(a) engaged in the same or similar activities under the same or similar conditions, and

(b) dealt wholly independently with the company.

(2) In applying subsection (1) it is to be assumed that—

(a) the NIRE has the same credit rating as the company, and

(b) the NIRE has such equity and loan capital as it could reasonably be expected to have in the circumstances specified in that subsection.

(3) In this Chapter the principle in subsection (1) (read with subsection (2)) is called “the separate enterprise principle”.

357ND Transactions treated as being on arm's length terms U.K.

In accordance with the separate enterprise principle, transactions between the company's NIRE and any other part of the company are treated as taking place on such terms as would have been agreed between parties dealing at arm's length.

357NE Provision of goods or services for NIRE U.K.

(1) This section applies if the company provides its NIRE with goods or services.

(2) If the goods or services are of a kind that the company supplies, in the ordinary course of business, to third parties dealing with it at arm's length, the matter is dealt with as a transaction to which the separate enterprise principle applies.

(3) If not, the matter is dealt with as an expense incurred by the company for the purposes of its NIRE (see section 357NF).

Rules about deductions and receipts U.K.

357NF Allowable deductions U.K.

(1) A deduction is allowed in calculating the profits attributable to the company's NIRE for any allowable expenses incurred for the purposes of the NIRE.

(2) Expenses incurred for the purposes of the NIRE include executive and general administrative expenses so incurred, whether in Northern Ireland or elsewhere.

(3) It does not matter whether the expenses are incurred by, or reimbursed by, the NIRE.

(4) The amount of expenses to be taken into account under subsection (1) is the actual cost to the company.

(5) “Allowable expenses”, means expenses of a kind in respect of which a deduction is allowed for corporation tax purposes or (in the case of a company that is not UK-resident) would be so allowed if incurred by a UK resident company.

357NG Deductions attributable to the NIRE for costs U.K.

A deduction is allowed in calculating the profits attributable to the company's NIRE for any costs that would have been incurred on the assumptions in section 357NC(2).

357NH Payments and receipts in respect of intangible assets U.K.

(1) No deduction is allowed in calculating the profits attributable to the company's NIRE for royalties paid, or other similar payments made, by the NIRE to any other part of the company in respect of the use of intangible assets held by the company.

(2) But a deduction is allowed in calculating the profits attributable to the NIRE for any contribution by the NIRE to the costs of creation of an intangible asset.

(3) No receipt is to be brought into account in calculating the profits attributable to the NIRE for royalties or other similar amounts received from any other part of the company in respect of the use of intangible assets held by the company for the purposes of the NIRE.

(4) But a receipt is to be brought into account in calculating profits attributable to the NIRE for any contribution received by the NIRE in respect of the costs of creation of an intangible asset.

(5) In this section “intangible asset”—

(a) includes any intellectual property (as defined in section 712(3) of CTA 2009), and

(b) subject to that, has the meaning it has for accounting purposes.

357NI Interest or other financing costs and receipts U.K.

(1) No deduction is allowed in calculating the profits attributable to the company's NIRE for payments of interest or other financing costs by the NIRE to any other part of the company.

(2) No receipt is to be brought into account in calculating profits attributable to the NIRE for interest or other financing income received from any other part of the company.

Supplementary U.K.

357NJ Losses U.K.

This Part applies in relation to the attribution of losses to a company's NIRE as it applies to the attribution of profits.

357NK Trade includes office U.K.

In this Part, except so far as the context otherwise requires—

(a) references to a trade include an office, and

(b) references to carrying on a trade including holding an office.]