Corporation Tax Act 2010 section 106

Restriction on losses etc surrenderable by UK resident

Section 106 prevents a UK-resident company from surrendering losses attributable to a foreign permanent establishment where those losses already qualify for relief against another person's profits under the tax law of the country where the establishment is located.

• A UK-resident company cannot surrender losses through group relief if those losses relate to a permanent establishment it operates outside the UK and the losses qualify for relief from foreign tax in that country
• Losses are treated as attributable to a foreign permanent establishment if they would form part of the company's surrenderable amounts when calculated by reference to that establishment alone, using the same principles as would apply to a UK permanent establishment of a non-UK resident company
• The restriction applies where the foreign loss can be deducted from or set against the non-UK profits of any person other than the surrendering company — in other words, where the foreign country provides its own form of group relief
• Where foreign tax law denies relief because the loss may qualify for UK relief, creating a potential circularity, the loss is treated as relievable in the UK unless the surrendering company is also treated as resident in the foreign territory, in which case UK group relief is denied