Corporation Tax Act 2010

113 Steps to determine extent to which loss etc can be surrendered

(1) This section applies if an EEA related company has a loss or other amount for an EEA accounting period.

(2) Take the following steps to determine the extent to which the EEA related company may surrender the loss or other amount under this Chapter.

• Step 1

  Determine the extent to which (if at all) the loss or other amount is eligible for corporation tax relief (apart from this Chapter).

  The loss or other amount may be surrendered only so far as it is not so eligible.

  A loss or other amount, so far as surrenderable under this Step, is referred to in this Chapter as an “EEA amount”.

• Step 2

  Determine the extent to which the EEA amount in question meets—

  (a)

  the equivalence condition (see section 114),

  (b)

  the EEA tax loss condition (see sections 115 and 116),

  (c)

  the qualifying loss condition (see sections 117 to 120), and

  (d)

  the precedence condition (see section 121).

  References to “the qualifying part of the EEA amount” are references to the EEA amount so far as it meets all those conditions.

• Step 3

  Recalculate the EEA amount in accordance with section 128 using the assumptions set out in sections 123 to 126.

  The result is called “the recalculated EEA amount”.

• Step 4

  Determine the amount that may be surrendered.

  That amount is—

  (a)

  the qualifying part of the EEA amount, or

  (b)

  if less, an amount equal to the relevant proportion of the recalculated EEA amount.

  If the recalculated EEA amount is an amount of income or other profits, the amount that may be surrendered is nil.

  “The relevant proportion” is the same as the proportion that the qualifying part of the EEA amount bears to the EEA amount.

• Step 5

  Determine the extent to which (if at all) the amount resulting from Step 4 is excluded by section 127.

  If any of that amount is excluded, reduce it accordingly.

(3) If in recalculating the EEA amount at Step 3 it is to be assumed under section 125 that there are two or more accounting periods in relation to the EEA accounting period, the total of the amounts apportioned to the assumed accounting periods available for surrender under subsection (2) is not to exceed the qualifying part of the EEA amount.

(4) Under paragraph 70(1) of Schedule 18 to FA 1998, an EEA related company surrenders an EEA amount, so far as eligible for surrender under this Chapter, by consenting to one or more claims for group relief in relation to the amount (see Requirement 1 in section 135).

(5) In this Part, in relation to losses or other amounts that an EEA related company has for an EEA accounting period—

• “the surrenderable amounts” means the losses or other amounts so far as eligible for surrender under this Chapter,

• “surrendering company” means the company that has the losses or other amounts, and

• “the surrender period” means the assumed accounting period under section 125 for which the company is taken to have the surrenderable amounts.