(2) If an election by a company for the purposes of this subsection has
effect, “qualifying trade” also includes a trade carried on by the
company (otherwise than in partnership) where—

(a) the trade is an excluded trade within—

(i) 5section 357XB (lending and investment),

(ii) section 357XC (investment management), or

(iii) section 357XE (re-insurance trade), and

(b) the trade includes any back-office activities.

(3) An election for the purposes of subsection (2)—

(a) 10must be made by notice to an officer of Revenue and Customs,

(b) must specify the first accounting period (“the specified
accounting period”) in relation to which it is to have effect,

(c) must be made before the end of the period of 12 months
beginning with the end of the specified accounting period, and

(d) 15if made in accordance with paragraphs (a) to (c)—

(i) has effect in relation to the specified accounting period
and subsequent accounting periods, and

(ii) is irrevocable.

(4) For the meaning of “excluded trade”, and for power to make provision
20about the meaning of “back-office activities”, see Chapter 17.

Meaning of “SME”

357KC “SME”

(1) A company is an “SME” in relation to an accounting period if the
company is a micro, small or medium-sized enterprise as defined in the
25Annex—

(a) in that accounting period, or

(b) in each accounting period any part of which falls within the
period of 12 months preceding that accounting period.

(2) In this section “the Annex” means the Annex to Commission
30Recommendation No 2003/361/EC of 6 May 2003.

(3) For the purposes of this Part the Annex has effect with the following
modifications.

(4) Where any enterprise is in liquidation or administration, the rights of
the liquidator or administrator (in that capacity) are to be left out of
35account when applying Article 3(3)(b) in determining for the purposes
of this Part whether—

(a) that enterprise, or

(b) any other enterprise (including that of the liquidator or
administrator),

40is an SME.

(5) Article 3 has effect as if paragraph 5 (declaration in good faith where
control cannot be determined etc) were omitted.

(6) In Article 4, the first sentence of paragraph 1 has effect as if the data to
apply to—

(a) 45the headcount of staff, and

(b) the financial amounts,

were the data relating to the accounting period or periods mentioned in
subsection (1) above (instead of the period referred to in that sentence)
and calculated on an annual basis.

(7) 5Article 4 has effect as if the following provisions were omitted—

(a) in paragraph 1, the second sentence (data to be taken into
account from date of closure of accounts);

(b) paragraph 2 (no change of status unless enterprise’s change of
size sustained over two consecutive periods);

(c) 10paragraph 3 (genuine estimate in case of newly established
enterprise).

Meaning of “Northern Ireland employer”

357KD “Northern Ireland employer”

A company is a “Northern Ireland employer” in relation to an
15accounting period if the Northern Ireland workforce conditions are
met—

(a) in relation to that accounting period, or

(b) in relation to the period of 12 months preceding that accounting
period.

357KE 20 Northern Ireland workforce conditions

(1) The Northern Ireland workforce conditions, in relation to a period,
are—

(a) that 75% or more of the working time that is spent in the United
Kingdom during the period by members of the company’s
25workforce is spent in Northern Ireland, and

(b) that 75% or more of the company’s workforce expenses that are
attributable to working time spent in the United Kingdom
during the period by members of the company’s workforce are
attributable to time spent in Northern Ireland.

(2) 30References in this section to members of the company’s workforce are
to—

(a) directors of the company,

(b) employees of the company, and

(c) externally provided workers in relation to the company.

(3) 35In subsection (2) “externally provided worker”, in relation to a
company, has the same meaning as in Part 13 of CTA 2009 (see section
1128 of that Act).

(4) References in this section to the working time spent by members of the
company’s workforce in a place are to the total time spent by those
40persons in that place while providing services to the company.

(5) The reference in subsection (1)(b) to “the company’s workforce
expenses” is, where the period is an accounting period of the company,
to the total of the deductions made by the company in the period in
respect of members of the workforce in calculating the profits of any
45trade carried on by the company.

(6) The reference in subsection (1)(b) to “the company’s workforce
expenses” is, where the period is not an accounting period of the
company, to the total of—

(a) the deductions made by the company in any accounting period
5falling wholly within the period, and

(b) the appropriate proportion of the deductions made by the
company in any accounting period falling partly within the
period,

in respect of members of the workforce in calculating the profits of any
10trade carried on by the company.

(7) For the purposes of subsection (6)(b), “the appropriate proportion” is to
be determined by reference to the number of days in the periods
concerned.

(8) The Commissioners for Her Majesty’s Revenue and Customs may by
15regulations specify descriptions of deduction that are, or are not, to be
regarded for the purposes of this section as made in respect of members
of a company’s workforce.

(9) Regulations under this section—

(a) may make different provision for different purposes;

(b) 20may make incidental, supplemental, consequential and
transitional provision and savings.

