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
67

120
The qualifying loss condition: non-UK tax relief in another territory
(1)
This section applies to an EEA amount so far as it is not excluded by subsection
(2) or (3).
(2)
The EEA amount is excluded so far as, for the purposes of any non-UK tax
chargeable under the law of any territory other than the relevant EEA territory,
5
it has been taken into account in calculating any profits, income or gains that—
(a)
have arisen in any period to the surrendering company or any other
person, and
(b)
were chargeable to that tax for the period (or would have been so
chargeable had the EEA amount not been so taken into account).
10
(3)
The EEA amount is excluded so far as, for the purposes of any non-UK tax
chargeable under the law of any territory other than the relevant EEA territory,
it has been relieved in any period—
(a)
by the payment of a credit,
(b)
by the elimination or reduction of a tax liability, or
15
(c)
in any other way.
121
The precedence condition
(1)
An EEA amount meets the precedence condition so far as no relief can be given
for it in any territory which—
(a)
is outside the United Kingdom,
20
(b)
is not the relevant EEA territory (as defined by section 117(2)), and
(c)
is within subsection (2).
(2)
A territory is within this subsection if—
(a)
a company resident in the territory owns (directly or indirectly)
ordinary share capital in the surrendering company,
25
(b)
a UK resident company owns (directly or indirectly) ordinary share
capital in the company resident in the territory,
(c)
the surrendering company is a 75% subsidiary of the UK resident
company, and
(d)
the surrendering company is not such a subsidiary as a result of its
30
being a 75% subsidiary of another UK resident company.
(3)
In subsection (1) the reference to relief being given in any territory is a
reference to relief being given—
(a)
by taking the EEA amount (or a part of it) into account in calculating
any profits, income or gains of any person chargeable to non-UK tax
35
under the law of the territory,
(b)
by the payment of a credit to any person under that law,
(c)
by the elimination or reduction of a tax liability of any person under
that law, or
(d)
in any other way.
40
(4)
Chapter 5 explains how to determine if a company is a 75% subsidiary of
another company.

Corporation Tax Bill
Part 5 — Group relief
Chapter 3 — Surrenders made by non-UK resident company resident or trading in the EEA
68

Other rules, assumptions and exclusions
122
Assumptions to be made in recalculating EEA amount
Sections 123 to 126 apply for the purpose of recalculating the EEA amount at
Step 3 in section 113.
123
Assumptions as to UK residence
5
(1)
Assume that the surrendering company is UK resident throughout the EEA
accounting period.
(2)
But this does not require it to be assumed—
(a)
that there is any change in the place or places at which the surrendering
company carries on its activities (although see section 124), or
10
(b)
that the surrendering company ceases to be UK resident at the end of
the EEA accounting period.
(3)
Assume that the surrendering company becomes UK resident (and, therefore,
within the charge to corporation tax) at the beginning of the EEA accounting
period.
15
124
Assumptions as to places in which activities carried on
(1)
If during the EEA accounting period the surrendering company carries on a
trade wholly or partly in the relevant EEA territory, assume that the trade is
carried on wholly or partly in the United Kingdom.
(2)
If the surrendering company holds any estate, interest or rights in or over land
20
in the relevant EEA territory, assume that the land is in the United Kingdom.
(3)
For the purposes of subsection (2) the reference to holding an estate, interest or
rights in or over land in the relevant EEA territory is to be read so as to produce
the result that most closely corresponds with that produced by applying those
concepts of law in relation to a UK property business or land in the United
25
Kingdom.
(4)
In this section “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.
30
125
Assumptions as to accounting periods
(1)
Assume that an accounting period of the surrendering company begins at the
beginning of the EEA accounting period.
(2)
Assume that the accounting period ends—
(a)
when the EEA accounting period ends, or
35
(b)
if earlier, at the end of 12 months.
(3)
If the accounting period ends before the end of the EEA accounting period,
assume that a further accounting period then begins and so on until the EEA
accounting period ends.
(4)
Assume that any further accounting period ends—
40

Corporation Tax Bill
Part 5 — Group relief
Chapter 3 — Surrenders made by non-UK resident company resident or trading in the EEA
69

