(1). Trading losses cannot be surrendered to K Co unless it has a permanent establishment in the UK.
Trading losses can be surrendered to FG Ltd because it is resident in the UK.
(2). The trading losses should be surrendered to:
P Ltd – £7,500
This will reduce the profits of P Ltd to £187,500, the quarterly payments threshold, such that the company will no longer be required to pay its corporation tax liability in instalments.
Q Ltd – £22,500 (the balance of the losses)
Q Ltd is required to pay corporation tax in instalments. However, it is not possible to reduce its profits down to the quarterly payments threshold. Accordingly, once the profits of P Ltd have been reduced to the threshold, the remaining losses should be surrendered to Q Ltd in order to reduce that company’s quarterly payments.