|
| |
|
(a) | the company would be a chargeable company were section |
| |
371BC (charging the CFC charge) to apply in relation to the |
| |
| |
(b) | the percentage of the CFC’s chargeable profits which would |
| |
be apportioned to the company at step 3 in section 371BC(1) |
| 5 |
would represent more than half of X%. |
| |
(6) | Two or more companies may together give a notice if— |
| |
(a) | the companies would all be chargeable companies were |
| |
section 371BC (charging the CFC charge) to apply in relation |
| |
to the accounting period, and |
| 10 |
(b) | the percentage of the CFC’s chargeable profits which would |
| |
be apportioned to the companies, taken together, at step 3 in |
| |
section 371BC(1) would represent more than half of X%. |
| |
(7) | In subsections (5) and (6) “X%” means the total percentage of the |
| |
CFC’s chargeable profits which would be apportioned to chargeable |
| 15 |
companies at step 3 in section 371BC(1) were section 371BC |
| |
(charging the CFC charge) to apply in relation to the accounting |
| |
| |
371CF | Does Chapter 7 apply? |
| |
(1) | Chapter 7 (captive insurance business) applies for a CFC’s |
| 20 |
accounting period if (and only if)— |
| |
(a) | at any time during the accounting period, the main part of the |
| |
CFC’s business is insurance business, and |
| |
(b) | the CFC’s assumed total profits include amounts falling |
| |
| 25 |
(2) | An amount falls within this subsection if it derives (directly or |
| |
| |
(a) | a contract of insurance which is entered into with— |
| |
(i) | a UK resident company connected with the CFC, or |
| |
(ii) | a non-UK resident company connected with the CFC |
| 30 |
acting through a UK permanent establishment, or |
| |
(b) | a contract of insurance which— |
| |
(i) | is entered into with a UK resident person, and |
| |
(ii) | is linked (directly or indirectly) to the provision of |
| |
goods or services to the UK resident person |
| 35 |
(excluding services provided as part of insurance |
| |
| |
371CG | Does Chapter 8 apply? |
| |
(1) | Chapter 8 (solo consolidation) applies for a CFC’s accounting period |
| |
if (and only if) condition A or B is met. |
| 40 |
(2) | Condition A is that, at any time during the accounting period— |
| |
(a) | the CFC is a subsidiary undertaking which is the subject of a |
| |
solo consolidation waiver under section BIPRU 2.1 of the FSA |
| |
| |
(b) | the CFC’s parent undertaking in relation to that waiver is a |
| 45 |
| |
(3) | Condition B is that, at any time during the accounting period— |
| |
|
| |
|
| |
|
(a) | the CFC is controlled (either alone or with other persons) by |
| |
a UK resident bank which holds shares in the CFC, |
| |
(b) | the UK resident bank must meet requirements of the FSA |
| |
Handbook in relation to its capital, |
| |
(c) | any fall in the value of the shares held in the CFC would be |
| 5 |
(wholly or mainly) ignored for the purpose of determining if |
| |
the UK resident bank meets those requirements of the FSA |
| |
| |
(d) | the main purpose, or one of the main purposes, of the UK |
| |
resident bank in holding the shares in the CFC is to obtain a |
| 10 |
tax advantage for itself or any company connected with it. |
| |
| |
“the FSA Handbook” means the Handbook of Rules and |
| |
Guidance made by the Financial Services Authority (as that |
| |
Handbook has effect from time to time), and |
| 15 |
“UK resident bank” means a UK resident person carrying on |
| |
| |
(5) | The Treasury may by regulations amend this Chapter or Chapter 8 |
| |
as they consider appropriate to take account of— |
| |
(a) | any changes to the FSA Handbook, or |
| 20 |
(b) | any relevant document published by the Financial Services |
| |
Authority from time to time. |
| |
(6) | “Relevant document” means— |
| |
(a) | a document which replaces the FSA Handbook, or |
| |
(b) | a document which changes or replaces a document falling |
| 25 |
within paragraph (a) or a document which is a relevant |
| |
document by virtue of this paragraph. |
| |
| |
The CFC charge gateway: profits attributable to UK activities |
| |
371DA | Introduction to Chapter |
| 30 |
(1) | Take the steps set out in section 371DB(1) to determine the CFC’s |
| |
profits falling within this Chapter for the purposes of step 2 in |
| |
section 371BB(1) (the CFC charge gateway). |
| |
(2) | In this Chapter references to the CFC’s assumed total profits are to |
| |
those profits excluding its non-trading finance profits and property |
| 35 |
business profits (if any). |
| |
(3) | For the purposes of this Chapter— |
| |
(a) | “the OECD Report” means the Report on the Attribution of |
| |
Profits to Permanent Establishments of the Organisation for |
| |
Economic Co-operation and Development (“OECD”) dated |
| 40 |
| |
(b) | terms used which are also used in the OECD Report have the |
| |
same meaning as they have in the OECD Report, |
| |
(c) | “the CFC group” means the CFC taken together with the |
| |
companies with which it is connected as those companies |
| 45 |
may change from time to time, |
| |
|
| |
|
| |
|
(d) | “the provisional Chapter 4 profits” has the meaning given at |
| |
step 7 in section 371DB(1), |
| |
(e) | “the relevant assets and risks” has the meaning given at step |
| |
1 in section 371DB(1), subject to any exclusions at step 2 or 6, |
| |
(f) | “SPF” means a significant people function or a key |
| 5 |
entrepreneurial risk-taking function, |
| |
(g) | an SPF is a “UK SPF” so far as the SPF is carried out in the |
| |
| |
(i) | by the CFC, otherwise than through a UK permanent |
| |
| 10 |
(ii) | by a company connected with the CFC, and |
| |
(h) | an SPF is a “non-UK SPF” so far as it is not a UK SPF. |
| |
(4) | The Treasury may by regulations amend this Chapter as they |
| |
consider appropriate to take account of any relevant document |
| |
published by OECD from time to time. |
| 15 |
(5) | “Relevant document” means— |
| |
(a) | a document which replaces, updates or supplements the |
| |
report mentioned in subsection (3)(a), or |
| |
(b) | a document which replaces, updates or supplements a |
| |
document falling within paragraph (a) or a document which |
| 20 |
is a relevant document by virtue of this paragraph. |
| |
| |
(1) | Here are the steps referred to in section 371DA(1). |
| |
| The steps are to be taken in accordance with the principles set out in |
| |
the OECD Report (so far as relevant). |
| 25 |
| |
| Identify the assets which the CFC has or has had, and the risks which |
| |
the CFC bears or has borne, and from which amounts included in the |
| |
CFC’s assumed total profits have arisen. |
| |
| The identified assets and risks are called “the relevant assets and |
| 30 |
| |
| |
| Exclude from the relevant assets and risks any asset or risk to which |
| |
subsection (2) applies (subject to subsections (3) and (4)). |
| |
| 35 |
| Identify the SPFs carried out by the CFC group which are relevant |
| |
| |
(a) | the economic ownership of the assets included in the relevant |
| |
| |
(b) | the assumption and management of the risks included in the |
| 40 |
relevant assets and risks. |
| |
| For this purpose, assume that the CFC group is a single company. |
| |
| |
| Determine the extent to which the SPFs identified at step 3 are UK |
| |
SPFs and the extent to which they are non-UK SPFs. |
| 45 |
| If none of the SPFs is a UK SPF to any extent, then no profits fall |
| |
within this Chapter and no further steps are to be taken. |
| |
|
| |
|
| |
|
| |
| Assume that the UK SPFs determined at step 4 are carried out by a |
| |
permanent establishment which the CFC has in the United Kingdom |
| |
and, accordingly, determine the extent to which the assets and risks |
| |
included in the relevant assets and risks would be attributed to the |
| 5 |
| |
| For this purpose, assume that the non-UK SPFs determined at step 4 |
| |
are all carried out by the CFC itself (if that is not otherwise the case). |
| |
| |
| Exclude from the relevant assets and risks any asset or risk, or any |
| 10 |
assets or risks taken together, to which section 371DC applies. |
| |
| |
| Re-determine the CFC’s assumed total profits on the basis that the |
| |
| |
(a) | does not hold, or has not held, the assets included in the |
| 15 |
relevant assets and risks, and |
| |
(b) | does not bear, or has not borne, the risks included in the |
| |
relevant assets and risks, |
| |
| so far as they would be attributed to the permanent establishment |
| |
| 20 |
| “The provisional Chapter 4 profits” are the CFC’s assumed total |
| |
profits so far as they are left out of the re-determined profits. |
| |
| |
| Exclude from the provisional Chapter 4 profits any amounts which |
| |
are required to be excluded by section 371DD, 371DE or 371DF. |
| 25 |
| The remaining profits (if any) fall within this Chapter. |
| |
(2) | This subsection applies to an asset or risk if the CFC’s assumed total |
| |
profits are only negligibly higher than what they would be if the |
| |
| |
(a) | did not hold, or had not held, the asset to any extent at all, or |
| 30 |
(b) | did not bear, or had not borne, the risk to any extent at all. |
| |
(3) | The total number of assets and risks which may be excluded at step |
| |
2 in subsection (1) is limited as follows. |
| |
(4) | As well as applying to each asset and risk separately, subsection (2) |
| |
must also apply to all the assets and risks included in the total |
| 35 |
| |
371DC | Exclusion: UK activities a minority of total activities |
| |
(1) | For the purposes of step 6 in section 371DB(1), this section applies to |
| |
an asset or risk included in the relevant assets and risks if amount A |
| |
is no more than 50% of amount B. |
| 40 |
(2) | Amount A is the total of— |
| |
(a) | the gross amounts (that is, the amounts before deduction of |
| |
expenses or transfers to or from reserves) of the CFC’s |
| |
income which would not have become receivable during the |
| |
accounting period had the CFC— |
| 45 |
(i) | not held the asset, or |
| |
| |
|
| |
|
| |
|
| so far as it would be attributed to the permanent |
| |
establishment mentioned at step 5 in section 371DB(1), and |
| |
(b) | the additional expenses which the CFC would have incurred |
| |
during the accounting period had the CFC— |
| |
(i) | not held the asset, or |
| 5 |
