|
| |
|
has been used for the purposes of the business carried on by the |
| |
company through the permanent establishment in the territory (to |
| |
such extent as is appropriate having regard to the extent to which it |
| |
has been so used); and the references to losses in section 18A(7) are |
| |
to be construed accordingly. |
| 5 |
(3) | The references in section 18A(6) to profits which would be taken, in |
| |
the case of a company in relation to which an election under section |
| |
18A has effect, to be attributable to the permanent establishment of |
| |
the company in a territory (including as extended by subsection (2)) |
| |
do not include any gains which would be taken to be so attributable |
| 10 |
for the purposes of ascertaining credit to be allowed in respect of tax |
| |
payable under the law of the territory before the election has effect; |
| |
and the references to losses in section 18A(7) are to be construed |
| |
| |
18C | Capital allowances etc |
| 15 |
(1) | Any allowance under Part 2 of CAA 2001 which, but for section 18A |
| |
and for section 15(2A)(b) of CAA 2001, could be claimed under |
| |
section 3(1) of that Act in respect of assets provided for the purposes |
| |
of a permanent establishment in a territory outside the United |
| |
Kingdom through which business is or has been carried on by a |
| 20 |
company in relation to which an election under section 18A has effect |
| |
(and any charge in connection with any such allowance) is to be |
| |
made automatically and reflected in any calculation for any relevant |
| |
accounting period of the company of the profits or losses attributable |
| |
to business carried on by the company through such a permanent |
| 25 |
| |
(2) | In the application of section 13 of CAA 2001 by virtue of subsection |
| |
(1) on the taking effect of the election under section 18A, references |
| |
to “market value” have effect as references to “transition value” |
| |
within the meaning of section 62A of that Act in relation to any plant |
| 30 |
or machinery in the case of which that is the disposal value under |
| |
| |
(3) | In determining any relevant profits amount or relevant losses |
| |
amount under section 18A(6) or (7) in relation to a company there are |
| |
to be left out of account any profits or losses arising from a plant or |
| 35 |
machinery lease under which the company is a lessor if an allowance |
| |
under CAA 2001 has been made to the company or a connected |
| |
company in respect of expenditure on the provision of any plant or |
| |
machinery subject to the lease (otherwise than in accordance with |
| |
| 40 |
(4) | Section 70K of that Act (meaning of “plant or machinery lease” and |
| |
“lessor”) applies for the purposes of subsection (3). |
| |
(5) | In determining for the purposes of section 18A the amount of any |
| |
credit to be allowed under TIOPA 2010 in respect of tax under the |
| |
law of a relevant foreign territory in the case of a company it is to be |
| 45 |
assumed that the company made any claim or election (other than a |
| |
claim for allowances under Part 2 of CAA 2001) which would reduce |
| |
any relevant profits amount, or increase the relevant losses amount, |
| |
by any means, and within any time limit, applicable to it. |
| |
|
| |
|
| |
|
18D | Payments subject to deduction |
| |
(1) | In determining any relevant profits amount or relevant losses |
| |
amount under section 18A(6) or (7) in relation to a company there are |
| |
to be left out of account profits or losses referable to any transaction |
| |
between a person who is UK resident and a permanent |
| 5 |
establishment in a territory outside the United Kingdom through |
| |
which the company carries on (or has carried on) business (“the |
| |
foreign territory in question”) if the condition in subsection (2) is met. |
| |
(2) | That condition is that the UK resident would be obliged under Part |
| |
15 of ITA 2007 to deduct income tax that is not repayable from |
| 10 |
payments in respect of the transaction if the payments were made to |
| |
a company resident in the foreign territory in question (taking |
| |
account of any double taxation arrangements having effect in |
| |
relation to the foreign territory in question). |
| |
(3) | But subsection (1) does not apply if the company is a bank unless the |
| 15 |
transaction forms part of arrangements the main purpose, or one of |
| |
the main purposes, of which is the avoidance of an obligation under |
| |
Part 15 of ITA 2007 to deduct income tax from any payments. |
| |
(4) | Section 1120 of CTA 2010 (meaning of “bank”) applies for the |
| |
purposes of subsection (3). |
| 20 |
18E | Employee share acquisitions |
| |
(1) | Any relief which would be given under Chapter 2 or 3 of Part 12 is to |
| |
be taken into account in determining any relevant profits amount or |
| |
relevant losses amount in the case of a company under section 18A(6) |
| |
or (7) in relation to a relevant territory in so far as it is linked to the |
| 25 |
