Paragraph 66 permits a full or partial reallocation of the taxable credit (see below) between group members. There is a provision for a joint election to be made, subject to the companies being members of the ‘relevant group’ at the ‘relevant time’ (see CIRD40710). The result is that a charge that would have arisen on one company is, instead, regarded as arising on the other in the form of a non-trading credit ( CIRD13530) at the relevant time.
The taxable credit is simply that arising on the deemed realisation of the asset at market value, the first element in the computation of the degrouping adjustment outlined in CIRD40520. It follows that:
There is a further condition concerning residence of the company
accepting the taxable credit on degrouping. If not resident at the
relevant time, the company must have been carrying on a trade in
the UK through a permanent establishment, and not be exempt from UK
CT by virtue of the double taxation relief arrangements in ICTA88
Part 18. Where an election is made in these circumstances the
taxable credit is regarded as income of the UK branch of the
company to which it is reallocated.
(FA03/S153 (1) substituted the words ‘permanent
establishment’ for ‘branch or agency’ effective
for all accounting periods beginning on or after 1 January
2003.)
For the purposes of making the required election Y cannot be a dual resident investing company (CTM34560) or a tax-exempt friendly society.
The required election must be made jointly, by notice in writing to the Inland Revenue, not more than 2 years after the end of the accounting period of company X within which the relevant time falls.
