Income and Corporation Taxes Act 1988

Part 2 U.K. Application of UK rules to non-resident company

Modifications etc. (not altering text)

C1 Sch. 18A Pt. 2 modified (28.10.2008 with effect in accordance with reg. 1(2) of the modifying S.I.) by The Group Relief for Overseas Losses (Modification of the Corporation Tax Acts for Non-resident Insurance Companies) Regulations 2008 (S.I. 2008/2646), regs. 1(1), 2

Introduction U.K.

10 (1) This Part of this Schedule applies in the case of any loss or other amount (“the EEA amount”) arising to a non-resident company (“the EEA company”) in any period (“the loss period”) in so far as the EEA amount meets the conditions mentioned in subsection (2)(a) to (d) of section 403F.

(2) In this Part of this Schedule “the EEA territory concerned” means the EEA territory in which the EEA company is resident or (as the case may be) in which it carries on a trade through a permanent establishment.

(3) In this Part of this Schedule any reference to the appropriate part of the EEA amount is to that amount in so far as it meets the conditions mentioned in subsection (2)(a) to (d) of section 403F.

Basic rules U.K.

11 (1) The EEA amount must, on the relevant assumptions (see sub-paragraph (5)), be recalculated in accordance with the applicable UK tax rules (see paragraph 16).

(2) The amount of the EEA amount that is available for surrender by the EEA company by way of group relief is so much of the appropriate part of it as does not exceed the relevant proportion (see sub-paragraph (5)) of the amount given by that recalculation.

(3) But if the amount given by that recalculation is an amount of income or other profits, no part of the EEA amount is available for surrender by way of group relief.

(4) So far as any part of the EEA amount is available for surrender by the EEA company by way of group relief, the provisions of this Chapter have effect in that case on the basis that the relevant assumptions are made.

(5) In this paragraph—

• “the relevant assumptions” are the assumptions set out in paragraphs 12 to 15, and

• “the relevant proportion” means the proportion that the appropriate part of the EEA amount bears to the EEA amount.

Assumptions as to UK residence U.K.

12 (1) It is to be assumed that the EEA company is resident in the United Kingdom throughout the loss period.

(2) But this does not require it to be assumed—

(a) that there is any change in the place or places at which the EEA company carries on its activities (although see paragraph 13), or

(b) that the EEA company ceases to be resident in the United Kingdom at the end of the loss period.

(3) It is to be assumed that the EEA company becomes resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the beginning of the loss period.

Assumptions as to places in which activities carried out U.K.

13 (1) In the case of any trade carried on by the EEA company in the loss period wholly or partly in the EEA territory concerned, it is to be assumed that the trade is carried on wholly or partly in the United Kingdom.

(2) In the case of any estate, interest or rights in or over land in the EEA territory concerned which are held by the EEA company, it is to be assumed that the land is in the United Kingdom.

(3) For this purpose, the reference to domestic concepts of law in relation to the land in the EEA territory concerned is to be read so as to produce the result that most closely corresponds with that produced for Schedule A purposes in relation to land in the United Kingdom.

Deemed accounting period U.K.

14 (1) It is to be assumed that an accounting period of the EEA company begins at the beginning of the loss period.

(2) It is to be assumed that the accounting period ends on the earlier of—

(a) the end of 12 months from the beginning of the loss period, or

(b) the end of the loss period.

(3) If an accounting period ends in accordance with sub-paragraph (2)(a), it is to be assumed that a further accounting period begins when the previous one ends.

(4) It is to be assumed that the further accounting period ends on the earlier of—

(a) the end of 12 months from the beginning of the further accounting period, or

(b) the end of the loss period.

Capital allowances U.K.

15 (1) This paragraph applies if, before the beginning of the loss period, the EEA company incurs any capital expenditure on the provision of plant or machinery for the purposes of any activity.

(2) It is to be assumed for the purposes of Part 2 of the Capital Allowances Act that the plant or machinery—

(a) was provided for purposes wholly other than those of the activity, and

(b) was not brought into use for the purposes of the activity until the beginning of the loss period,

and section 13 of the Capital Allowances Act (use for qualifying activity of plant or machinery provided for other purposes) is to apply accordingly.

(3) This paragraph is to be read as one with Part 2 of the Capital Allowances Act.

Applicable UK tax rules U.K.

16 (1) For the purposes of this Part of this Schedule references to recalculating the EEA amount in accordance with the applicable UK tax rules are to recalculating it in accordance with any provision made by or under the Corporation Tax Acts—

(a) which applies for the purpose of calculating for corporation tax purposes the amount of the loss or other amount to which the EEA amount corresponds, or

(b) which otherwise affects in any way the amount of that loss or other amount for which relief from corporation tax is available.

(2) For the purposes of sub-paragraph (1), the Treasury may by regulations provide for the modification of any provision made by or under the Corporation Tax Acts—

(a) which applies as mentioned in sub-paragraph (1)(a), or

(b) which otherwise affects an amount as mentioned in sub-paragraph (1)(b).

(3) Regulations under this paragraph may make provision in relation to—

(a) all classes of trade or business, or

(b) any particular class or classes of trade or business.

(4) Regulations under this paragraph may make—

(a) different provision for different cases or different purposes, and

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

(5) Regulations under this paragraph may make provision having effect before the date on which the regulations are made.