CTM34070 - Residence: inward company migration: deemed commencement - specific points

A company that becomes resident in the UK is within the charge to CT. Prior to 30 November 1993 this was so even where residence was awarded to another country for the purposes of a Double Taxation Agreement. An accounting period begins and no relief is available for losses incurred by the company before it comes within the charge to UK tax. If the company is a trading company then, unless it was previously trading in the UK through a branch or agency, the provisions of ICTA88/S337 (1) apply. The effect of Section 337 (1) may not be clear in a number of situations. The main ones are:

• The company may claim that on the deemed commencement under Section 337 (1) the normal principles of stock valuation do not apply. It may attempt to value opening stock at the 'higher' original cost rather than the 'lower' net realisable value.
• The company may claim that capital allowances for plant and machinery should be calculated by reference to the 'higher' original cost rather than the usually accepted market value.
• The company may claim that the deemed commencement under Section 337 (1) entitles the company to relief for pre-trading expenditure under ICTA88/S401.

In the event of any claim of this sort or on any other problem arising on the inward migration of a company submit the file to CTIAA (International).