Income and Corporation Taxes Act 1988

SCHEDULE 24 ASSUMPTIONS FOR CALCULATING CHARGEABLE PROFITS, CREDITABLE TAX AND CORRESPONDING UNITED KINGDOM TAX OF FOREIGN COMPANIES

Section 747(6). General 1 (1) The company shall be assumed to be resident in the United Kingdom. (2) Nothing in sub-paragraph (1) above requires it to be assumed that there is any change in the place or places at which the company carries on its activities. (3) For the avoidance of doubt, it is hereby declared that, if any sums forming part of the company’s profits for an accounting period have been received by the company without any deduction of or charge to tax and have been so received by virtue of section 1279 of CTA 2009 the effect of the assumption in sub-paragraph (1) above is that those sums are to be brought within the charge to tax for the purposes of calculating the company’s chargeable profits or corresponding United Kingdom tax. (3A) In any case where— (a) it is at any time necessary for any purpose of Chapter IV of Part XVII to determine in the case of any person the chargeable profits of the company for an accounting period, and (b) at that time— (i) it has not been established in the case of that person that that or any earlier accounting period of the company is an accounting period in respect of which an apportionment under section 747(3) falls to be made, . . . (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . in determining the chargeable profits of the company for the accounting period mentioned in paragraph (a) above, it shall be assumed, for the purposes of those provisions of paragraphs 2 and 10 below which refer to the first accounting period in respect of which an apportionment under section 747(3) falls to be made . . . , that that period (but not any earlier period) is an accounting period in respect of which such an apportionment falls to be made . . . . (4) In any case where— (a) it is at any time necessary for any purpose of Chapter IV of Part XVII to determine in the case of any person the chargeable profits of the company for an accounting period, and (b) at that time it has not been established in the case of that person that that or any earlier accounting period of the company is an accounting period in respect of which an apportionment under section 747(3) falls to be made, in determining the chargeable profits of the company for the accounting period mentioned in paragraph (a) above, it shall be assumed, for the purposes of those provisions of paragraph 9 below which refer to the first accounting period in respect of which an apportionment under section 747(3) falls to be made, that such an apportionment falls to be made in respect of that period (but not in respect of any earlier period). (5) Nothing in this Schedule affects any liability for, or the computation of, corporation tax in respect of a trade which is carried on by a company resident outside the United Kingdom through a permanent establishment in the United Kingdom. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (1) The company shall be assumed to have become resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the beginning of the first accounting period— (a) in respect of which an apportionment under section 747(3) falls to be made, . . . (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and that United Kingdom residence shall be assumed to continue throughout subsequent accounting periods of the company (whether or not an apportionment falls to be made in respect of all or any of them) until the company ceases to be controlled by persons resident in the United Kingdom. (2) Except in so far as the following provisions of this Schedule otherwise provide, for the purposes of calculating a company’s chargeable profits or corresponding United Kingdom tax for any accounting period which is not the first such period referred to in sub-paragraph (1) above (and, in particular, for the purpose of applying any relief which is relevant to two or more accounting periods), it shall be assumed that a calculation of chargeable profits or, as the case may be, corresponding United Kingdom tax has been made for every previous accounting period throughout which the company was, by virtue of sub-paragraph (1) above, assumed to have been resident in the United Kingdom. 3 The company shall be assumed not to be a close company. 4 (1) Subject to sub-paragraph (2) below, where any relief under the Corporation Tax Acts is dependent upon the making of a claim or election, the company shall be assumed to have made that claim or election which would give the maximum amount of relief and to have made that claim or election within any time limit applicable to it , except that the company shall be assumed not to have made an election under section 18A of CTA 2009. (1A) Sub-paragraph (2) below applies to any accounting period of the company— (a) in respect of which an apportionment under section 747(3) falls to be made; . . . (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Where this sub-paragraph applies to an accounting period of the company, then if, by notice given to an officer of the Board at any time not later than the expiry of the period of twenty months following the end of the accounting period or within such longer period as the Board may in any particular case allow, the United Kingdom resident company which has or, as the case may be, any two or more United Kingdom resident companies which together have, a majority interest in the company so request, the company shall be assumed— (a) not to have made any claim or election specified in the notice; or (b) to have made a claim or election so specified, being different from one assumed by sub-paragraph (1) above but being one which (subject to compliance with any time limit) could have been made in the case of a company within the charge to corporation tax; or (c) to have disclaimed or required the postponement, in whole or in part, of an allowance if (subject to compliance with any time limit) a company within the charge to corporation tax could have disclaimed the allowance or, as the case may be, required such a postponement. (2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2B) For the purposes of sub-paragraph (1) an election under section 9A of CTA 2010 (designated currency of a UK resident investment company) is not to be regarded as an election upon which relief under the Corporation Tax Acts is dependent, and