Finance Act 2006

113 Ring-fencing of tax-exempt business U.K.

(1) For the purposes of corporation tax, the business of C (tax-exempt) shall be treated as a separate business (distinct from—

(a) any business carried on by C (pre-entry),

(b) any business carried on by C (residual), and

(c) any business carried on by C (post-cessation)).

(2) For the purposes of corporation tax C (tax-exempt) shall be treated as a separate company (distinct from—

(a) C (pre-entry),

(b) C (residual), and

(c) C (post-cessation)).

(3) In particular—

(a) a loss incurred by C (tax-exempt) may not be set off against profits of C (residual),

(b) a loss incurred in respect of C (residual) may not be set off against profits of C (tax-exempt),

(c) a loss incurred in respect of C (pre-entry) may not be set off against profits of C (tax-exempt) (but this section does not prevent a loss of that kind from being set off against profits of C (residual)),

(d) a loss incurred by C (tax-exempt) may not be set off against profits arising to C (post-cessation) (in respect of business of any kind), and

(e) receipts accruing after entry but relating to business of C (pre-entry) shall not be treated as receipts of C (tax-exempt).

(4) In subsection (3) a reference to a loss includes a reference to a deficit, expense, charge or allowance.

(5) Section 392B of ICTA (ring-fencing of losses from overseas property business) shall not apply to business of C (tax-exempt).

(6) Paragraphs 5B and 5C of Schedule 28AA to ICTA (transfer pricing: exemption for small and medium enterprises) shall not apply to a company to which this Part applies (whether to C (tax-exempt) or to C (residual)).