CHAPTER 5 Northern Ireland regional establishments

General

357L Northern Ireland regional establishments of companies

(1) 25A company has a Northern Ireland regional establishment (referred to
in this Part as a “NIRE”) if (and only if)—

(a) the company has a fixed place of business in Northern Ireland
through which the business of the company is wholly or partly
carried on, or

(b) 30an agent acting on behalf of the company has and habitually
exercises in Northern Ireland authority to do business on behalf
of the company.

(2) For this purpose a “fixed place of business” includes (without prejudice
to the generality of that expression)—

(a) 35a place of management,

(b) a branch,

(c) an office,

(d) a factory,

(e) a workshop,

(f) 40an installation or structure for the exploration of natural
resources,

(g) a mine, an oil or gas well, a quarry or any other place of
extraction of natural resources, and

(h) a building site or construction or installation project.

(3) Subsection (1) is subject to sections 357LA and 357LB.

Circumstances where there is no NIRE

357LA Agent of independent status

(1) A company is not regarded as having a NIRE by reason of the fact that
5it carries on business in Northern Ireland through an agent of
independent status acting in the ordinary course of the agent’s
business.

(2) Sections 357LC to 357LI apply for the purpose of supplementing
subsection (1) in relation to transactions carried out on behalf of a
10company by a person in Northern Ireland acting as—

(a) a broker (section 357LC),

(b) an investment manager (sections 357LD to 357LH), or

(c) a members’ or managing agent at Lloyd’s (section 357LI).

357LB Alternative finance arrangements

(1) 15Subsection (2) applies if alternative finance return is paid to a company.

(2) The company is not regarded as having a NIRE merely by virtue of
anything done for the purposes of the alternative finance
arrangements—

(a) by the other party to the arrangements, or

(b) 20by any other person acting for the company in relation to the
arrangements.

(3) In subsection (1) “alternative finance return” means alternative finance
return within the application of—

(a) section 564I, 564K or 564L(2) or (3) of ITA 2007, or

(b) 25section 511, 512 or 513(2) or (3) of CTA 2009.

(4) In subsection (2) the reference to “the alternative finance arrangements”
is a reference to the alternative finance arrangements under which the
alternative finance return mentioned in subsection (1) is paid.

Brokers

357LC 30 The independent broker condition

(1) This section applies if a transaction is carried out on behalf of a
company in the course of the company’s trade by a person in Northern
Ireland acting as a broker.

(2) In relation to the transaction, the broker is regarded for the purposes of
35section 357LA(1) as an agent of independent status acting in the
ordinary course of the broker’s business if (and only if) each of
conditions A to D is met.

(3) Condition A is that at the time of the transaction the broker is carrying
on the business of a broker.

(4) 40Condition B is that the transaction is carried out in the ordinary course
of that business.

(5) Condition C is that the remuneration which the broker receives in
respect of the transaction for the provision of the services of a broker to
the company is not less than is customary for that class of business.

(6) Condition D is that the broker does not fall (apart from this subsection)
5to be treated as a NIRE of the company in relation to any other
transaction of any kind carried out in the same accounting period of the
company as the transaction in question.

Investment managers

357LD The independent investment manager conditions

(1) 10This section applies if an investment transaction is carried out on behalf
of a company in the course of the company’s trade by a person in
Northern Ireland acting as an investment manager.

(2) In relation to the investment transaction, the investment manager is
regarded for the purposes of section 357LA(1) as an agent of
15independent status acting in the ordinary course of the investment
manager’s business if (and only if) each of conditions A to E is met (“the
independent investment manager conditions”).

(3) Condition A is that at the time of the transaction the investment
manager is carrying on a business of providing investment
20management services.

(4) Condition B is that the transaction is carried out in the ordinary course
of that business.

(5) Condition C is that, when the investment manager acts on behalf of the
company in relation to the transaction, the relationship between them,
25having regard to its legal, financial and commercial characteristics, is a
relationship between persons carrying on independent businesses
dealing with each other at arm’s length.

(6) Condition D is that the requirements of the 20% rule are met (see
section 357LE).

(7) 30Condition E is that the remuneration which the investment manager
receives in respect of the transaction for the provision of investment
management services to the company is not less than is customary for
that class of business.

357LE Investment managers: the 20% rule

(1) 35The requirements of the 20% rule are met if conditions A and B are met.

(2) Condition A is that, in relation to a qualifying period, it has been or is
the intention of the investment manager and the persons connected
with the investment manager that at least 80% of the company’s
relevant disregarded income should consist of amounts to which none
40of them has a beneficial entitlement.

(3) Condition B is that, so far as there is a failure to fulfil that intention, that
failure—

(a) is attributable (directly or indirectly) to matters outside the
control of the investment manager and persons connected with
45the investment manager, and

(b) does not result from a failure of any of them to take such steps
as may be reasonable for mitigating the effect of those matters
in relation to the fulfilment of that intention.

