1. Clause 97 and Schedule 28 provide for tax payable by a non-resident company to be recovered from another company within the same group. These changes are being made as a consequence of the modernisation of the group relief rules and take effect for accounting periods ending on or after 1 April 2000.

2. The changes to group relief in clause 96 and Schedule 27 extend group relief to UK branches of non-resident companies with effect from 1 April 2000. This clause ensures that, where UK branch of a non-resident company fails to pay the corporation tax due on its profits, that tax can be recovered from other members of the group.

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3. Clause 97 provides for Schedule 28 to have effect for the recovery of unpaid corporation tax payable by a non-resident company for accounting periods ending on or after 1 April 2000.

4. Paragraph 1 applies the provisions of the Schedule where an amount of corporation tax which has been assessed on a non-resident company remains unpaid six months after it became payable.

5. Paragraph 2 provides that any of the following companies may be required to pay the unpaid tax:

• any company within the same group (based on 51% ownership)

• a member of a consortium which owns the non-resident company or

• a member of the same group (defined as for group relief) as a member of the consortium which owns the non-resident company.

6. Paragraph 3 permits the Board of Inland Revenue to serve a notice on any of the above-mentioned companies, requiring it to pay the unpaid tax (or, in a consortium case, a proportion of it calculated in accordance with paragraph 5). The paragraph also stipulates what must be stated in the notice, and provides that the notice has effect for the purposes of interest and appeals as if it were an assessment of tax due from that company.

7. Paragraph 4 sets the time limit for serving a notice under paragraph 3. This is three years from the date when the non-resident company’s corporation tax liability is finally determined.

8. Paragraph 5 limits the proportion of the unpaid tax that a company is required to pay where it is a member of a consortium which owns the non-resident company or is a member of the same group as a consortium member. The limit is calculated by reference to the member’s share in the consortium. Where the company required to pay is a member of the same group as a consortium member, the proportion takes into account the share held in the consortium by any members of the group.

9. Paragraph 6 allows a company to recover any amount which it is required to pay under this Schedule from the non-resident company which failed to pay the tax. It also provides that no relief can be claimed in computing profits for any payment under the Schedule.

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10. UK branches of non-resident companies are subject to UK corporation tax on their trading profits. With effect from 1 April 2000 (clause 96 and Schedule 27), they will be able to claim group relief and will also be able to surrender losses and other amounts as group relief providing those amounts are not relievable against non-UK profits in the overseas country.

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