Corporation Tax Act 2010 section 357KEA

Disqualified close company

Section 357KEA defines what makes a close company a "disqualified close company" for the purposes of the Northern Ireland corporation tax rate, targeting arrangements designed to artificially channel profits through Northern Ireland.

• A close company (or one that would be close if UK resident) is disqualified if it has obtained a Northern Ireland Regional Establishment (NIRE) through tax-avoidance arrangements whose sole or main purpose is to classify profits or losses as Northern Ireland profits or losses.
• The company is also disqualified if 50% or more of its UK working time, or 50% or more of its UK workforce expenses, is attributable to participators (broadly, shareholders or others with a stake in the company) working outside Northern Ireland.
• Both conditions must be met: the NIRE must result from tax-avoidance arrangements (Condition A), and the working time or workforce expenses test must be failed (Condition B).
• "Arrangements" is defined very broadly to include any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable.