Unremittable income

[IloveParis]

I have a client (Ltd Co) who has made a profit of approx 2,000 but has unremittable foreign income of approx £4,000 (so actually £2,000 loss). I understand that a claim can be made against Corporation tax for the unremittable income as long as it does not create or increase a loss. I therefore conclude that £2,000 of this can be set against the profit and the balance carried forward to next year. Is this correct and if so where on the corporation tax return would this claim be made?

Any help would be greatly appreciated.

 

[UK Contractor Accountant]

CTA09/S1275 provides relief for unremittable overseas income of a company.
http://www.legislation.gov.uk/ukpga/2009/4/part/18

There is nowhere specfic on the ct return to put the claim so I would add the £4K back in the tax comp and include a note in the white space of the Return to say why the income is unremittable or alternatively attach a pdf letter explaining what relief you are claiming.

Can not find anything in the Legislation that says the claim can not be used to turn a profit into a loss - if its unremittable then it falls out of assessment.

 

[IloveParis]

Thanks for your reply I was reading para 646 in the CTA 2009 notes - does this apply?
CTA2009/4/notes/division/2/3/1/12

 

[teddys]

I therefore conclude that £2,000 of this can be set against the profit and the balance carried forward to next year. Is this correct and if so where on the corporation tax return would this claim be made?

I would interpret the legislation as follows:

1. A UK company pays corporation tax on its worldwide income which is computed on accrual basis. As a result foreign income is INCLUDED in the total income.

2. Now comes the s.1275 claim. Because the income included in the total income and is un-remittable, you claim relief against that part of the income INCLUDED in your computation which is unremittable.

This is exactly what para 646 of the explanatory statement says:

Relief can be given only against the profits of the trade that include the unremittable amount.

.

 

[IloveParis]

Thanks for clarifying that for me