Commentary on Sections Overview Overview Section 172: Application of Chapter
636.This section defines the basic concepts. It is based on ESC C34. The corresponding rule for income tax is in section 188 of ITTOIA.
637.The relief applies both to amounts owed to the company and to amounts that have been paid to the company. Relief is allowed if some, or all, of those amounts cannot be remitted to the United Kingdom because of foreign exchange restrictions. The different definitions of “unremittable” in subsections (2) and (3) reflect the differences between an amount that has been paid and an amount owed.
638.The relief is available to any company, including a company carrying on a financial trade.
639.Subsection (4) provides a definition of “foreign exchange restrictions”. Local foreign exchange restrictions are not defined in the extra-statutory concession but are clearly a key concept in the operation of the concession. This subsection introduces a definition based on section 584(1)(a) of ICTA. That subsection is rewritten as section 1274 (unremittable income: introduction) in Part 18. The corresponding provision for income tax is section 841(3) of ITTOIA. By basing the definition on section 584 of ICTA this Act brings the two reliefs into line.
640.This section and the rewrite of section 584 of ICTA in Part 18 of this Act clarify the scope of section 584 of ICTA and the extra-statutory concession in two ways.
641.First, sections 584(1)(a) of ICTA refers to “the impossibility of obtaining foreign currency in that territory”. It could be argued that this condition is not met if it is possible to obtain foreign currency in the overseas territory regardless of whether that currency may be transferred to the United Kingdom. Section 1274 of Part 18 of this Act makes clear that it must not be possible to obtain foreign currency that could be transferred to the United Kingdom.
642.Second, section 1274 of Part 18 of this Act makes clear that the reference to foreign currency in section 584(1)(a) of ICTA does not include currency of the overseas country or territory. In relation to sterling the currency of the overseas country or territory clearly is foreign but in this context “foreign” means foreign to the local territory.
643.Subsection (5) deals with the interaction with the loan relationship rules. Most of the amounts in this Chapter will be within the scope of Chapter 2 of Part 4 of FA 1996 because they are loan relationships (rewritten in Parts 5 and 6 of this Act). In particular section 100 of FA 1996 treats trade debts as loan relationships (see Chapter 2 of Part 6).
644.Section 80(5) of FA 1996 is a wide-ranging rule which provides that only Chapter 2 of Part 4 of FA 1996 applies to any loan relationship unless there is an express provision to the contrary. Section 80(5) of FA 1996 has been rewritten as section 464(1). This rule would prevent relief being given under section 173 or recovered under section 175. Subsection (5) overrides section 464(1).