Section 1042N — Corporation Tax Act 2009: Amounts surrendered to other group companies

Amounts surrendered to other group companies 1042N 1 Subsection (3) applies if an amount of expenditure credit is surrendered by the qualifying company to another member of its group under step 5 in section 1042I or under section 1042L(2).

2 For the purposes of that subsection—

a the accounting period in respect of which the surrender is made is “the surrender AP”;

b an accounting period of the other group member is an “overlapping AP” if it overlaps with the surrender AP to any extent.

3 The surrendered amount is to be dealt with as follows. Step 1 Select an overlapping AP. Step 2 Calculate the proportion of the overlapping AP that overlaps with the surrender AP, and apply that proportion to the amount of corporation tax payable by the other group member for that overlapping AP. Step 3 Calculate the proportion of the surrender AP that overlaps with the overlapping AP, and apply that proportion to the surrendered amount. Step 4 The amount given by step 3 is to be applied in discharging the liability of the other group member to pay the corporation tax mentioned in step 2, up to the amount given by that step. Step 5 Select another overlapping AP, if there is one, and repeat steps 2 to 4. Step 6 If any of the surrendered amount remains after steps 2 to 4 have been taken in relation to each overlapping AP, the remainder is to be treated for the purposes of section 1042I or (as the case may be) section 1042L(2) as if it had not been surrendered as mentioned in subsection (1).

4 A surrender to which subsection (3) applies is not to be—

a taken into account in determining, for corporation tax purposes, the profits or losses of the qualifying company or the other group member, or b regarded for corporation tax purposes as the making of a distribution.

5 Subsection (6) applies (in addition to subsection (3)) if—

a the qualifying company and the other group member have an agreement between them in relation to the surrendering of amounts of expenditure credit, and b as a result of the agreement the other group member makes a payment to the qualifying company that does not exceed the total amount of expenditure credit surrendered to the other group member.

6 The payment is not to be—

a taken into account in determining, for corporation tax purposes, the profits of the qualifying company or the other group member, or b regarded for corporation tax purposes as a distribution.