357LF Section 357LE: interpretation

(1) 5This section applies for the purposes of section 357LE.

(2) A “qualifying period” means—

(a) the accounting period of the company in which the transaction
in question is carried out, or

(b) a period of not more than 5 years comprising two or more
10complete accounting periods including that one.

(3) The “relevant disregarded income” of the company for a qualifying
period is the total of the company’s income for the accounting periods
comprised in the qualifying period which derives from transactions—

(a) carried out by the investment manager on the company’s
15behalf, and

(b) in relation to which the investment manager does not (apart
from the requirements of the 20% rule) fall to be treated as a
NIRE of the company.

(4) A person has a “beneficial entitlement” to relevant disregarded income
20if the person has or may acquire a beneficial entitlement that is, or
would be, attributable to the relevant disregarded income as a result of
having an interest or other rights mentioned in subsection (5).

(5) The interests and rights referred to in subsection (4) are—

(a) an interest (whether or not an interest giving a right to an
25immediate payment of a share in the profits or gains) in
property in which the whole or any part of the relevant
disregarded income is represented, or

(b) an interest in, or other rights in relation to, the company.

357LG Application of 20% rule to collective investment schemes

(1) 30This section applies if amounts arise or accrue to the company as a
participant in a collective investment scheme.

(2) It applies for the purpose of determining whether the requirements of
the 20% rule are met in relation to a transaction carried out for the
purposes of the scheme (so far as the transaction is one in respect of
35which amounts so arise or accrue).

(3) In applying this section the following assumptions are to be made—

(a) that all the transactions carried out for the purposes of the
scheme are carried out on behalf of a company (“the assumed
company”) which is—

(i) 40constituted for the purposes of the scheme, and

(ii) not resident in the United Kingdom, and

(b) that the participants do not have any rights in respect of the
amounts arising or accruing in respect of those transactions,
other than the rights which, if they held shares in the assumed
45company, would be their rights as shareholders.

(4) If the scheme is such that the assumed company would not be regarded
for tax purposes as carrying on a trade in the United Kingdom in
relation to the accounting period in which the transaction was carried
out, the requirements of the 20% rule are to be treated as met in relation
5to a transaction carried out for the purposes of the scheme.

(5) If the scheme is such that the assumed company would be so regarded
for tax purposes, sections 357LE and 357LF have effect in relation to a
transaction carried out for the purposes of the scheme as if—

(a) references to the company were references to the assumed
10company, and

(b) references to the company’s relevant disregarded income for a
qualifying period were references to the sum of the amounts
that would, for accounting periods comprised in the qualifying
period, be chargeable to tax on the assumed company as profits
15deriving from the transactions—

(i) carried out by the investment manager, and

(ii) assumed to be carried out on behalf of the company.

(6) In this section—

• “collective investment scheme” has the meaning given by section
  20235 of FISMA 2000;

• “participant”, in relation to a collective investment scheme, is to be
  read in accordance with that section.

357LH Meaning of “investment manager” and “investment transaction”

In this Chapter “investment manager” and “investment transaction”
25have the same meanings as in Chapter 2 of Part 24 (see section 1150(1)).

Lloyd’s agents

357LI Lloyd’s agents

(1) This section applies if a transaction is carried out on behalf of a
company in the course of the company’s trade by a person in Northern
30Ireland acting as a members’ agent or managing agent at Lloyd’s.

(2) In relation to the transaction, the person is regarded for the purposes of
section 357LA(1) as an agent of independent status acting in the
ordinary course of the person’s business if conditions A, B and C are
met.

(3) 35Condition A is that the company is a member of Lloyd’s.

(4) Condition B is that the transaction is carried out in the course of the
company’s underwriting business.

(5) Condition C is that the person acting on behalf of the company in
relation to the transaction acts as members’ agent or as managing agent
40of the syndicate in question.

(6) For the purposes of this section—

(a) a company is a member of Lloyd’s if it is a corporate member
within the meaning of Chapter 5 of Part 4 of FA 1994;

(b) “members’ agent” and “managing agent” are to be read in
45accordance with section 230 of that Act.

Supplementary

357LJ Investment managers: disregard of certain chargeable profits

(1) This section applies if—

(a) an investment manager carries out one or more investment
5transactions on behalf of a company (whether or not the
investment manager also carries out other transactions of any
kind on behalf of the company), and

(b) the investment manager falls to be treated as a NIRE of the
company (whether because the independent investment
10manager conditions are not met in relation to such investment
transactions or otherwise).

(2) In determining under Chapter 7 of this Part the amount of profits
attributable to the NIRE represented by the investment manager acting
as an agent on behalf of the company, chargeable profits deriving from
15an investment transaction carried out by the investment manager on
behalf of the company are to be disregarded in either of the following
two cases—

Case 1

The independent investment manager conditions are met in relation to
20the investment transaction.