(a)
at the end of 12 months, or
(b)
if earlier, when the EEA accounting period ends.
126
Assumptions in relation to capital allowances
(1)
This section applies if, before the EEA accounting period, the surrendering
company incurs capital expenditure on the provision of plant or machinery for
5
the purposes of any activity.
(2)
For the purposes of Part 2 of CAA 2001 assume that the plant or machinery—
(a)
was provided for purposes wholly other than those of the activity, and
(b)
was not brought into use for the purposes of the activity until the
beginning of the EEA accounting period,
10

and section 13 of CAA 2001 is to apply accordingly.
(3)
This section is to be read as if contained in Part 2 of CAA 2001.
127
Amounts excluded because of certain arrangements
(1)
An amount (or part of an amount) resulting from Step 4 in section 113 is
excluded if—
15
(a)
it is not attributable for corporation tax purposes to any permanent
establishment through which the surrendering company carries on a
trade in the United Kingdom, and
(b)
the following condition is met.
(2)
The condition is that the amount (or part)—
20
(a)
would not have resulted from Step 4 but for any arrangements within
subsection (3), or
(b)
would not have arisen to the surrendering company but for any such
arrangements.
(3)
Arrangements are within this subsection if their main purpose, or one of their
25
main purposes, is to secure that the amount (or part) may be surrendered for
the purposes of group relief.
(4)
“Arrangements” includes any agreement, understanding, scheme, transaction
or series of transactions (whether or not legally enforceable).
128
Rules for recalculating EEA amount
30
(1)
For the purposes of Step 3 in section 113 the EEA amount is to be recalculated
in accordance with any provision made by or under the Corporation Tax
Acts—
(a)
that applies for the purpose of calculating for corporation tax purposes
losses or other amounts to which the EEA amount corresponds, or
35
(b)
that otherwise affects in any way the amount of those losses or other
amounts that is eligible for corporation tax relief.
(2)
For the purposes of subsection (1) the Treasury may by regulations provide for
the modification of any provision made by or under the Corporation Tax
Acts—
40
(a)
that applies as mentioned in subsection (1)(a), or
(b)
that otherwise affects an amount as mentioned in subsection (1)(b).

Corporation Tax Bill
Part 5 — Group relief
Chapter 4 — Claims for group relief
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(3)
Regulations under subsection (2) may make provision in relation to—
(a)
all classes of trade or business, or
(b)
any particular class or classes of trade or business.
(4)
Regulations under subsection (2) may—
(a)
make different provision for different cases or different purposes,
5
(b)
contain incidental, supplemental, consequential and transitional
provision and savings, and
(c)
make provision having retrospective effect.
Chapter 4
Claims for group relief
10
Introduction
129
Overview of Chapter
(1)
This Chapter sets out how a company may claim group relief, how group relief
is given and limitations on the amount of group relief to be given on a claim.
(2)
Sections 130 to 134 deal with claims in relation to surrenderable amounts under
15
Chapter 2.
(3)
Sections 135 and 136 deal with claims in relation to surrenderable amounts
under Chapter 3.
(4)
Section 137 deals with how group relief is given.
(5)
Sections 138 to 142 set out a limitation on the amount of group relief to be given
20
on any claim.
(6)
Sections 143 to 149 set out limitations on the amount of group relief to be given
on claims based on consortium condition 1, consortium condition 2 or
consortium condition 3 (see Requirement 3 in section 130).
Surrenderable amounts under Chapter 2
25
130
Group relief claims on amounts surrenderable under Chapter 2
(1)
This section applies in relation to the surrendering company’s surrenderable
amounts for the surrender period under Chapter 2.
(2)
A company (“the claimant company”) may make a claim for group relief for an
accounting period (“the claim period”) in relation to those amounts (in whole
30
or in part) if the following requirements are met.
Requirement 1

The surrendering company consents to the claim.
Requirement 2

There is a period (“the overlapping period”) that is common to the claim period
35
and the surrender period.

Corporation Tax Bill
Part 5 — Group relief
Chapter 4 — Claims for group relief
71

Requirement 3

At a time during the overlapping period—
(a)
the group condition is met (see section 131),
(b)
consortium condition 1 is met (see section 132),
(c)
consortium condition 2 is met (see section 133(1), (3) and (4)), or
5
(d)
consortium condition 3 is met (see section 133(2), (3) and (4)).
(3)
More than one company may make a claim for group relief in relation to any
surrenderable amounts (but the giving of group relief in relation to any claim
is subject to the provisions of this Chapter).
131
The group condition
10
(1)
The group condition is met if the surrendering company and the claimant
company—
(a)
are members of the same group of companies (see section 152), and
(b)
are both UK related.
(2)
For the meaning of “UK related” in subsection (1)(b) and in sections 132 and
15
133, see section 134.
132
Consortium condition 1
(1)
Consortium condition 1 is met if subsection (2) or (3) applies.
(2)
This subsection applies if—
(a)
the surrendering company is a trading company or a holding company,
20
(b)
the surrendering company is owned by a consortium,
(c)
the claimant company is a member of the consortium, and
(d)
both companies are UK related.
(3)
This subsection applies if—
(a)
the claimant company is a trading company or a holding company,
25
(b)
the claimant company is owned by a consortium,
(c)
the surrendering company is a member of the consortium, and
(d)
both companies are UK related.
(4)
But consortium condition 1 is not met if a profit on a sale within subsection (5)
by the company that is the member of the consortium would be a trading
30
receipt of the member.
(5)
A sale is within this subsection if it is a sale of—
(a)
the share capital the member owns in the company owned by the
consortium, or
(b)
if that company is owned by the consortium as a result of section 153(3)
35
(consortiums involving holding companies), the share capital the
member owns in the holding company in question.
133
Consortium conditions 2 and 3
(1)
Consortium condition 2 is met if—
(a)
the surrendering company is a trading company or a holding company,
40
(b)
the surrendering company is owned by a consortium,

