Section 106 | Restriction on losses etc surrenderable by UK resident

(1)This section applies if the surrendering company is UK resident.

(2)The surrendering company may not surrender a loss or other amount under this Chapter so far as the loss or other amount—

(a)is attributable to a permanent establishment through which the company carries on a trade outside the United Kingdom (see subsection (3)), and

(b)is, or represents, an amount within subsection (5).

(3)A loss or other amount is attributable to a permanent establishment of the surrendering company if (ignoring this section) the amount could be included in the company's surrenderable amounts for the surrender period if those amounts were determined—

(a)by reference to that establishment alone, and

(b)by applying, in relation to that establishment, principles corresponding in all material respects to those mentioned in subsection (4).

(4)The principles are those that would be applied for corporation tax purposes in determining an equivalent loss or other amount in the case of a permanent establishment through which a non-UK resident company carries on a trade in the United Kingdom.

(5)An amount is within this subsection if, for the purposes of non-UK tax (see section 187) chargeable under the law of the territory in which the permanent establishment is situated, the amount is (in any period) deductible from or otherwise allowable against non-UK profits (see section 108) of a person other than the surrendering company.

(6)Subsection (7) applies for the purposes of subsection (5) if, in order to determine if an amount is deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is deductible or otherwise allowable for tax purposes in the United Kingdom.

(7)The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned if (and only if) the surrendering company is treated as resident in that territory for the purposes of the non-UK tax.