sub-paragraph (2)(b) does not apply in relation to such an election. (2C) But if, by notice given to an officer of the Board, the United Kingdom resident company which has or, as the case may be, any two or more United Kingdom resident companies which together have, a majority interest in the company so request, the company shall be assumed (subject to section 9A(2) of CTA 2010) to have made an election under section 9A of that Act in the form specified in the notice (and accordingly that section and section 9B of that Act apply to determine the effect (if any) of that election). (3) For the purposes of this paragraph, a United Kingdom resident company has, or two or more United Kingdom resident companies together have, a majority interest in the company if on the apportionment of the company’s chargeable profits for the relevant accounting period under section 747(3) more than half of the amount of those profits— (a) which are apportioned to all United Kingdom resident companies, and (b) which give rise to any liability on any such companies under subsection (4)(a) of that section, are apportioned to the United Kingdom resident company or companies concerned. (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In sub-paragraph (3) above “the relevant accounting period” means the accounting period or, as the case may be, the first accounting period in which the relief in question is or would be available in accordance with sub-paragraph (1) above. 4A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group relief etc. 5 (1) The company shall be assumed to be neither a member of a group of companies nor a member of a consortium for the purposes of any provision of the Tax Acts. (2) Where, under Part 5 of CTA 2010, any relief is in fact surrendered by the company and allowed to another company by way of group relief, it shall be assumed that the chargeable profits of the company, apart from this paragraph, are to be increased by an amount of additional profits equal to the amount of the relief so surrendered and allowed. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company reconstructions 8 Without prejudice to the operation of Chapter 1 of Part 22 of CTA 2010 in a case where the company is the predecessor, within the meaning of that Chapter, and a company resident in the United Kingdom is the successor, within the meaning of that Chapter— (a) the assumption that the company is resident in the United Kingdom shall not be regarded as requiring it also to be assumed that the company is within the charge to tax in respect of a trade for the purposes of that Chapter, and (b) except in so far as the company is actually within that charge (by carrying on the trade through a permanent establishment in the United Kingdom), it shall accordingly be assumed that the company can never be the successor, within the meaning of that Chapter, to another company (whether resident in the United Kingdom or not). Losses in pre-direction accounting periods 9 (1) . . . This paragraph applies in any case where the company incurred a loss in a trade in an accounting period— (a) which precedes the first accounting period in respect of which an apportionment under section 747(3) falls to be made (“the starting period”); and (b) which ended less than six years before the beginning of the starting period; and (c) in which the company was not resident . . . in the United Kingdom; and in this paragraph any such accounting period is referred to as a “ pre-apportionment period”. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) If a claim is made for the purpose by the United Kingdom resident company or companies referred to in paragraph 4(2) above, the chargeable profits (if any) of the company for accounting periods beginning with that pre-apportionment period which is specified in the claim and in which a loss is incurred as mentioned in sub-paragraph (1) above shall be determined (in accordance with the provisions of this Schedule other than this paragraph) on the assumption that that pre-apportionment period was the first accounting period in respect of which an apportionment under section 747(3) fell to be made. (4) A claim under sub-paragraph (3) above shall be made by notice given to an officer of the Board within the period of twenty months following the end of the starting period or within such longer period as the Board may in any particular case allow. (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) Nothing in— (a) paragraph 10 of Schedule 18 to the Finance Act 1998 (claims or elections in company tax returns), or (b) Schedule 1A to the Management Act (claims or elections not included in returns), shall apply, whether by virtue of section 754 or otherwise, to a claim under sub-paragraph (3) above. Capital allowances and expenditure on car hire 10 (1) Subject to paragraph 12 below, if, in an accounting period falling before the beginning of the first accounting period— (a) in respect of which an apportionment under section 747(3) falls to be made, . . . (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the company incurred any capital expenditure on the provision of plant or machinery for the purposes of its trade, that plant or machinery shall be assumed, for the purposes of Part 2 of the Capital Allowances Act, to have been provided for purposes wholly other than those of the trade and not to have been brought into use for the purposes of that trade until the beginning of that first accounting period, and section 13 of that Act (use for qualifying activity of plant or machinery provided for other purposes) shall apply accordingly. (2) This paragraph shall be construed as one with Part 2 of the Capital Allowances Act. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unremittable overseas income 12 For the purposes of the application of Part 18 of CTA 2009 to the company’s income it shall be assumed— (a) that any reference in section 1274(3) or (4) of that Act to the United Kingdom is a reference to both the United Kingdom and the territory in which the company is in fact resident; and (b) that a claim under section 1275 of that Act (claim for relief for unremittable income) may be made on behalf of the company by the United Kingdom resident company or companies referred to in paragraph 4(2) above. Exchange gains and losses 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer pricing 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .