SCHEDULE 24ASSUMPTIONS FOR CALCULATING CHARGEABLE PROFITS, CREDITABLE TAX AND CORRESPONDING UNITED KINGDOM TAX OF FOREIGN COMPANIES
Capital allowances
10
(1)
Subject to paragraphs 11 and 12 below, if, in an accounting period falling before the beginning of the first accounting period
F1(a)
in respect of which a direction is given under section 747(1), or
(b)
which is an ADP exempt period,
the company incurred any capital expenditure on the provision of machinery or plant for the purposes of its trade, that machinery or plant shall be assumed, for the purposes of [F2Part II of the 1990 Act], to have been provided for purposes wholly other than those of the trade and not to have been brought into use for the purposes of that trade until the beginning of that first accounting period, and [F2section 81 of] that Act (expenditure treated as equivalent to market value at the time the machinery or plant is brought into use) shall apply accordingly.
(2)
This paragraph shall be construed as one with [F3Part II of the 1990 Act].
11
(1)
This paragraph applies in any case where it appears to the Board that the reason why no direction was given under section 747(1) in respect of an accounting period which precedes the starting period was that the effect of any allowance which would be assumed for that preceding period by virtue of this Schedule would be such that—
(a)
the company would not have been considered to be subject in that accounting period to a lower level of taxation in the territory in which it was resident; or
(b)
the company would have had no chargeable profits for that accounting period; or
(c)
the chargeable profits of the company for that accounting period would not have exceeded £20,000 or such smaller amount as was appropriate in accordance with section 748(1)(d).
(2)
In this paragraph “the starting period” means the first accounting period
F4(a)
in respect of which a direction is given under section 747(1), or
(b)
which is an ADP exempt period,
and, in a case where a claim is made under sub-paragraph (3) of paragraph 9 above, no account shall be taken of the effect of that sub-paragraph in determining which accounting period is the starting period for the purposes of this paragraph.
(3)
If, in a case where this paragraph applies, the Board so declare by notice given to every company to which, in accordance with section 753(1), notice of the making of the direction relating to the starting period is required to be given, the chargeable profits of that period and every subsequent accounting period and the corresponding United Kingdom tax for every subsequent accounting period shall be determined (in accordance with the provisions of this Schedule other than this paragraph) on the assumption that the accounting period specified in the declaration was the first accounting period in respect of which a direction was given and, accordingly, as if allowances had been assumed in respect of that accounting period and any subsequent accounting period which precedes the starting period.
(4)
Nothing in sub-paragraph (3) above affects the operation of paragraph 9(3) above in a case where the accounting period specified in a claim under paragraph 9(3) above begins before the period specified in a declaration under sub-paragraph (3) above.
(5)
Subject to sub-paragraph (6) below, the Board shall not make a declaration under sub-paragraph (3) above with respect to an accounting period which precedes the starting period unless the facts are such that—
(a)
assuming the company to have been subject in that period to a lower level of taxation in the territory in which it was resident, and
(b)
assuming the company to have had in that period chargeable profits of such an amount that the condition in section 748(1)(d) would not be fulfilled,
correction could have been given in respect of that period under section (1).
(6)
In its application to a company falling within section 749(3), sub-paragraph (5) above shall have effect with the omission of paragraph (a).
(7)
In this paragraph “allowance” means an allowance under [F5Part I or II of the 1990 Act].
11A
(1)
This paragraph applies where by virtue of section 747A the company’s chargeable profits for an accounting period (the period in question) are to be computed and expressed in a currency (the relevant foreign currency) other than sterling.
(2)
For the purposes of making in relation to the period in question any calculation which—
(a)
falls to be made under the enactments relating to capital allowances, and
(b)
takes account of amounts arrived at under those enactments in relation to accounting periods falling before the company’s commencement day (within the meaning given by section 747A(9)),
it shall be assumed that any such amount is the equivalent, expressed in the relevant foreign currency, of the amount expressed in sterling.
(3)
For the purposes of the application in relation to the period in question of paragraph 11(1)(c) above, it shall be assumed that the company’s chargeable profits for the period are the sterling equivalent of its chargeable profits found in the relevant foreign currency.
(4)
For the purposes of the application of section 34, 35 or 96 of the 1990 Act (motor cars and dwelling-houses) in relation to expenditure incurred in the period in question, it shall be assumed that any sterling sum mentioned in any of those sections is the equivalent, expressed in the relevant foreign currency, of the amount expressed in sterling.
(5)
The translation required by sub-paragraph (2) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the first day of the period in question.
(6)
The translation required by sub-paragraph (3) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the last day of the period in question.
(7)
The translation required by sub-paragraph (4) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the day on which the expenditure concerned was incurred.