CFM97220 - Interest restriction: public infrastructure: fully taxed in the UK

TIOPA10/S433(1)(c) and (11)-(12)

The third condition set out in S433(1) that a company must meet to be a qualifying infrastructure company is that it is fully taxed in the UK in the accounting period.

The primary requirement is that “every source of income that a company has” at any time in the accounting period must be within the charge to UK corporation tax. This is primarily of relevance to the position of non-resident companies, which might have significant profits outside the ambit of UK CT.

In this context, a “source of income” does not include chargeable gains. So, if a chargeable gain would fall within the ambit of the Substantial Shareholdings Exemption in TCGA92/SCH7AC, or a gain of a charity is excluded from tax by TCGA92/S256, this would not invalidate a QIC election.

However, a company must not have:

• made an election to exempt its profits or losses from an overseas permanent establishment (under CTA09/S18A) which has effect for that accounting period; nor
• made a claim for double taxation relief (under TIOPA10/Part 2/Chapter 2) for that same accounting period.

Non-resident companies

There is a relaxation for non-resident companies, in that income from a source of income is ignored if, having regard to all of the circumstances, it could reasonably be regarded as insignificant. If this is the only source of income that is not taxed, it should not cause the test to be failed.