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(1)This section applies if—
(a)an apportionment under section 747(3) falls to be made as regards an accounting period (“the relevant accounting period”) of a controlled foreign company,
(b)throughout that period the controlled foreign company has a business establishment in an EEA territory,
(c)throughout that period there are individuals who work for the controlled foreign company in that territory, and
(d)a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period.
(2)The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period to be reduced by an amount (“the specified amount”) specified in the application (including to nil).
(3)If the Commissioners grant the application—
(a)those chargeable profits are treated as reduced by the specified amount, and
(b)the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in those chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
(4)The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the amount (if any) equal to so much of those chargeable profits as can reasonably be regarded as representing the net economic value which—
(a)arises to the appropriate body of persons (taken as a whole), and
(b)is created directly by qualifying work.
(5)For the purposes of subsection (4) “net economic value” does not include any value which derives directly or indirectly from the reduction or elimination of any liability of any person to any tax or duty imposed under the law of any territory.
(6)For the purposes of subsection (4) “the appropriate body of persons” means—
(a)if the controlled foreign company is not a member of a group of companies, the controlled foreign company and the persons who have an interest in it at any time in the relevant accounting period, and
(b)if the controlled foreign company is a member of a group of companies, all the persons falling within paragraph (a) and any other person who is a member of that group of companies,
and for the purposes of this subsection “group of companies” means a company and any other companies of which it has control.
(7)For the purposes of subsection (4) “qualifying work” means work which—
(a)is done in any EEA territory in which the controlled foreign company has a business establishment throughout the relevant accounting period, and
(b)is done in that territory by individuals working for the controlled foreign company there.
(8)Any reference in this section to a business establishment of a controlled foreign company in an EEA territory is to be construed in accordance with paragraph 7 of Schedule 25 (but as if the reference in that paragraph to the territory in which the company is resident were to the EEA territory).
(9)For the purposes of this section individuals are not to be regarded as working for a company in any territory unless—
(a)they are employed by the company in the territory, or
(b)they are otherwise directed by the company to perform duties on its behalf in the territory.
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