Case 2

The independent investment manager conditions, other than
Condition D in section 357LD(6) (the 20% rule), are met in relation to
the investment transaction.

(3) 25But if case 2 applies in relation to the investment transaction,
chargeable profits deriving from the transaction are to be disregarded
only to the extent that they do not represent relevant disregarded
income of the company to which the investment manager or a person
connected with the investment manager has or has had any beneficial
30entitlement.

(4) In subsection (3) “relevant disregarded income” and “beneficial
entitlement” have the meanings given in section 357LF.

357LK Miscellaneous

(1) For the purposes of this Chapter a person is regarded as carrying out a
35transaction on behalf of another if the person—

(a) undertakes the transaction, whether on behalf of or to the
account of the other, or

(b) gives instructions for it to be so carried out by another.

(2) In the case of a person who acts as a broker or investment manager as
40part only of a business, this Chapter has effect as if that part were a
separate business.

CHAPTER 6 Northern Ireland profits and losses etc: SMEs

357M Introductory

(1) This Chapter applies to a company that is a Northern Ireland company
in an accounting period by virtue of the SME condition in section
5357KA.

(2) In this Chapter—

(a) a reference to “the company” or “the accounting period” is to
the company or accounting period mentioned in subsection (1);

(b) a reference to “the trade” is to any qualifying trade carried on by
10the company in the period.

(3) Section 357MA contains provision under which profits or losses of the
trade for the accounting period are—

(a) Northern Ireland profits or losses of the trade,

(b) mainstream profits or losses of the trade, or

(c) 15a combination of—

(i) profits or losses within paragraph (a), and

(ii) profits or losses within paragraph (b).

(4) Further provision under which profits or losses of the trade may be
Northern Ireland profits or losses of the trade, or mainstream profits or
20losses of the trade, is contained in—

(a) Chapters 8 to 15 of this Part, and

(b) CAA 2001 (see section 6E of that Act).

(5) This Chapter has effect for the purposes of this Part.

357MA Northern Ireland profits or losses and mainstream profits or losses

(1) 25Where the trade is a qualifying trade by virtue of section 357KB(1)
(trade other than excluded trade), the profits or losses of the trade for
the accounting period are Northern Ireland profits or Northern Ireland
losses of the trade for the period to the extent that they do not arise from
an excluded activity.

(2) 30Subsection (1)—

(a) does not apply in relation to any profits or losses of the trade
that form part of the Northern Ireland profits or losses of the
trade by virtue of any provision apart from this section, and

(b) is subject to any provision apart from this section under which
35profits or losses of the trade are mainstream profits or losses of
the trade.

(3) Where the trade is a qualifying trade by virtue of section 357KB(2)
(excluded trade with back-office activities), the profits, if any,
determined under section 357MB as back-office profits of the trade for
40the accounting period are Northern Ireland profits of the trade for the
period.

(4) The profits or losses of the trade for the accounting period are
mainstream profits or mainstream losses of the trade for the period to
the extent that they are not Northern Ireland profits or Northern

Ireland losses by virtue of subsection (1) or (3) or any provision apart
from this section.

(5) Subsection (4) does not apply in relation to any profits or losses of the
trade that form part of the mainstream profits or losses of the trade by
5virtue of any provision apart from this section.

357MB Profit imputed to back-office activities

(1) To determine for the purposes of section 357MA(3) the back-office
profits of the qualifying trade for the accounting period, take the
following steps—

10Step 1

Multiply each back-office deduction by the relevant percentage.

Step 2

Add together each amount calculated under step 1.

(2) In subsection (1)—

• 15“back-office deduction” means a deduction—

  (a)

  to which the company is entitled in calculating the
  profits of the trade for the period, and

  (b)

  which is in respect of back-office activities;

• “the relevant percentage” means 5%.

(3) 20The Treasury may by regulations amend subsection (2) so as to
substitute a different percentage for the percentage for the time being
specified there.

(4) Regulations under this section—

(a) may make different provision for different purposes (including,
25in particular, different trades or different back-office activities);

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

CHAPTER 7 Northern Ireland profits and losses etc: large companies

Introductory

357N 30Introductory

(1) This Chapter applies to a company that is a Northern Ireland company
in an accounting period by virtue of the large company condition in
section 357KA.

(2) In this Chapter—

(a) 35a reference to “the company” or “the accounting period” is to
the company or accounting period mentioned in subsection (1);

(b) a reference to “the trade” is to any qualifying trade carried on by
the company in the period.

(3) Section 357NA contains provision under which profits or losses of the
40trade for the accounting period are—

(a) Northern Ireland profits or losses of the trade,