INTM209090 - Controlled Foreign Companies: Computation of Chargeable Profits and Creditable Tax
Claims assumed to be made
ICTA88/SCH24/PARA4(1)
Where any relief to which a foreign company may be entitled in the computation of its chargeable profits is dependent on the making of a claim or election, the company is assumed to have made the claim or election. It is assumed to have made the claim or election which would produce the maximum amount of relief and it is assumed to have made the claim or election within any applicable time limit.
Example 1
X, a non-resident company, is liable to Corporation Tax under
ICTA88/S11 in respect of the trading profits of a branch or agency
in the United Kingdom. In the year ended 31 March year 1, it incurs
trading losses of £2,000 which are not relieved. For the
purposes of computing its chargeable profits for the year ended 31
March year 2, it is assumed to have claimed relief in respect of
the losses of £2,000 under ICTA88/S393A(1), regardless of
whether the two year time limit in ICTA88/S393A(1) has expired.
Where the making of a claim affects the accounting period for
which relief is due or where there is more than one possible way of
claiming relief, ICTA88/SCH24/PARA4(1) should be interpreted as
requiring relief to be given for the earliest possible accounting
period.
Example 2
The facts are as in the Example 1 except that X has other
profits chargeable to Corporation Tax totalling £1,000. As a
result of a claim under ICTA88/S393A(1) , its Corporation Tax
profits are reduced to nil and unrelieved losses of £1,000 are
carried forward under ICTA88/S393(1). In computing its chargeable
profits for the year ended 31 March year 3, the maximum relief
available in accordance with ICTA88/SCH24/PARA4(1) is £1,000
in respect of the losses brought forward.
Losses cannot be carried back to earlier periods under
ICTA88/S393A(2) and (2B) or ICTA88/S394 where exceptionally these
apply because the controlled foreign company has a trade conducted
in the United Kingdom itself. Where there are no chargeable profits
for the period in which the losses arose, so no direction was made
for that period, the computation of losses is relevant only for the
purposes of computing chargeable profits for the later period
(ICTA88/SCH24/PARA2(2)). Thus the losses are only available against
the profits of subsequent periods.
Example 3
The facts are as in Example 2. However, even if X had profits chargeable to Corporation Tax in the year ended 31 March year 1 (or in an earlier accounting period) against which the surplus losses of the year ended 31 March year 2 could have been relieved if a claim had been made, no account is taken of this possibility and the surplus losses are regarded as available to be included in the computation of the chargeable profits for the year ended 31 March year 3.
