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Relief against a sum charged on a chargeable company

CFC accounting periods beginning on or after 8 July 2015

In respect of CFC’s that have an accounting period beginning on or after 8 July 2015, it is not possible for the chargeable company to make a claim under TIOPA10/S371UD(2) for relief in respect of relevant allowances to be set against the sum charged at step 5 in TIOPA10/S371BC(1).

»Ê¹ÚÌåÓýapp purpose of this amendment in F(No 2)A15/S36 is to ensure that UK tax is actually paid on profits that have been diverted from the UK to a CFC and that relevant allowances do not reduce or eliminate this amount.

»Ê¹ÚÌåÓýapp changes made repeal TIOPA10/S371UD(2) removing the ability of UK companies to reduce or eliminate a CFC charge by effectively offsetting UK losses and surplus expenses against a CFC’s chargeable profits that arise on or after 8 July 2015.

Straddling periods (CFC accounting periods beginning before but ending on or after 8 July 2015)

For CFC accounting periods which start before but end after 8 July 2015, the sum charged on a company at step 5 in TIOPA10/S371BC(1) is apportioned between two notional accounting periods of the CFC on a just and reasonable basis. This ensures that sums charged on a company at step 5 in TIOPA10/S371BC(1) based on a CFC’s chargeable profits which arise before 8 July 2015 can still be reduced by relief for relevant allowances under TIOPA10/S371UD(2) in the manner set out below.

Relief previously available (CFC accounting periods ending before 8 July 2015)

»Ê¹ÚÌåÓýapp manner in which certain reliefs may be set against a CFC charge is set out at TIOPA10/S371UD.

If a chargeable company in relation to a CFC’s accounting period is entitled, or on the making of a claim, would be entitled to a deduction in respect of a “relevant allowance� for the “relevant corporation tax accounting period�, a claim may be made under TIOPA10/S371UD(2) for relief in respect of the “relevant allowance�.

For the purposes of TIOPA10/S371UD “the relevant corporation tax accounting period� has the meaning given by TIOP10/S371BC(3) and “relevant allowance� means:

• any loss to which section 37 or section 62(1) to (3) of CTA 2010 applies,
• any qualifying charitable donation,
• any expense of management to which section 1219(1) of CTA 2009 applies,
• any adjusted basic life assurance and general annuity business (“BLAGABâ€�) management expenses for the purposes of section 73 of FA 2012,
• any excess to which section 260(3) of CAA 2001 applies,
• any amount available to the company by way of group relief, or
• any non-trading deficit on the company’s loan relationships.

If a claim is made, the relief is given by setting off the “relevant sumâ€� against the sum charged on the company at step 5 in TIOPA10/S371BC(1). »Ê¹ÚÌåÓýapp “relevant sumâ€� is a sum equal to corporation tax at the “appropriate rateâ€� on the amount of the relevant allowance claimed. »Ê¹ÚÌåÓýapp “appropriate rateâ€� has the meaning given by TIOPA10/S371BC(3).

However for sums charged on a company by virtue of TIOPA10/S371BH(2) (i.e. a chargeable company carrying on BLAGAB , “the appropriate rate� means the rate given by TIOPA10/S371BH(3)(a) and “relevant allowance� means any adjusted BLAGAB management expenses for the purposes of section 73 of FA 2012.

»Ê¹ÚÌåÓýapp amount of the relevant allowance specified in the claim is taken, for the purposes of the Taxes Acts, as having been allowed as a deduction. No other relief is available to be given against the sum charged on a company at step 5 in TIOPA10/S371BC(1).