Corporation Tax Act 2010 section 107

Restriction on losses etc. surrenderable by non-UK resident

Section 107 restricts the losses and other amounts that a non-UK resident company within the charge to corporation tax may surrender as group relief, ensuring that only genuinely UK-sourced and unreleved amounts qualify.

• A non-UK resident company can only surrender losses as group relief if those losses arise from activities that bring it within the UK corporation tax charge (e.g. trading through a UK permanent establishment).
• Losses from activities that are exempt from UK tax under a double taxation agreement — such as certain airline operations — cannot be surrendered as group relief.
• Losses that correspond to, or are represented in, amounts deductible against non-UK profits under any foreign tax system are blocked from surrender, preventing the same loss from being relieved in more than one jurisdiction.
• Where a foreign tax system needs to calculate UK profits solely to exempt them (as in France or Australia), that calculation alone does not trigger the restriction; and where foreign law denies relief because it depends on whether the amount is deductible in the UK, the amount is treated as allowable abroad, resolving any circularity.