Back Link Text Only Rich Text Print Custom print

  • Part 5: Part 5: Loss Relief

    • Article 26 - Policy Statement on Loss Relief

      Tax losses are calculated on the same basis as Chargeable Profits. Losses can be carried forward but not back, and can be relieved against the profits of QFC Entities, which are Companies or LLPs, in the same Group. The carry forward of losses may be restricted in the event of a change in Ownership.

      Amended (as from 18th June 2014)

    • Article 27 - Calculation of Tax Losses

      Tax losses shall be computed in a like manner and in respect of the same period as Chargeable Profits. Relief shall not be given more than once in respect of the same loss.

      Amended (as from 18th June 2014)

    • Article 28 - Carry Forward of Tax Losses

      (1) Where, in any Accounting Period a QFC Entity carrying on a Licensed Activity generates a tax loss, the loss shall be set off against any Chargeable Profits generated by that QFC Entity in succeeding Accounting Periods, for so long as it continues to have a source of income within the terms of its QFC Licence.
      (2) Any tax loss carried forward to a succeeding Accounting Period shall be set off in full against the Chargeable Profits of that succeeding period before any of the loss can be carried forward to a second succeeding Accounting Period.
      (3) Losses arising before these Regulations come into force are not available for carry forward.

    • Article 29 - Transfer of Licensed Activity Without Change in Ownership

      (1) This Article applies where a QFC Entity (the "predecessor") ceases to carry on a Licensed Activity, and another QFC Entity (the "successor") begins to carry it on, and at that time a Person with a 51% Interest in the predecessor has a 51% Interest in the successor which he continues to hold for at least 6 months from the date the successor begins to carry on the Licensed Activity.
      (2) Subject to Article 29(3), tax losses available to the predecessor, and not utilised as at the date of transfer of the Licensed Activity, shall be available to the successor as though they were losses carried forward under Article 28 as at the date of transfer.
      (3) Tax losses transferred to the successor shall only be available against Chargeable Profits arising from the Licensed Activity referred to in Article 29(1).
      Amended (as from 18th June 2014)

    • Article 30 - Disallowance of Tax Losses on a Change in Ownership

      (1) Where—
      (a) within an Ownership change period there is a major change in the nature or conduct of the Licensed Activities carried on by a QFC Entity; or
      (b) at any time after the scale of the activities carried on by a QFC Entity under its QFC Licence become negligible, and before any significant revival of those activities, there is a change in the Ownership of the QFC Entity, no relief shall be available for tax losses carried forward from an Accounting Period ending before the change in Ownership to an Accounting Period ending after the change in Ownership.
      (2) An "Ownership change period" is the period commencing one year before and ending two years after a change in Ownership.
      (3) For the purposes of this Article an Accounting Period shall be treated as ending on the day of the change in Ownership.
      (4) The apportionment of Chargeable Profits or tax losses between the period before and after a change in Ownership shall be on a time basis unless it can be shown, to the satisfaction of the Tax Department, that such a method would produce an unjust or unreasonable result for the QFC Entity when such other method may be used as appears to the Tax Department to produce a just and reasonable result.
      (5) A major change in the nature of the Licensed Activities shall include a major change in the contents of the QFC Licence.
      (6) A change in Ownership in a QFC Entity shall be determined in accordance with Article 31.
      Amended (as from 18th June 2014)

    • Article 31 - Determination of Change in Ownership

      (1) For the purposes of Article 30 there has been a change in the Ownership of a Company if—
      (a) a single Person acquires more than half of the Ordinary Share Capital of the Company; or
      (b) two or more Persons each acquire a holding of 10% or more of the Ordinary Share Capital of the Company, and those holdings together amount to more than half of the Ordinary Share Capital of the Company.
      (2) Ownership of a Company shall include both direct and indirect Ownership of Ordinary Share Capital.
      (3) For the purposes of Article 30, there has been a change in the Ownership of a Partnership if there is a change in the Ownership of—
      (a) at least half of the Partnership assets; or
      (b) at least half of the income earning rights in the Partnership.
      (4) A determination of whether there has been a change in Ownership under this Article shall be restricted to a review of Company shareholdings or Ownership of a Partnership, as the case may be, within any 12 month period.
      Amended (as from 18th June 2014)