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Part 5 — Group relief
Chapter 4 — Claims for group relief
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(c)
the claimant company is not a member of the consortium,
(d)
the claimant company is a member of the same group of companies as
a third company (“the link company”),
(e)
the link company is a member of the consortium, and
(f)
the surrendering company, the claimant company and the link
5
company are all UK related.
(2)
Consortium condition 3 is met if—
(a)
the claimant company is a trading company or a holding company,
(b)
the claimant company is owned by a consortium,
(c)
the surrendering company is not a member of the consortium,
10
(d)
the surrendering company is a member of the same group of companies
as a third company (“the link company”),
(e)
the link company is a member of the consortium, and
(f)
the surrendering company, the claimant company and the link
company are all UK related.
15
(3)
But neither consortium condition 2 nor consortium condition 3 is met if a profit
on a sale within subsection (4) by the link company would be a trading receipt
of that company.
(4)
A sale is within this subsection if it is a sale of—
(a)
the share capital the link company owns in the company (“the
20
consortium company”) owned by the consortium as mentioned in
subsection (1)(b) or (2)(b), or
(b)
if the consortium company is owned by the consortium as a result of
section 153(3) (consortiums involving holding companies), the share
capital the link company owns in the holding company in question.
25
134
Meaning of “UK related” company
For the purposes of sections 131 to 133 a company is UK related if—
(a)
it is a UK resident company, or
(b)
it is a non-UK resident company carrying on a trade in the United
Kingdom through a permanent establishment.
30
Surrenderable amounts under Chapter 3
135
Group relief claims on amounts surrenderable under Chapter 3
(1)
This section applies in relation to the surrendering company’s surrenderable
amounts for the surrender period under Chapter 3.
(2)
A company (“the claimant company”) may make a claim for group relief for an
35
accounting period (“the claim period”) in relation to those amounts (in whole
or in part) if the following requirements are met.
Requirement 1

The surrendering company consents to the claim.
Requirement 2
40

There is a period (“the overlapping period”) that is common to the claim period
and the surrender period.

Corporation Tax Bill
Part 5 — Group relief
Chapter 4 — Claims for group relief
73

Requirement 3

The EEA group condition is met (see section 136) at a time during the
overlapping period.
(3)
More than one company may make a claim for group relief in relation to any
surrenderable amounts (but the giving of group relief in relation to any claim
5
is subject to the provisions of this Chapter).
136
The EEA group condition
(1)
The EEA group condition is met if subsection (2) or (3) applies.
(2)
This subsection applies if—
(a)
the surrendering company is a 75% subsidiary of the claimant
10
company, and
(b)
the claimant company is UK resident.
(3)
This subsection applies if—
(a)
both the surrendering company and the claimant company are 75%
subsidiaries of a third company, and
15
(b)
the third company is UK resident.
(4)
Chapter 5 explains how to determine if a company is a 75% subsidiary of
another company.
Giving of group relief
137
Deduction from total profits
20
(1)
If the claimant company makes a claim as mentioned in section 130 or 135, the
group relief is given by the making of a deduction from the claimant
company’s total profits of the claim period.
(2)
The amount of the deduction is—
(a)
an amount equal to the surrendering company’s surrenderable
25
amounts for the surrender period, or
(b)
if the claim is in relation to only part of those amounts, an amount equal
to that part.
(3)
Subsection (2) is subject to—
(a)
subsections (4) to (7),
30
(b)
the limitation set out in sections 138 to 142 that applies in relation to all
claims for group relief,
(c)
the limitations set out in sections 143 to 149 that apply in relation to
claims based on consortium condition 1, consortium condition 2 or
consortium condition 3,
35
(d)
Chapter 3 of Part 4 (relief in cases involving trading losses made in
limited partnerships or limited liability partnerships), and
(e)
section 305(1) (group relief in cases involving oil activities etc).
(4)
The deduction is to be made—
(a)
before deductions for relief within subsection (5), but
40
(b)
after all other deductions to be made at Step 2 in section 4(2) (apart from
deductions for group relief on other claims).