Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 5 — Group relief
Chapter 3 — Surrenders made by non-UK resident company resident or trading in the EEA
63

“EEA accounting period” means a period for which an EEA related
company has a loss or other amount,
“EEA amount” has the meaning given under Step 1 of section 113(2),
“EEA related company” means a non-UK resident company that—
(a)
is resident in an EEA territory, or
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(b)
is not resident in any EEA territory but is carrying on a trade in
an EEA territory through a permanent establishment, and
“EEA territory”, in relation to any time, means a territory outside the
United Kingdom that is within the European Economic Area at that
time.
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Basic provisions about surrendering losses and other amounts
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
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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.
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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),
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(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.
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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
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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.
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If the recalculated EEA amount is an amount of income or other profits, the
amount that may be surrendered is nil.

Corporation Tax Bill
Part 5 — Group relief
Chapter 3 — Surrenders made by non-UK resident company resident or trading in the EEA
64


“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.
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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
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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).
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(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
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amounts, and
“the surrender period” means the assumed accounting period under
section 125 for which the company is taken to have the surrenderable
amounts.
Conditions that must be met
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114
The equivalence condition
An EEA amount meets the equivalence condition so far as it corresponds (in all
material respects) to a loss or other amount within section 99(1)(a) to (g).
115
The EEA tax loss condition: companies resident in EEA territory
(1)
In the case of a surrendering company that is resident in an EEA territory (“the
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resident EEA territory”), an EEA amount meets the EEA tax loss condition so
far as—
(a)
subsection (2) applies to the amount, and
(b)
the amount is not excluded by subsection (3).
(2)
This subsection applies to the EEA amount so far as it is calculated in
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accordance with the rules of the resident EEA territory that are applicable for
determining, in the surrendering company’s case, the amount of any loss or
other amount eligible for relief from any non-UK tax (see section 187)
chargeable under the law of the resident EEA territory.
(3)
The EEA amount is excluded so far as, for corporation tax purposes, it is
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attributable to a permanent establishment through which the surrendering
company carries on a trade in the United Kingdom.

Corporation Tax Bill
Part 5 — Group relief
Chapter 3 — Surrenders made by non-UK resident company resident or trading in the EEA
65

116
The EEA tax loss condition: companies not resident in EEA territory
(1)
In the case of a surrendering company that is not resident in any EEA territory
but is carrying on a trade in an EEA territory (“the relevant EEA territory”)
through a permanent establishment, an EEA amount meets the EEA tax loss
condition so far as—
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(a)
subsection (2) applies to the amount, and
(b)
the amount is not excluded by subsection (3).
(2)
This subsection applies to the EEA amount so far as it is calculated in
accordance with the rules in the relevant EEA territory that are applicable for
determining, in the surrendering company’s case, the amount of any loss or
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other amount eligible for relief from any non-UK tax chargeable under the law
of the relevant EEA territory.
(3)
The EEA amount is excluded so far as it is attributable to activities of the
surrendering company that are subject to relieving arrangements.
(4)
“Relieving arrangements” means arrangements within subsection (5) that have
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the effect mentioned in subsection (6) (or would have that effect if a claim were
made).
(5)
Arrangements are within this subsection if they are made with a view to
affording relief from double taxation in relation to—
(a)
any non-UK tax chargeable under the law of the relevant EEA territory
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and any non-UK tax chargeable under the law of any other territory, or
(b)
any non-UK tax chargeable under the law of the relevant EEA territory
and United Kingdom income or corporation tax.
(6)
The effect referred to in subsection (4) is that the income or gains arising for the
EEA accounting period from the activities are ignored in calculating the
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surrendering company’s profits, income or gains chargeable to non-UK tax
under the law of the relevant EEA territory for that period.
117
The qualifying loss condition: general
(1)
An EEA amount meets the qualifying loss condition so far as sections 118, 119
and 120 apply to it.
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(2)
In this section and sections 118 to 120, “the relevant EEA territory” means—
(a)
the EEA territory in which the surrendering company is resident, or
(b)
(as the case may be) the EEA territory in which the surrendering
company carries on a trade through a permanent establishment.
(3)
In sections 118 and 119 “relevant non-UK tax” means any non-UK tax
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chargeable under the law of the relevant EEA territory or any other resident
territory.
(4)
A “resident territory” is—
(a)
if the surrendering company is resident in an EEA territory and is also
resident in another territory outside the United Kingdom, that other
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territory, or
(b)
if the surrendering company is not resident in any EEA territory, the
territory (or territories) in which it is resident.

Corporation Tax Bill
Part 5 — Group relief
Chapter 3 — Surrenders made by non-UK resident company resident or trading in the EEA
66

118
The qualifying loss condition: relief for current and previous periods
(1)
This section applies to an EEA amount so far as subsections (2) and (3) apply
to it (but subject to subsection (4)).
(2)
This subsection applies to the EEA amount so far as, for the purposes of any
relevant non-UK tax, the EEA amount cannot be taken into account in
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calculating any profits, income or gains that—
(a)
arise in the EEA accounting period or any previous period to the
surrendering company or any other person, and
(b)
are chargeable to that tax for the EEA accounting period or any
previous period.
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(3)
This subsection applies to the EEA amount so far as, for the purposes of any
relevant non-UK tax, the EEA amount cannot be relieved in the EEA
accounting period or any previous period—
(a)
by the payment of a credit,
(b)
by the elimination or reduction of a tax liability, or
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(c)
in any other way.
(4)
This section applies to the EEA amount (or a part of it) only if every step is
taken (whether by the surrendering company or any other person) to secure
that the EEA amount (or part) is—
(a)
taken into account as mentioned in subsection (2), or
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(b)
relieved as mentioned in subsection (3).
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The qualifying loss condition: relief for future periods
(1)
This section applies to an EEA amount so far as subsections (2) and (3) apply
to it.
(2)
This subsection applies to the EEA amount so far as, for the purposes of any
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relevant non-UK tax, the EEA amount cannot be taken into account in
calculating any profits, income or gains that—
(a)
might arise in any period after the EEA accounting period to the
surrendering company or any other person, and
(b)
(if there were any) would be chargeable to that tax for any period after
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the EEA accounting period.
(3)
This subsection applies to the EEA amount so far as, for the purposes of any
relevant non-UK tax, the EEA amount cannot be relieved in any period after
the EEA accounting period—
(a)
by the payment of a credit,
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(b)
by the elimination or reduction of a tax liability, or
(c)
in any other way.
(4)
The determination as to the extent to which the EEA amount—
(a)
cannot be taken into account as mentioned in subsection (2), or
(b)
cannot be relieved as mentioned in subsection (3),
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is to be made as at the time immediately after the end of the EEA accounting
period.