    • Article 32 - Group Relief

      (1) Where in any Accounting Period a QFC Entity that is a Company or an LLP (the "Surrendering Entity") has incurred a tax loss, the amount of the loss may be set off for the purposes of corporation tax against the Chargeable Profits of a second QFC Entity that is a Company or an LLP (the "Claimant Entity") for its corresponding Accounting Period by way of a relief from corporation tax called "Group Relief".
      (2) Group Relief shall be available where the Surrendering Entity and the Claimant Entity are both members of the same Group.
      (3) Group Relief for an Accounting Period shall be allowed as a deduction against the Claimant Entity's Chargeable Profits for the period after the deduction of tax losses brought forward from previous Accounting Periods under Article 28.
      (4) Group Relief may, by election, be allowed against the Claimant Entity's Chargeable Profits before the deduction of tax losses brought forward under Article 28. An election under this paragraph shall be made in writing to the Tax Department within 18 months from the end of the Accounting Period to which the election relates.
      (5) A claim to Group Relief shall be made in accordance with the provisions of the Tax Rules (TAX 9).
      (6) A payment for Group Relief, up to the amount of that relief, shall not be taken into account in computing Chargeable Profits or tax losses of either the Surrendering Entity or the Claimant Entity.
      (7) If the Tax Department discover that any Group Relief which has been given is, or has become, excessive they may make an assessment to tax in the amount which in their opinion ought to be charged. If an assessment under this Article is made because a Claimant Entity fails, or is unable, to amend its return under TAX 9.5.5, the assessment is not out of time under Article 129 if it is made within one year from—
      (a) the date on which the Surrendering Entity gives notice of the withdrawal of consent or, if later, sends a copy of a new notice of consent, to the Claimant Entity under TAX 9.5.3; or
      (b) the date on which the Tax Department sends the Claimant Entity a copy of a notice containing their directions under TAX 9.5.4.
      (8) An assessment made under this Article may be appealed under Article 133.
      Amended (as from 18th June 2014)

    • Article 33 - Corresponding Accounting Periods

      (1) For the purposes of Group Relief any Accounting Period of the Claimant Entity which falls wholly or partly within an Accounting Period of the Surrendering Entity shall correspond to that Accounting Period.
      (2) Where an Accounting Period of the Surrendering Entity and a corresponding Accounting Period of the Claimant Entity do not coincide—
      (a) the tax losses of the Surrendering Entity available to surrender to the Claimant Entity shall be reduced by applying the fraction—

      A
      B


      and;
      (b) the Chargeable Profits of the Claimant Entity, against which the tax losses of the Surrendering Entity are to be set off, shall be reduced by applying the fraction—
      A
      C
      where—

      A is the length of the period common to the two Accounting Periods;

      B is the length of the Accounting Period of the Surrendering Entity; and

      C is the length of the corresponding Accounting Period of the Claimant Entity.
      Amended (as from 18th June 2014)

    • Article 34 - Definition of a Group

      (1) For the purposes of these Regulations, QFC Entities shall be deemed to be members of a Group if one QFC Entity is a 75% Subsidiary of the other or both are 75% Subsidiaries of a third Company or an LLP.
      (2) Subject to Article 34(3), a Company is a 75% Subsidiary of another Company or an LLP if and so long as not less than 75% of its Ordinary Share Capital is owned directly or indirectly by that other Company or LLP.
      (3) A Company shall not be treated as a 75% Subsidiary of another Company or LLP unless that Company or LLP is—
      (a) beneficially entitled to not less than 75% of any profits available for Distribution to equity holders of the subsidiary Company; and
      (b) beneficially entitled to not less than 75% of any assets of the subsidiary Company available to its equity holders on a winding up.
      (4) In determining whether one Company is a 75% Subsidiary of another Company or LLP, the other Company or LLP shall be treated as not being the owner of any Ordinary Share Capital which it owns directly in the first mentioned Company if the shares are held with the sole or main intention of deriving a profit from their resale.
      (5) An LLP is a 75% Subsidiary of another Company or LLP (5) if and so long as—
      (a) not less than 75% of the assets of the LLP; and
      (b) not less than 75% of the income earning rights in the LLP,
      are beneficially owned by that other Company or LLP.
      (6) An LLP shall not be treated as a 75% Subsidiary of another Company or LLP unless that Company or LLP is—
      (a) beneficially entitled to not less than 75% of any profits available for Distribution to holders of an LLP interest, as applicable, in the subsidiary LLP; and
      (b) beneficially entitled to not less than 75% of any assets of the subsidiary LLP available to holders of an LLP interest, as applicable, in the subsidiary LLP on a winding up.
      Amended (as from 18th June 2014)

    • Article 35 - Companies Joining or Leaving a Group

      (1) Subject to Article 35(2), Group Relief is available only if the Surrendering Entity and the Claimant Entity are members of the same Group throughout the whole of the Surrendering Entity's Accounting Period to which the claim relates and throughout the whole of the corresponding Accounting Period of the Claimant Entity.
      (2) Where on any occasion two QFC Entities become or cease to be members of the same Group, then for the purposes of determining the availability and amount of Group Relief it shall be assumed in respect of each QFC Entity that on that occasion (unless a true Accounting Period of the QFC Entity then begins or ends) an Accounting Period of the QFC Entity ends and a new one begins.
      (3) Chargeable Profits and tax losses of the true Accounting Period shall be apportioned between the deemed Accounting Periods on a time basis according to their lengths.
      Amended (as from 18th June 2014)