Corporation Tax Act 2010 section 188BH

Restriction on surrender of losses etc. made when UK resident

Section 188BH restricts the ability of a UK resident company to surrender carried-forward losses that are attributable to an overseas permanent establishment, where relief for those losses has been or could be obtained in the territory where that permanent establishment is situated.

• This section applies where a UK resident surrendering company carries forward a loss or other amount to the surrender period and that loss is attributable to a permanent establishment through which it traded outside the United Kingdom.
• The loss cannot be surrendered if the amount is, or has at any time been, deductible from or otherwise allowable against non-UK profits of another person for the purposes of foreign tax in the territory where the permanent establishment was located.
• Whether a loss is attributable to an overseas permanent establishment is determined by asking whether the amount could form part of the company's surrenderable amounts if calculated by reference to that establishment alone, applying principles equivalent to those used for UK corporation tax purposes when assessing a non-UK resident company's UK permanent establishment.
• Where the foreign tax law requires knowledge of whether an amount is deductible in the United Kingdom before deciding if it is deductible overseas, the amount is treated as deductible abroad only if the surrendering company is treated as resident in that territory for foreign tax purposes.