111Y Qualifying loss election

Summary

This provision provides for the making of a qualifying loss election.

Details

(1)(a) Section 111X (which provides for the total deferred tax amount) shall not apply where a filing constituent entity makes a qualifying loss election for a jurisdiction.

(1)(b) Where a qualifying loss election is made for a jurisdiction, a qualifying loss deferred tax asset shall be determined for the jurisdiction each fiscal year in which there is a net qualifying loss in that jurisdiction.

(1)(c) For the purposes of paragraph (b), the qualifying loss deferred tax asset for a jurisdiction in respect of a fiscal year shall be calculated as follows:

where—

NQL is the net qualifying loss for a fiscal year for the jurisdiction, and

MTR is the minimum tax rate.

(1)(d) A qualifying loss election shall not be made for a jurisdiction with an eligible distribution tax system as defined in section 111AS.

(2) An amount of qualifying loss deferred tax asset for a jurisdiction in respect of a fiscal year, shall be used in any subsequent fiscal year in which there is a net qualifying income for the jurisdiction, calculated as the lessor of:

(2)(a)

where—

NQI is the net qualifying income for the fiscal year for the jurisdiction, and

MTR is the minimum tax rate,

or

(2)(b) the amount of the qualifying loss deferred tax asset that is available.

(3) The qualifying loss deferred tax asset for a jurisdiction, shall be reduced by the amount that is used for a fiscal year and the balance remaining shall be carried forward to subsequent fiscal years.

(4) Where a qualifying loss election is withdrawn:

• (4)(a) any remaining qualifying loss deferred tax asset for a jurisdiction shall be reduced to zero as of the first day of the first fiscal year in which the qualifying loss election is no longer applicable, and
• (4)(b) the deferred tax assets and deferred tax liabilities for the jurisdiction, if any, will be taken into account as if they had been calculated in accordance with section 111X (total deferred tax adjustment amount) and 111AW (tax treatment of deferred tax assets and liabilities upon transition) for the prior fiscal year.

(5)(a) Subject to paragraph (b), the qualifying loss election shall be made in the top-up tax information return for the first fiscal year in which the MNE group or large-scale domestic group has a constituent entity located in the jurisdiction for which the election is made.

(5)(b) Where a transitional CbCR safe harbour election has been made in respect of a jurisdiction by the MNE group or large-scale domestic group, the qualifying loss election for that jurisdiction shall be made in the first top-up tax information return delivered after the transitional CbCR safe harbour election ceases to apply.

(6) Where a flow-through entity which is the ultimate parent entity of an MNE group or large-scale domestic group makes a qualifying loss election under this section, the qualifying loss deferred tax asset shall be calculated by reference to the qualifying loss of the flow-through entity after reduction pursuant to section 111AQ(3) (i.e. the qualifying loss of a flow-through entity that is an ultimate parent entity shall be reduced by the amount of qualifying loss that is attributable to the ownership holder in the flow-through entity).

Relevant Date: Finance Act 2024