If certain conditions are met, a UK parent company (or a UK
resident subsidiary of the UK parent company) may be able to claim
to set an amount representing the foreign tax loss suffered by a
subsidiary resident in another European Economic Area (EEA)
territory against its profits.
In order to quantify the loss eligible for relief, the
foreign loss is to be recomputed in accordance with UK tax
principles.
The amount of loss to be relieved is the foreign loss
recomputed in accordance with UK principles. However, where the
amount recomputed under UK rules exceeds the eligible foreign loss
the amount available for surrender by way of group relief cannot
exceed the quantum of the eligible foreign loss. Such differences
will arise, for example, because of timing differences in the
recognition of income or expenditure, so will either be amounts
that have already been relieved or could be relieved in future.
If the recomputation results in an amount of profits or
surplus income then no amount may be surrendered as group relief.
If a non-resident company has more than one category of loss
eligible for relief, then the comparison described above must be
made in relation to each category of loss.
If the non-resident company had both trading losses and
excess capital allowances eligible for group relief then the UK and
foreign amounts in each category would need to be compared to
ascertain the amount that could actually be surrendered against UK
profits.
There are examples at
CTM81625.
