Section 113: Steps to determine extent to which loss etc can be surrendered
410.This section sets out how to calculate how much of an “EEA amount” may be surrendered. It is based on section 403F of, and paragraph 11 of Schedule 18A to, ICTA.
411.Subsection (2) is a method statement.
412.Step 1 eliminates any amount that is within the United Kingdom tax net and available for surrender under the rules in Chapter 2.
413.Step 2 sets out the conditions that the EEA amount has to meet. The detail of the conditions is set out in sections 114 to 121. To the extent that the EEA amount meets these conditions it is the “qualifying part of the EEA amount”.
414.Step 3 requires the EEA amount to be recalculated using United Kingdom tax rules and the assumptions set out in sections 123 to 126.
415.In paragraph 11(4) of Schedule 18A to ICTA the assumptions are made in relation to “the provisions of this Chapter” (that is, Chapter 4 of Part 10 of ICTA). In fact the assumptions are used only for the purpose of recalculating the EEA amount. So in this Act they apply only for that restricted purpose.
416.Step 4 compares the qualifying part of the EEA amount with the same proportion of the EEA amount recalculated in Step 3. The lower amount is the amount that may be surrendered.
417.Step 5 requires a restriction for any amount excluded from relief by section 127 (arrangements).
418.Subsection (3) deals with the possibility that the accounting period assumed by section 125 does not coincide with the accounting period of the surrendering company. The subsection makes clear that the total of the recalculated amounts is compared with the qualifying part of the EEA amount. See Change 23 in Annex 1.
419.Subsection (4) cross-refers to the need for consent to the surrender. This rule corresponds to the rule in section 99(6) for UK related companies.