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Finance (No.2) Bill


Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

151

 

      (3)  

In paragraph 7 (supplemental matters), in sub-paragraph (1) (definition of

“the relevant accounting period”), in the opening words, after “means”

insert “(subject to sub-paragraphs (1A) to (1C) below)”.

      (4)  

After that sub-paragraph insert—

   “(1A)  

In this Schedule “the relevant accounting period” means, in the

5

case of a non-resident company which is not within the charge to

corporation tax, the accounting period which the company would

have on the following assumption.

     (1B)  

The assumption is that the company became resident in the United

Kingdom (and, accordingly, within the charge to corporation tax)

10

at the time when it became a 75 per cent. subsidiary as mentioned

in section 402(2A).

     (1C)  

For the purposes of sub-paragraph (1B) above the reference to the

company’s being a 75 per cent. subsidiary is to its being such a

subsidiary disregarding section 413(7).”.

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Meaning of conditions in section 403F etc

7          

After Schedule 18 to ICTA (group relief: equity holders and profits or assets

available for distribution) insert—

“Schedule 18A

Section 403F

 

Group relief: overseas losses of non-resident companies

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Part 1

Meaning of conditions for the purposes of section 403F

Introduction

1          

This Part of this Schedule applies, in the case of any non-resident

company, for the purposes of section 403F (relief in respect of

25

overseas losses of non-resident companies).

The equivalence condition

2          

An amount meets the equivalence condition if it corresponds (in

all material respects) to an amount of a kind that, for the purposes

of section 403, could be available for surrender by way of group

30

relief by a company resident in the United Kingdom.

The EEA tax loss condition: companies resident in EEA territory

3     (1)  

In the case of a non-resident company which is resident in an EEA

territory (“the relevant territory”), an amount meets the EEA tax

loss condition in relation to the relevant territory in so far as

35

conditions A and B are met.

      (2)  

Condition A is that the amount is calculated in accordance with

the applicable rules under the law of the relevant territory for

determining, in the case of the company, the amount of any loss or

 

 

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

152

 

other amount eligible for relief from any tax under the relevant

territory.

      (3)  

Condition B is that, for the purposes of corporation tax, the

amount is not attributable to a UK permanent establishment of the

company.

5

      (4)  

“UK permanent establishment”, in relation to the company, means

any permanent establishment through which it carries on a trade

in the United Kingdom.

      (5)  

For the meaning of tax under any territory outside the United

Kingdom, see paragraph 17.

10

The EEA tax loss condition: companies not resident in EEA territory

4     (1)  

In the case of a non-resident company which is not resident in any

EEA territory but which carries on a trade in an EEA territory (“the

relevant territory”) through a permanent establishment, an

amount meets the EEA tax loss condition for any period in relation

15

to the relevant territory in so far as conditions A and B are met.

      (2)  

Condition A is that the amount is calculated in accordance with

the applicable rules under the law of the relevant territory for

determining, in the case of the company, the amount of any loss or

other amount eligible for relief from any tax under the relevant

20

territory.

      (3)  

Condition B is that the amount is not attributable to activities of

the company which are made exempt from tax under the relevant

territory for the period by any double taxation arrangements.

      (4)  

For this purpose, activities of the company are made exempt from

25

tax under the relevant territory for the period by any double

taxation arrangements if those arrangements—

(a)   

have the following effect, or

(b)   

would have the following effect if a claim were made.

      (5)  

The effect is that the income and gains (if any) arising for the

30

period from those activities are ignored in calculating the

company’s profits, income or gains chargeable to tax under the

relevant territory for the period.

      (6)  

For the purposes of this paragraph, arrangements are double

taxation arrangements if they are made with a view to affording

35

relief from double taxation in relation to—

(a)   

any tax under the relevant territory and any other territory

outside the United Kingdom, or

(b)   

any tax under the relevant territory and United Kingdom

income or corporation tax.

40

The qualifying loss condition

5     (1)  

This paragraph applies in the case of a non-resident company—

(a)   

which is resident in any EEA territory, or

(b)   

which is not so resident but which carries on a trade in an

EEA territory through a permanent establishment,

45

 

 

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

153

 

           

and for the purposes of this paragraph “the EEA territory

concerned” means the EEA territory in which the company is

resident or (as the case may be) in which it carries on a trade

through a permanent establishment.

      (2)  

An amount meets the qualifying loss condition in so far as the

5

amount—

(a)   

cannot be given qualifying relief for any period (“the

current period”) or any other period, and

(b)   

has not been given any other qualifying relief under the

law of any territory outside the United Kingdom (other

10

than the EEA territory concerned).

      (3)  

Paragraph 6 determines whether the amount cannot be given

qualifying relief for the current period or any previous period.

