Section IQ 2 — Income Tax Act 2007: Ring-fencing cap on attributed CFC net losses

IQ 2 Ring-fencing cap on attributed CFC net losses When this section applies (1A) This section applies if a person, for a tax year and a country or territory (the jurisdiction ),— (a) derives an amount of attributed CFC income or FIF income calculated under the attributable FIF income method; and (b) has an amount of attributed CFC net loss or FIF net loss— (i) carried forward to the tax year: (ii) made available under section IQ 4 to the person by another company in the same group. Amount subtracted: losses not from elective attributing CFCs or elective attributing FIFs (1) The total amount of attributed CFC net loss and FIF net loss, relating to a CFC or FIF (the loss entity ) resident in the jurisdiction when the loss arises and not an elective attributing CFC or elective attributing FIF, that is subtracted from the person's net income for the tax year is the lesser of— (a) the total amount of attributed CFC income, and FIF income calculated under the attributable FIF income method or branch equivalent method, that the person derives in the tax year in relation to a CFC or FIF that is resident in the jurisdiction for the accounting period corresponding to the tax year: (b) the total amount of attributed CFC net loss and FIF net loss— (i) relating to the loss entity and the jurisdiction; and (ii) carried forward to the tax year or made available in the tax year to the person by another company in the same group; and (iii) available to the person under subsection (1B), (1C), or section IQ 3 . Amount subtracted: losses from elective attributing CFCs or elective attributing FIFs (1BA) The total amount of attributed CFC net loss and FIF net loss, relating to an elective attributing CFC or elective attributing FIF (the loss entity ) resident in the jurisdiction when the loss arises, that is subtracted from the person's net income for the tax year is the lesser of— (a) the total amount of attributed CFC income, and FIF income calculated under the attributable FIF income method or branch equivalent method, that the person derives in the tax year in relation to an elective attributing CFC or elective attributing FIF— (i) with the same election commencement date as the loss entity; and (ii) resident in the jurisdiction for the accounting period corresponding to the tax year: (b) the total amount of attributed CFC net loss and FIF net loss— (i) relating to the loss entity and the jurisdiction; and (ii) carried forward to the tax year or made available in the tax year to the person by another company in the same group; and (iii) available to the person under subsection (1B), (1C), or section IQ 3 . Losses from year after transition (1B) If an amount of attributed CFC net loss or FIF net loss arises for a person in an income year for which section IQ 2B applies to the person, or is made available to the person by a company for which the loss arises in an income year for which section IQ 2B applies to the company, all of the attributed CFC net loss or FIF net loss is available for subtracting from the person's net income for the tax year. Attributed CFC net losses from income year before transition (1C) If an amount of attributed CFC net loss of a person, or made available to the person, relates to an income year before section IQ 2B applies to the person and is carried forward to a tax year in which section IQ 2B applies to the person,— (a) the amount of the attributed CFC net loss available in the tax year for subtracting from the person's net income is equal to the equivalent CFC loss under section IQ 2B : (b) the amount of the attributed CFC net loss is reduced by the converted BE loss under section IQ 2B . Income only once (2) In subsection (1), the person may take into account an amount of attributed CFC income or FIF income only to the extent to which they have not accounted for it in— (a) calculating a deduction under sections DN 4 or DN 8 (which relate to ring-fencing caps); or (b) establishing their entitlement to make available, under section IC 5 (Company B using company A's tax loss) or IQ 4 , an amount of attributed CFC net loss or FIF net loss carried forward; or (c) applying subsection (1) in relation to another attributed CFC net loss or FIF net loss. Treatment of excess (3) If the person cannot use all of the maximum amount referred to in subsection (1) because there is insufficient net income, the surplus is no longer available to them as a CFC net loss, but becomes a tax loss component under section IA 2(4) (Tax losses). Defined in this Act: amount , attributed CFC income , attributable FIF income, attributed CFC net loss , branch equivalent method , CFC , company , deduction , elective attributing CFC elective attributing FIF FIF , FIF income , FIF net loss , income year , net income , tax loss component , tax year Compare: 2004 No 35 s IE 3(2), (3), (5) Section IQ 2(1A) heading: inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(1A): inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(1A)(a): amended (with effect on 1 July 2011), on 29 August 2011 (applying for income years beginning on or after 1 July 2011), by section 94(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(1) heading: replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section IQ 2(1): replaced (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section IQ 2(1BA) heading: inserted (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section IQ 2(1BA): inserted (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 114(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section IQ 2(1B) heading: substituted (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), pursuant to section 94(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(1B): substituted (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(1C) heading: inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section IQ 2(1C): inserted (with effect on 30 June 2009), on 6 October 2009, by section 302(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section IQ 2(1C): amended (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(6)(a) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(1C)(a): amended (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(6)(b) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(1C)(b): amended (with effect on 30 June 2009), on 29 August 2011 (applying for income years beginning on or after 1 July 2009), by section 94(6)(c) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(2)(b): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(7) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(2)(c): substituted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 94(7) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 302(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section IQ 2 list of defined terms attributable FIF income : inserted (with effect on 30 June 2009), on 29 August 2011, by section 94(9) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2 list of defined terms company : inserted (with effect on 1 April 2008), on 29 August 2011, by section 94(8) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2 list of defined terms elective attributing CFC : inserted (with effect on 30 June 2009), on 2 November 2012, by section 114(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section IQ 2 list of defined terms elective attributing FIF : inserted (with effect on 30 June 2009), on 2 November 2012, by section 114(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section IQ 2 list of defined terms FIF net loss : inserted (with effect on 1 April 2008), on 29 August 2011, by section 94(8) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2 list of defined terms income year : inserted (with effect on 1 April 2008), on 29 August 2011, by section 94(8) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section IQ 2 list of defined terms tax loss : repealed (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).