Taxes Consolidation Act 1997 section 111Y

Qualifying loss election

Section 111Y sets out the rules for making a qualifying loss election, which allows a filing constituent entity to use net qualifying losses in a jurisdiction to create a deferred tax asset based on the minimum tax rate, instead of applying the standard deferred tax adjustment rules.

• Where a qualifying loss election is made for a jurisdiction, the standard total deferred tax adjustment rules are disapplied and instead a qualifying loss deferred tax asset is calculated each year as the net qualifying loss multiplied by the minimum tax rate.
• The qualifying loss deferred tax asset can be used in a subsequent year with net qualifying income, capped at the lesser of the net qualifying income multiplied by the minimum tax rate or the remaining deferred tax asset balance, with any unused amount carried forward.
• If the election is withdrawn, any remaining qualifying loss deferred tax asset is reduced to zero and deferred tax assets and liabilities are recalculated as though the standard rules had applied all along.
• The election must be made in the top-up tax information return for the first fiscal year the group has a constituent entity in the jurisdiction, or, where a transitional CbCR safe harbour election was in place, in the first return after that safe harbour election ceases to apply.

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