Chapter 6
30.Chapter 6 determines which profits and losses of a qualifying trade of a company which is a Northern Ireland company by virtue of the SME condition at section 357KA(2) are Northern Ireland profits or Northern Ireland losses.
31.The Northern Ireland profits and losses of a Northern Ireland SME company are all the profits and losses of a qualifying trade except to the extent that they arise from excluded activities (re-insurance and the exploration or exploitation of UK sector of the continental shelf). The definition of “qualifying trade” covers cases where a company makes a one-off election under section 357KB to bring in profits attributable to the back-office functions of certain trades which would otherwise be excluded trades.
32.Section 357MB sets out how the back-office profits of an excluded trade for which an election under section 357KB has been made are to be determined. The profits are imputed on a percentage mark-up basis. Each back-office deduction is marked up at a rate of 5 per cent.
33.Section 357MB(3) provides a power for the Treasury to vary the rate which is used to arrive at the value of the imputed profits of back-office activities.
