4. The principal Regulations are amended by inserting, immediately after regulation 5, the following regulations:| “Deduction of unabsorbed losses, capital allowances and donations |
6.—(1) Any balance of the losses, capital allowances and donations 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, capital allowances and donations available as a deduction under those sub-paragraphs were unabsorbed losses, capital allowances and donations 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. |
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| (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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| Deduction of bad debt, provision for doubtful debt and impairment loss |
7.—(1) Any bad debt, provision for doubtful debt or impairment loss in respect of a syndicated offshore facility that is allowable as a deduction under the Act in any year of assessment to the specified financial institution that provided the facility, being the year of assessment relating to any basis period that is subsequent to the basis period in which the 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 deducted in the following manner:| (a) | for that year of assessment, 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; |
| | (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) Section 37B of the Act shall apply, with the necessary modifications, to a deduction under sub-paragraphs (a) and (b) of paragraph (1) as if the bad debt, provision for doubtful debt or impairment loss available as a deduction under those sub-paragraphs were unabsorbed losses of the institution in respect of income subject to tax at the rate of tax of 5%. |
| (3) Section 37(12) to (17) of the Act shall apply, with the necessary modifications, to a deduction under sub-paragraphs (a) and (b) of paragraph (1) as if the bad debt, provision for doubtful debt or impairment loss available as a deduction under those sub-paragraphs were a loss incurred by the institution in a trade or business. |
(4) Where —| (a) | any bad debt or provision for doubtful debt has been allowed as a deduction to a specified financial institution under paragraph (1)(a) or (b); and | | (b) | the bad debt or any part of it is subsequently recovered or the provision or any part of it is subsequently written back, |
| then the amount of the bad debt recovered or provision written back shall be deemed to be income derived by the institution in the basis period in which the bad debt is recovered or the provision written back and chargeable to tax at the rate of tax of 5% for the year of assessment relating to that basis period. |
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(5) Where ––| (a) | any impairment loss has been allowed as a deduction to a specified financial institution under paragraph (1)(a) or (b); and | | (b) | the impairment loss or any part of it is subsequently reversed and such reversal is recognised under FRS 39, |
| then the amount of the reversal shall be deemed to be income derived by the institution in the basis period in which the reversal is made and chargeable to tax at the rate of tax of 5% for the year of assessment relating to that basis period. |
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(6) 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. |
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| (7) In paragraph (6), “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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