Taxation (International and Other Provisions) Act 2010 section 71A

Circumstances in which section 71B applies

Section 71A sets out the trigger conditions under which a UK company's double taxation relief may be reduced where losses of its overseas permanent establishment have been used to shelter other parties' profits from foreign tax.

• The section applies to UK-resident companies that have a permanent establishment (PE) in a foreign territory, where certain conditions are met in the current or any earlier accounting period.
• Condition A is met when, under the foreign territory's tax rules, a loss or other amount attributable to the PE is offset against amounts belonging to a person other than the UK company, resulting in a reduction in foreign tax for a period ending within the relevant UK accounting period.
• Condition B covers situations where the PE's results are aggregated with those of other persons for foreign tax purposes — for example, through fiscal consolidation — and a PE loss is used to reduce the combined tax charge on that aggregated basis.
• Once either condition is triggered, the consequences set out in section 71B apply to limit the amount of double taxation credit relief the UK company can claim in respect of the PE's profits.