business carried on by the company through a permanent |
| |
establishment in the territory. |
| |
(2) | The extent to which any such relief is so linked is to be determined |
| |
on a just and reasonable basis having regard to the extent to which |
| |
the work of the employees concerned contributes to the purposes of |
| 30 |
the business so carried on. |
| |
| |
(1) | An election made by a company under section 18A— |
| |
(a) | (subject to subsection (2)) is irrevocable, and |
| |
(b) | applies to all accounting periods of the company following |
| 35 |
that in which it is made. |
| |
(2) | The election can be revoked at any time before the first accounting |
| |
period of the company for which the election would have effect. |
| |
| |
| 40 |
(1) | This section applies for the purposes of this Chapter if the lower level |
| |
of tax test is met for any relevant accounting period of a company in |
| |
relation to any permanent establishment through which the |
| |
company carries on, or has carried on, business in a territory outside |
| |
| 45 |
|
| |
|
| |
|
(2) | If there is an adjusted relevant profits amount in relation to the |
| |
territory for the relevant accounting period, the relevant profits |
| |
amount is to be taken to be nil (but this is subject to section 18I). |
| |
(3) | For the purposes of this Chapter “adjusted”, in relation to a relevant |
| |
profits amount, is what the relevant profits amount would be if it |
| 5 |
were determined without reference to gains and losses which are |
| |
chargeable gains or allowable losses for the purposes of corporation |
| |
| |
(4) | The lower level of tax test is met for a relevant accounting period in |
| |
relation to a permanent establishment in a territory if— |
| 10 |
(a) | the amount of tax paid under the law of that territory in |
| |
respect of the adjusted relevant profits amount in accordance |
| |
with a relevant treaty provision, is less than |
| |
(b) | 75% of the amount of corporation tax that would be payable |
| |
in respect of that amount if it were subject in full to |
| 15 |
corporation tax, ignoring any credit which would be allowed |
| |
against it under section 18(3) of TIOPA 2010 and assuming, |
| |
where there is more than one rate of corporation tax |
| |
applicable to the relevant accounting period, that it were |
| |
chargeable at the average rate over the accounting period. |
| 20 |
(5) | In subsection (4)(a) “a relevant treaty provision” means— |
| |
(a) | provision in double taxation arrangements having effect in |
| |
relation to the territory, or |
| |
(b) | if no double taxation arrangements have effect in relation to |
| |
the territory, provision in the terms of the OECD model. |
| 25 |
(6) | This section does not apply if— |
| |
(a) | the adjusted relevant profits amount in relation to the |
| |
territory for the relevant accounting period would (apart |
| |
from subsection (2)) be less than the entry limit (as to which |
| |
| 30 |
(b) | the motive test is met (as to which see section 18H). |
| |
(7) | “The entry limit” is— |
| |
| |
(b) | if the relevant accounting period is less than 12 months, a |
| |
proportionately reduced amount. |
| 35 |
| |
(1) | The motive test is met if conditions A and B are met. |
| |
(2) | Condition A is that in so far as any relevant transaction, or two or |
| |
more transactions at least one of which was a relevant transaction |
| |
(taken together), achieved a reduction in United Kingdom tax |
| 40 |
| |
(a) | the reduction was minimal, or |
| |
(b) | it was not the main purpose, or one of the main purposes, of |
| |
the transaction, or of those transactions taken together, to |
| |
| 45 |
(3) | In subsection (2) “relevant transaction” means a transaction the |
| |
results of which are reflected in such of the company’s profits in the |
| |
|
| |
|
| |
|
accounting period as are attributable to the permanent |
| |
| |
(4) | For the purposes of subsection (2) a transaction achieves (or |
| |
transactions achieve) a reduction in United Kingdom tax if, had the |
| |
transaction (or transactions) not been effected, any person— |
| 5 |
(a) | would (disregarding section 18G(2)) have been liable for |
| |
United Kingdom tax or for a greater amount of United |
| |
| |
(b) | would (disregarding that provision) not have been entitled to |
| |
a relief from, or repayment of, United Kingdom tax or would |
| 10 |
have been entitled to a smaller relief from, or repayment of, |
| |
| |
(5) | For the purposes of subsection (2) it is the main purpose, or one of |
| |
the main purposes, of a transaction (or of transactions taken |
| |
together) to achieve a reduction in United Kingdom tax if that is the |
| 15 |
main purpose, or one of the main purposes, of— |
| |
| |
(b) | a person who has an interest in the company at any time |
| |
during the relevant accounting period; |
| |
| and section 749B of ICTA (persons who have an interest in a |
| 20 |
company) applies for the purposes of paragraph (b) as for the |
| |
purposes of Chapter 4 of Part 17 of that Act. |
| |