      (4)  

Paragraph 7 determines whether the amount cannot be given

qualifying relief for any period after the current period.

15

      (5)  

Paragraph 8 determines whether the amount has not been given

qualifying relief under the law of any territory outside the United

Kingdom (other than the EEA territory concerned).

Qualifying relief for current period and previous periods

6     (1)  

For the purposes of paragraph 5, an amount cannot be given

20

qualifying relief for the current period or any previous period if

conditions A and B are met.

      (2)  

Condition A is that, for the purposes of any tax under the EEA

territory concerned or under any relevant territory, the amount

cannot be taken into account in calculating any profits, income or

25

gains which—

(a)   

arise to the company or any other person in the current

period or any previous period, and

(b)   

are chargeable to that tax for the current period or any

previous period.

30

      (3)  

Condition B is that, for the purposes of any tax under the EEA

territory concerned or under any relevant territory, the amount

cannot be relieved in the current period or any previous period—

(a)   

by the payment of a credit,

(b)   

by the elimination or reduction of a tax liability, or

35

(c)   

by any other means of any kind.

      (4)  

An amount is to be regarded for the purposes of this paragraph as

meeting conditions A and B if (but only if) every step to secure that

the amount is so taken into account or relieved is taken (whether

by the company or any other person).

40

      (5)  

In this paragraph “relevant territory” means—

(a)   

if the company is resident in any EEA territory and is also

resident in any other territory outside the United

Kingdom, that other territory,

(b)   

if the company is not resident in any EEA territory but

45

carries on a trade in an EEA territory through a permanent

 

 

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

154

 

establishment, the territory (or territories) in which it is

resident.

Qualifying relief for future periods

7     (1)  

For the purposes of paragraph 5, an amount cannot be given

qualifying relief for any period after the current period if

5

conditions A and B are met.

      (2)  

Condition A is that, for the purposes of any tax under the EEA

territory concerned or under any relevant territory, the amount

cannot be taken into account in calculating any profits, income or

gains which—

10

(a)   

might arise to the company or any other person in any

period after the current period, and

(b)   

(if there were any) would be chargeable to that tax for any

period after the current period.

      (3)  

Condition B is that, for the purposes of any tax under the EEA

15

territory concerned or under any relevant territory, the amount

cannot be relieved in any period after the current period—

(a)   

by the payment of a credit,

(b)   

by the elimination or reduction of a tax liability, or

(c)   

by any other means of any kind.

20

      (4)  

In determining for the purposes of conditions A and B whether an

amount can be so taken into account or relieved, the time at which

the determination is to be made is the time immediately after the

end of the current period.

      (5)  

In this paragraph “relevant territory” means—

25

(a)   

if the company is resident in any EEA territory and is also

resident in any other territory outside the United

Kingdom, that other territory,

(b)   

if the company is not resident in any EEA territory but

carries on a trade in an EEA territory through a permanent

30

establishment, the territory (or territories) in which it is

resident.

Amount not given other qualifying relief under law of territory outside UK

8     (1)  

For the purposes of paragraph 5, an amount has not been given

qualifying relief under the law of any territory outside the United

35

Kingdom (other than the EEA territory concerned) if conditions A

and B are met.

      (2)  

Condition A is that, for the purposes of any tax under any territory

outside the United Kingdom (other than the EEA territory

concerned), the amount has not been taken into account in

40

calculating any profits, income or gains which—

(a)   

have arisen to the company or any other person in any

period, and

(b)   

were chargeable to that tax for the period (or, but for so

taking the amount into account, would have been so

45

chargeable).

 

 

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

155

 

      (3)  

Condition B is that, for the purposes of any tax under any territory

outside the United Kingdom (other than the EEA territory

concerned), the amount has not been relieved in any period—

(a)   

by the payment of a credit,

(b)   

by the elimination or reduction of a tax liability, or

5

(c)   

by any other means of any kind.

Precedence condition

9     (1)  

This paragraph applies in the case of a non-resident company

(“the relevant company”)—

(a)   

which is resident in any EEA territory, or

10

(b)   

which is not so resident but which carries on a trade in an

EEA territory through a permanent establishment.

      (2)  

An amount meets the precedence condition in relation to the EEA

territory concerned in so far as relief for the amount cannot be

given in any other territory outside the United Kingdom which is

15

a qualifying territory in relation to the relevant company.

      (3)  

For this purpose a territory is a qualifying territory in relation to

the relevant company if—

(a)   

another company is resident in that territory (which need

not be an EEA territory),

20

(b)   

that other company owns directly or indirectly any

ordinary share capital in the relevant company,

(c)   

a third company which is resident in the United Kingdom

owns directly or indirectly any ordinary share capital of

that other company,

25

(d)   

the relevant company is a 75 per cent. subsidiary of that

third company, and

(e)   

the relevant company is not a 75 per cent. subsidiary of that

third company as a result of its being a 75 per cent.

subsidiary of a fourth company which is resident in the

30

United Kingdom.

