CTM80320 - Groups: group relief: UK permanent establishment of non-resident company: tax relief in a foreign jurisdiction: meaning

ICTA88/S403D (1)(c), (5), and (6)

For general guidance about the surrender as group relief of losses and other amounts of a UK permanent establishment of a non-resident company see CTM80310.

For the purposes of this part of the guidance the non-statutory expression ‘tax relief in a foreign jurisdiction’ is used. The statutory basis of this expression is that such relief arises where:

• ‘for the purposes of any foreign tax’ any part of the amount is ‘in any period deductible from or otherwise allowable against non-UK profits’ - ICTA88/S403D (1)(c).

For the meaning of non-UK profits see CTM80330 and for the meaning of foreign tax see CTM80335.

Losses and other amounts which are brought into foreign tax computations only for the purpose of excluding them from the foreign tax charge does not fall within this definition - ICTA88/S403D (5).

However the laws of the foreign jurisdiction may contain rules which prevent the deduction of losses in that jurisdiction if the losses are relieved in the UK. In that case, the question of whether tax relief is available in a foreign jurisdiction is determined without reference to such a rule - Section 403D (6).

Section 403D (1)(c) refers to deduction ‘in any period’. This means that it is not enough for there to have been no deduction or relief in foreign tax computations for the period that the loss etc. relates to. The carry forward of losses in the foreign jurisdiction for relief against future profits will also prevent a group relief surrender. The only exception to this is where it is clear that there is no possibility of relief in the foreign jurisdiction. This may be the case for instance if the company is in liquidation and any possibility of using the losses by consolidation with a parent group or other avenue of relief in the foreign jurisdiction is ruled out.

For the impact of these rules where the company is resident in a foreign jurisdiction which operate a credit system for overseas permanent establishment income or in one that operates an exemption system see CTM80325.