Income and Corporation Taxes Act 1988

Valid from 19/07/2006

Part 1 U.K. Meaning of conditions for the purposes of section 403F

Introduction U.K.

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 overseas losses of non-resident companies).

The equivalence condition U.K.

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 relief by a company resident in the United Kingdom.

The EEA tax loss condition: companies resident in EEA territory U.K.

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 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 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.

(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.

The EEA tax loss condition: companies not resident in EEA territory U.K.

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 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 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 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 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 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.

The qualifying loss condition U.K.

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,

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 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 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.

(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 U.K.

6 (1) For the purposes of paragraph 5, an amount cannot be given 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 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.

(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

(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).

(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 carries on a trade in an EEA territory through a permanent establishment, the territory (or territories) in which it is resident.

Qualifying relief for future periods U.K.

7 (1) For the purposes of paragraph 5, an amount cannot be given qualifying relief for any period after the current 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 gains which—

(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 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.

(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—

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

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

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 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 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 chargeable).

(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

(c) by any other means of any kind.

Precedence condition U.K.

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

(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 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),

(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,

(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 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 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 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.