      (4)  

In this paragraph references, in relation to any amount and any

territory, to relief being given for the amount in the territory are to

relief being given—

(a)   

by taking the amount into account in calculating any

35

profits, income or gains of any person chargeable to tax

under the law of that territory,

(b)   

by the payment of a credit to any person under the law of

that territory,

(c)   

by the elimination or reduction of a tax liability of any

40

person under the law of that territory, or

(d)   

by any other means of any kind.

      (5)  

“The EEA territory concerned” means the EEA territory in which

the relevant company is resident or (as the case may be) in which

it carries on a trade through a permanent establishment.

45

 

 

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

156

 

Part 2

Application of UK rules to non-resident company

Introduction

10    (1)  

This Part of this Schedule applies in the case of any loss or other

amount (“the EEA amount”) arising to a non-resident company

5

(“the EEA company”) in any period (“the loss period”) in so far as

the EEA amount meets the conditions mentioned in subsection

(2)(a) to (d) of section 403F.

      (2)  

In this Part of this Schedule “the EEA territory concerned” means

the EEA territory in which the EEA company is resident or (as the

10

case may be) in which it carries on a trade through a permanent

establishment.

      (3)  

In this Part of this Schedule any reference to the appropriate part

of the EEA amount is to that amount in so far as it meets the

conditions mentioned in subsection (2)(a) to (d) of section 403F.

15

Basic rules

11    (1)  

The EEA amount must, on the relevant assumptions (see sub-

paragraph (5)), be recalculated in accordance with the applicable

UK tax rules (see paragraph 16).

      (2)  

The amount of the EEA amount that is available for surrender by

20

the EEA company by way of group relief is so much of the

appropriate part of it as does not exceed the amount given by that

recalculation.

      (3)  

But if the amount given by that recalculation is an amount of

income or other profits, no part of the EEA amount is available for

25

surrender by way of group relief.

      (4)  

So far as any part of the EEA amount is available for surrender by

the EEA company by way of group relief, the provisions of this

Chapter have effect in that case on the basis that the relevant

assumptions are made.

30

      (5)  

In this paragraph “the relevant assumptions” are the assumptions

set out in paragraphs 12 to 15.

Assumptions as to UK residence

12    (1)  

It is to be assumed that the EEA company is resident in the United

Kingdom throughout the loss period.

35

      (2)  

But this does not require it to be assumed—

(a)   

that there is any change in the place or places at which the

EEA company carries on its activities (although see

paragraph 13), or

(b)   

that the EEA company ceases to be resident in the United

40

Kingdom at the end of the loss period.

 

 

Finance (No.2) Bill
Schedule 1 — Group relief where surrendering company not resident in UK
Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

157

 

      (3)  

It is to be assumed that the EEA company becomes resident in the

United Kingdom (and, accordingly, within the charge to

corporation tax) at the beginning of the loss period.

Assumptions as to places in which activities carried out

13    (1)  

In the case of any trade carried on by the EEA company in the loss

5

period wholly or partly in the EEA territory concerned, it is to be

assumed that the trade is carried on wholly or partly in the United

Kingdom.

      (2)  

In the case of any estate, interest or rights in or over land in the

EEA territory concerned which are held by the EEA company, it is

10

to be assumed that the land is in the United Kingdom.

      (3)  

For this purpose, the reference to domestic concepts of law in

relation to the land in the EEA territory concerned is to be read so

as to produce the result that most closely corresponds with that

produced for Schedule A purposes in relation to land in the

15

United Kingdom.

Deemed accounting period

14    (1)  

It is to be assumed that an accounting period of the EEA company

begins at the beginning of the loss period.

      (2)  

It is to be assumed that the accounting period ends on the earlier

20

of—

(a)   

the end of 12 months from the beginning of the loss period,

or

(b)   

the end of the loss period.

      (3)  

If an accounting period ends in accordance with sub-paragraph

25

(2)(a), it is to be assumed that a further accounting period begins

when the previous one ends.

      (4)  

It is to be assumed that the further accounting period ends on the

earlier of—

(a)   

the end of 12 months from the beginning of the further

30

accounting period, or

(b)   

the end of the loss period.

Capital allowances

15    (1)  

This paragraph applies if, before the beginning of the loss period,

the EEA company incurs any capital expenditure on the provision

35

of plant or machinery for the purposes of any activity.

      (2)  

It is to be assumed for the purposes of Part 2 of the Capital

Allowances Act that the plant or machinery—

(a)   

was provided for purposes wholly other than those of the

activity, and

40

(b)   

was not brought into use for the purposes of the activity

until the beginning of the loss period,

 

 

 
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