(6) | Condition B is that it was not the main reason, or one of the main |
| |
reasons, for the company carrying on business through the |
| |
permanent establishment to achieve a reduction in United Kingdom |
| 25 |
tax by a diversion of profits from the United Kingdom. |
| |
(7) | For the purposes of subsection (6) the fact that the company carries |
| |
on the business through the permanent establishment achieves a |
| |
reduction in United Kingdom tax by a diversion of profits from the |
| |
United Kingdom if it is reasonable to make the supposition in |
| 30 |
| |
(8) | That supposition is that, if the company did not carry on business |
| |
through any permanent establishment and there were no related |
| |
| |
(a) | the whole or a substantial part of the receipts which are |
| 35 |
reflected in the profits attributable to the permanent |
| |
establishment would have been received by the company |
| |
otherwise than through the permanent establishment or by |
| |
another UK resident company which is a non-electing |
| |
company or an individual resident in the United Kingdom, |
| 40 |
| |
(b) | the company, that other UK resident company, that |
| |
individual resident in the United Kingdom or any other |
| |
person resident in the United Kingdom either— |
| |
(i) | would (disregarding section 18G(2)) have been liable |
| 45 |
for United Kingdom tax or for a greater amount of |
| |
| |
(ii) | would (disregarding that provision) not have been |
| |
entitled to a relief from, or repayment of, United |
| |
|
| |
|
| |
|
Kingdom tax or would have been entitled to a smaller |
| |
relief from, or repayment of, United Kingdom tax. |
| |
(9) | For the purposes of subsection (8) a company is “related” to the |
| |
| |
(a) | either it is a UK resident company in relation to which an |
| 5 |
election under section 18A has effect or it is not a UK resident |
| |
| |
(b) | it is connected with, or an associate of, the company, and |
| |
(c) | it fulfils or could fulfil, directly or indirectly, the same |
| |
functions as those of the permanent establishment. |
| 10 |
(10) | Companies are associates for the purposes of subsection (9) if they |
| |
are associated for the purposes of Chapter 4 of Part 19 of CTA 2010 |
| |
| |
(11) | References in subsection (8) to a UK resident company include a |
| |
company which it is reasonable to assume would have been |
| 15 |
established if the permanent establishment did not exist. |
| |
(12) | For the purposes of subsection (8) a UK resident company is a non- |
| |
electing company if no election under section 18A has effect in |
| |
| |
(13) | In this section “United Kingdom tax” means corporation tax, income |
| 20 |
tax or capital gains tax. |
| |
18I | Proportionate reduction in certain cases |
| |
(1) | This section applies if— |
| |
(a) | condition A in section 18H is not met, but |
| |
(b) | condition B in that section is met. |
| 25 |
(2) | If there is an adjusted relevant profits amount in relation to the |
| |
territory for the relevant accounting period, section 18G(2) has effect |
| |
to cause it to be reduced by only any such amount as it is just and |
| |
reasonable to regard as referable to tainted relevant transactions. |
| |
(3) | In subsection (2) “tainted relevant transactions” means relevant |
| 30 |
transactions which achieve a reduction in United Kingdom tax, other |
| |
than any in relation to which the condition in section 18H(2)(b) is |
| |
| |
Companies with total opening negative amount |
| |
18J | Companies with total opening negative amount |
| 35 |
(1) | The following sections make provision about a company in relation |
| |
to which an election under section 18A has effect if there is a total |
| |
opening negative amount in the case of the company at the |
| |
beginning of the company’s first relevant accounting period. |
| |
(2) | To determine for the purposes of this Chapter whether there is a total |
| 40 |
opening negative amount at the beginning of the company’s first |
| |
relevant accounting period, take the following steps. |
| |
| |
|
| |
|
| |
|
| Take the adjusted foreign permanent establishments amount in |
| |
relation to the earliest affected prior accounting period in relation to |
| |
which that amount is negative. |
| |
| |
| Add to the amount arrived at under step 1 the adjusted foreign |
| 5 |
permanent establishments amount in relation to the next affected |
| |
prior accounting period (but not so as to cause the result to exceed |
| |
| |
| |
| Add to the amount arrived at under step 2 the adjusted foreign |
| 10 |
permanent establishments amount in relation to each remaining |
| |
affected prior accounting period, starting with the earliest (but not so |
| |
as to cause the result to exceed nil). |
| |
| If after the application of the preceding steps there is a negative |
| |
amount for the last affected prior accounting period there is a total |
| 15 |
opening negative amount at the beginning of the company’s first |
| |
relevant accounting period of an amount equal to that negative |
| |
| |
