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HMRC internal manual

International Manual

Controlled Foreign Companies: Assumed Taxable Total Profits, Assumed Total Profits and the Corporation Tax Assumptions: Claims and Elections

Claims and Elections

TIOPA10/S371SF(1) requires an assumption that any beneficial claims or elections have been made that would, on the assumption of UK residence, have been available in relation to any relief under the Corporation Tax Acts to the maximum amount that would be available under that provision, and to have been made within any applicable time limit.

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, TIOPA10/S371SF(1)(a) should be interpreted as requiring relief to be given for the maximum amount.

Where there are no other profits for the period in which the losses arise, the computation of losses is relevant only for the purposes of computing assumed taxable total profits for later periods of the CFC. Thus the losses will be available against the profits of subsequent periods.

TIOPA10/S371SF(2) restricts the application of subsection (1) so that it does not cover a claim or election under CTA09/S18A (exemption for profits or losses of foreign permanent establishments), CTA09/S1275 (relief for unremittable income), CTA10/S9A (designated currency of a UK resident investment company), or regulations made under FA06/Sch8/Para16 (election for a lease to be treated as a long funding lease).

An election under CTA10/S9A is possible provided that a notice is given to an officer of Revenue and Customs to that effect and the requirements with respect to the form of notice and time limits have been complied with (TIOPA10/S371SH).

TIOPA10/S371SF(3) requires an assumption that a rollover in respect of a reinvestment relief claim for intangible fixed assets has not been made nor will be made by the CFC.

Example

X, a CFC, is liable to corporation tax in respect of the trading profits of its UK permanent establishment. In the year ended 31 March 2014, it incurs trading losses of £2,000 attributable to its UK permanent establishment which are not relieved. For the purpose of computing its assumed taxable total profits for the year ended 31 March 2015, X is assumed to have claimed relief in respect of the losses of £2,000 under CTA 2010/S37 (relief for trade losses against total profits), regardless of whether the two year time limit in section 37 has expired.