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Deduction of unabsorbed losses and capital allowances

Income Tax (Exemption of Income from Syndicated Offshore Facilities) Regulations 2003

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—(1) Any balance of the losses and capital allowances referred to in regulation 5(1) and (2) remaining unabsorbed on the day the specified financial institution permanently ceases to provide any syndicated offshore facility, or any approved syndicated offshore credit or underwriting facility or syndicated guarantee facility referred to in the corresponding Regulations, shall be available as a deduction —(a)for the year of assessment which relates to the basis period in which the institution permanently ceases to provide such facility, against the following income of the institution and in the following order:(i)any income subject to tax at the rate of tax of 5%;(ii)any income subject to tax at a rate of tax other than 5% or the rate of tax specified in section 43(1)(a) of the Act;(iii)any income subject to tax at the rate of tax specified in section 43(1)(a) of the Act; and(b)so far as the deduction cannot be allowed under sub-paragraph (a), for any subsequent year of assessment against any income of the institution referred to in sub-paragraph (a)(i), (ii) and (iii) and in the order specified therein.(2) Capital allowances may be deducted under paragraph (1) only if the specified financial institution continues to carry on the same trade or business in respect of the gains or profits of which the allowances falls to be made, and the allowances shall be disregarded if the institution has ceased to do so.(3) Section 37B of the Act shall apply to any deduction under sub-paragraphs (a) and (b) of paragraph (1) as if the balance of losses, and capital allowances available as a deduction under those sub-paragraphs were unabsorbed losses and capital allowances in respect of income subject to tax at the rate of tax of 5%.(4) Sections 23(4) to (8) and 37(12) to (17) of the Act shall apply, with the necessary modifications, to any deduction under paragraph (1)(a) or (b).(5) Where ––(a)a deduction has been allowed under paragraph (1)(a) or (b) to a specified financial institution for the year of assessment relating to any basis period (referred to in this paragraph as the initial basis period); and(b)the institution derives exempt income in any basis period subsequent to the initial basis period (referred to in this paragraph as the subsequent basis period),then an amount equal to the lower of the following shall be deemed to be income derived by the institution in the subsequent basis period and chargeable to tax at the rate of tax of 5% for the year of assessment relating to that basis period:(i)the amount of the deduction allowed under paragraph (1)(a) or (b), less any amount or amounts deemed to be income of the institution by virtue of one or more earlier applications of this paragraph; and(ii)the amount of the exempt income derived in the subsequent basis period.(5A) Where —(a)a deduction has been allowed under paragraph (1)(a) or (b) to a specified financial institution for the year of assessment relating to any basis period (referred to in this paragraph as the initial basis period);(b)the amount deducted consists of or includes bad debt, provision for doubtful debt or impairment loss; and(c)in any basis period subsequent to the initial basis period (referred to in this paragraph as the subsequent basis period), the bad debt or any part of it is recovered, the provision or any part of it is written back or the impairment loss or any part of it is reversed (such reversal being recognised under FRS 39, FRS 109 or SFRS(I) 9, as the case may be), then an amount equal to the lower of the following shall be deemed to be income derived by the institution in the subsequent basis period and chargeable to tax at the rate of tax of 5% for the year of assessment relating to that basis period:(i)the amount of the bad debt, provision for doubtful debt or impairment loss allowed as a deduction under paragraph (1)(a) or (b), less any amount or amounts deemed to be income of the institution by virtue of one or more earlier applications of this paragraph; and(ii)the amount of the bad debt so recovered, provision so written back or impairment loss so reversed.(6) In paragraph (5), “exempt income” means income that is exempt from tax under regulation 4(1), or under regulation 3(2) of the corresponding Regulations.

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