| |
| so far as it would be so attributed. |
| |
(3) | Amount B is the total of— |
| |
(a) | the gross amounts (that is, the amounts before deduction of |
| |
expenses or transfers to or from reserves) of the CFC’s |
| 10 |
income which would not have become receivable during the |
| |
accounting period had the CFC— |
| |
(i) | not held the asset to any extent at all, or |
| |
(ii) | not borne the risk to any extent at all, and |
| |
(b) | the additional expenses which the CFC would have incurred |
| 15 |
during the accounting period had the CFC— |
| |
(i) | not held the asset to any extent at all, or |
| |
(ii) | not borne the risk to any extent at all. |
| |
(4) | Subsection (5) applies if it is not reasonably practicable to separate a |
| |
number of assets or risks included in the relevant assets and risks for |
| 20 |
the purpose of determining amounts A and B in relation to each of |
| |
those assets or risks separately. |
| |
(5) | In subsections (1) to (3) references to an asset or risk are to be read as |
| |
references to those assets or risks taken together. |
| |
371DD | Exclusion: economic value |
| 25 |
(1) | Subsection (2) applies if— |
| |
(a) | an asset or risk is included in the relevant assets and risks, |
| |
(b) | the SPFs which are relevant to the economic ownership of the |
| |
asset, or the assumption and management of the risk, are |
| |
wholly or partly UK SPFs as determined at step 4 in section |
| 30 |
| |
(c) | as a result of that determination, an amount is included in the |
| |
provisional Chapter 4 profits. |
| |
(2) | The amount is to be excluded from the provisional Chapter 4 profits |
| |
| 35 |
(a) | the net economic value to the CFC group which results from |
| |
the holding of the asset, or the bearing of the risk, exceeds |
| |
what that value would have been had the asset been held, or |
| |
the risk been borne, solely by UK resident companies |
| |
connected with the CFC, and |
| 40 |
(b) | the relevant non-tax value is a substantial proportion of the |
| |
excess value mentioned in paragraph (a). |
| |
(3) | “Net economic value” does not include any value which derives |
| |
(directly or indirectly) from the reduction or elimination of any |
| |
liability of any person to tax or duty imposed under the law of any |
| 45 |
territory outside the United Kingdom. |
| |
|
| |
|
| |
|
(4) | “The relevant non-tax value” is the excess value mentioned in |
| |
subsection (2)(a) so far as it does not derive (directly or indirectly) |
| |
from the reduction or elimination of any liability of any person to tax |
| |
or duty imposed under the law of the United Kingdom. |
| |
(5) | Subsection (6) applies if— |
| 5 |
(a) | there are SPFs which are relevant to the economic ownership |
| |
of a number of assets, or the assumption and management of |
| |
a number of risks, included in the relevant assets and risks, |
| |
| |
(b) | it is not reasonably practicable to separate those assets or |
| 10 |
risks for the purpose of determining the extent to which the |
| |
SPFs are relevant to the economic ownership of each of those |
| |
assets, or the assumption and management of each of those |
| |
| |
(6) | In subsections (1) and (2) references to an asset or risk are to be read |
| 15 |
as references to those assets or risks taken together. |
| |
371DE | Exclusion: independent companies’ arrangements |
| |
(1) | Subsection (2) applies if— |
| |
(a) | an asset or risk is included in the relevant assets and risks, |
| |
(b) | the SPFs which are relevant to the economic ownership of the |
| 20 |
asset, or the assumption and management of the risk, are |
| |
wholly or partly UK SPFs as determined at step 4 in section |
| |
| |
(c) | as a result of that determination, an amount is included in the |
| |
provisional Chapter 4 profits, and |
| 25 |
(d) | the UK SPFs are carried out by companies connected with the |
| |
CFC under arrangements made between the CFC and those |
| |
| |
(2) | The amount is to be excluded from the provisional Chapter 4 profits |
| |
if it is reasonable to suppose that, were the SPFs which are UK SPFs |
| 30 |
not to be carried out by companies connected with the CFC, the CFC |
| |
would enter into arrangements with companies not connected with |
| |
| |
(a) | would be structured in the same way as the arrangements |
| |
mentioned in subsection (1)(d), and |
| 35 |
(b) | would, in relation to the CFC’s business, have the same |
| |
commercial effect as those arrangements. |
| |
(3) | Subsection (4) applies if— |
| |
(a) | there are SPFs which are relevant to the economic ownership |
| |
of a number of assets, or the assumption and management of |
| 40 |
a number of risks, included in the relevant assets and risks, |
| |
| |
(b) | it is not reasonably practicable to separate those assets or |
| |
risks for the purpose of determining the extent to which the |
| |
SPFs are relevant to the economic ownership of each of those |
| 45 |
assets, or the assumption and management of each of those |
| |
| |
(4) | In subsection (1) references to an asset or risk are to be read as |
| |
references to those assets or risks taken together. |
| |
|
| |
|