(3) | In subsection (2) “affected prior accounting period” means— |
| |
(a) | the accounting period of the company in which the election |
| 20 |
under section 18A is made, and |
| |
(b) | any earlier accounting period of the company ending less |
| |
than 6 years before the end of that accounting period. |
| |
(4) | For the purposes of subsection (2) the “adjusted” foreign permanent |
| |
establishments amount is what the foreign permanent |
| 25 |
establishments amount would be if it were determined without |
| |
reference to gains or losses which are chargeable gains or allowable |
| |
losses for the purposes of corporation tax. |
| |
18K | Total opening negative amount: “matching” |
| |
(1) | At the end of each relevant accounting period of the company |
| 30 |
(starting with the first) the total opening negative amount is to be |
| |
reduced (or further reduced) by the amount of any aggregate |
| |
relevant profits amount of the company for the accounting period |
| |
| |
(2) | In any relevant accounting period of the company for which there is |
| 35 |
a reduction under subsection (1), section 18A(1) does not apply in |
| |
relation to the aggregate relevant profits amount of the company for |
| |
| |
(3) | But in the case of the last relevant accounting period of the company |
| |
for which there is a reduction under subsection (1), section 18A(1) is |
| 40 |
disapplied by subsection (2) only in relation to so much of the |
| |
aggregate relevant profits amount of the company for the accounting |
| |
period as is equal to the total opening negative amount of the |
| |
company at the beginning of the accounting period. |
| |
(4) | The company may, in its company tax return for that relevant |
| 45 |
accounting period, specify to which part of the aggregate relevant |
| |
profits amount of the company for the accounting period section |
| |
18A(1) is to apply by virtue of subsection (3). |
| |
|
| |
|
| |
|
(5) | In this Chapter “aggregate relevant profits amount”, in relation to an |
| |
accounting period, means the aggregate of the relevant profits |
| |
amount in the case of each relevant foreign territory in relation to |
| |
which there is a relevant profits amount for the accounting period. |
| |
(6) | This section is subject to section 18L. |
| 5 |
| |
(1) | If a streaming election has effect in relation to the company sections |
| |
18M and 18N apply (instead of section 18K). |
| |
(2) | For the purposes of this section “streaming election” means an |
| |
election, made at the same time as the company’s election under |
| 10 |
| |
(a) | states that sections 18M and 18N are to have effect in relation |
| |
to the company (instead of section 18K), and |
| |
(b) | specifies which of the territories that are relevant foreign |
| |
territories in relation to the company are to be streamed |
| 15 |
territories for the purposes of the operation of sections 18M |
| |
and 18N in relation to the company. |
| |
(3) | Subject to subsection (4), a streaming election is irrevocable. |
| |
(4) | A streaming election can be revoked at any time before the first |
| |
relevant accounting period of the company. |
| 20 |
(5) | A streaming election does not have effect unless the company, in the |
| |
company tax return for the first relevant accounting period of the |
| |
company, specifies how much of the amount eligible to be streamed |
| |
to each streamed territory is to constitute for the purposes of sections |
| |
18M and 18N the streamed opening negative amount at the |
| 25 |
beginning of that relevant accounting period. |
| |
(6) | For the purposes of subsection (5) the amount eligible to be streamed |
| |
to a territory by the company is the amount that would be the total |
| |
opening negative amount of the company at the beginning of the first |
| |
relevant accounting period of the company if at all material times the |
| 30 |
territory were the only relevant foreign territory in relation to the |
| |
| |
18M | Streamed opening negative amounts: “matching” |
| |
(1) | At the end of each relevant accounting period of the company |
| |
(starting with the first) the streamed opening negative amount in |
| 35 |
relation to a territory is to be reduced (or further reduced) by the |
| |
amount of any relevant profits amount of the company for the |
| |
territory for the accounting period (but not to below nil). |
| |
(2) | In any relevant accounting period of the company for which there is |
| |
a reduction under subsection (1) in relation to a territory, section |
| 40 |
18A(1) does not apply in relation to the relevant profits amount of |
| |
the company for the territory for the accounting period. |
| |
(3) | But in the case of the last relevant accounting period of the company |
| |
for which there is a reduction under subsection (1) in relation to a |
| |
territory, section 18A(1) is disapplied by subsection (2) only in |
| 45 |
relation to so much of the relevant profits amount of the company for |
| |
the territory for the accounting period as is equal to the streamed |
| |
|
| |
|