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22 October 2000
New Section 403E acts as a mirror provision to section 403D. A United Kingdom-resident company trading through an overseas branch cannot claim group relief on that part of the loss that arises in the branch if it is deductible or otherwise allowable against the non-United Kingdom profits of another person. The Revenue is aware of only a few countries which do allow relief for the losses of the branch of a non-resident company against the profits of resident companies.
New Section 403E acts as a mirror provision to section 403D. A United Kingdom-resident company trading through an overseas branch cannot claim group relief on that part of the loss that arises in the branch if it is deductible or otherwise allowable against the non-United Kingdom profits of another person. The Revenue is aware of only a few countries which do allow relief for the losses of the branch of a non-resident company against the profits of resident companies.
In applying section 403E, the question of whether the losses will be relievable overseas will be decided without hypothesising entities and structures which do not exist at the time of the claim. So, for example, where an overseas country allows the losses of a branch to be carried forward when the branch is incorporated, that will not prevent the losses from being surrendered as group relief if the branch has not in fact been incorporated.
Ireland allows a relief similar to United Kingdom group relief for branches of non-resident companies, and as in the United Kingdom that relief cannot be carried forward. So where there are group members resident in Ireland which have profits for the year in which a claim can be made, the branch loss will not be available for surrender in the United Kingdom.
Where a French group has elected to be taxed under a consolidation system which allows losses in French branches of United Kingdom subsidiaries to be offset against group profits (of that period or a later one), that part of the United Kingdom company's loss that arises in France must be excluded from the United Kingdom group relief claim.
Where a German Organschaft includes the German branch of a United Kingdom company, no United Kingdom group relief will be available for any loss attributable to the branch.
United Kingdom group relief will also be restricted where a United Kingdom company is a member of a loss-making partnership trading in a territory where that partnership is treated as a corporate body (for example, an Australian or United States limited partnership) and within local group relief provisions.
In applying section 403E, the question of whether the losses will be relievable overseas will be decided without hypothesising entities and structures which do not exist at the time of the claim. So, for example, where an overseas country allows the losses of a branch to be carried forward when the branch is incorporated, that will not prevent the losses from being surrendered as group relief if the branch has not in fact been incorporated.
Ireland allows a relief similar to United Kingdom group relief for branches of non-resident companies, and as in the United Kingdom that relief cannot be carried forward. So where there are group members resident in Ireland which have profits for the year in which a claim can be made, the branch loss will not be available for surrender in the United Kingdom.
Where a French group has elected to be taxed under a consolidation system which allows losses in French branches of United Kingdom subsidiaries to be offset against group profits (of that period or a later one), that part of the United Kingdom company's loss that arises in France must be excluded from the United Kingdom group relief claim.
Where a German Organschaft includes the German branch of a United Kingdom company, no United Kingdom group relief will be available for any loss attributable to the branch.
United Kingdom group relief will also be restricted where a United Kingdom company is a member of a loss-making partnership trading in a territory where that partnership is treated as a corporate body (for example, an Australian or United States limited partnership) and within local group relief provisions.
