Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 20 — Controlled foreign companies and foreign permanent establishments
Part 3 — Other amendments
518

28
In section 521E (unallowable purpose) omit subsections (5) and (6).
29
Omit section 870 (intangible fixed assets: assumptions to be made in the case
of a controlled foreign company) and the cross-heading before it.
30
In Chapter 2 of Part 9A (exemption of distributions received by small
companies) after section 931C insert—
5
“931CA
Further exemption where distribution received from CFC
(1)
Subsection (2) applies if—
(a)
under Part 9A of TIOPA 2010 (controlled foreign companies),
the CFC charge is charged in relation to a CFC’s accounting
period,
10
(b)
a dividend or other distribution of the CFC is received in an
accounting period (for corporation tax purposes) of the
recipient in which the recipient is a small company,
(c)
the whole or a part of the distribution is paid in respect of
profits which are chargeable profits of the CFC for its
15
accounting period mentioned in paragraph (a), and
(d)
the requirements of section 931B(b) to (d) are met in relation
to the distribution.
(2)
The distribution is exempt.
(3)
If part of the distribution is not paid in respect of chargeable profits—
20
(a)
for the purposes of this Part and Part 2 of TIOPA 2010 that
part of the distribution is treated as a separate distribution,
and
(b)
subsection (2) does not apply to that separate distribution.
(4)
In this section references to chargeable profits of the CFC are limited
25
to chargeable profits so far as apportioned to chargeable companies
at step 3 in section 371BC(1) of TIOPA 2010.”
31
In section 931E (distributions from controlled companies) for subsections (3)
to (5) substitute—
“(3)
Condition B is that—
30
(a)
the recipient is one of two persons who, taken together,
control the payer,
(b)
the recipient has interests, rights and powers representing at
least 40% of the holdings, rights and powers in respect of
which the recipient and the second person fall to be taken as
35
controlling the payer, and
(c)
the second person has interests, rights and powers
representing—
(i)
at least 40%, but
(ii)
no more than 55%,
40

of the holdings, rights and powers in respect of which the
recipient and the second person fall to be taken as controlling
the payer.
(4)
For the purposes of subsection (3)—

Finance (No. 4) Bill
Schedule 20 — Controlled foreign companies and foreign permanent establishments
Part 3 — Other amendments
519

(a)
section 371RB of TIOPA 2010 (read with section 371RD of that
Act) applies for the purpose of determining if two persons,
taken together, control the payer, and
(b)
section 371RD of that Act applies for the purpose of
determining if the requirements of paragraphs (b) and (c) are
5
met in any case.
(5)
In subsection (4) references to section 371RD of TIOPA 2010 are to
that section omitting subsection (3)(c) and (d).”
FA 2009
32
Part 2 of Schedule 16 to FA 2009 (amendment of exempt activities
10
exemption) is amended as follows.
33
In paragraph 12—
(a)
in sub-paragraph (2) omit paragraph (b) and the “and” before it, and
(b)
after sub-paragraph (2) insert—
    “(3)
The amendments made by this Part have no effect in
15
relation to a qualifying holding company.”
34
Omit paragraph 15.
35
In paragraph 16—
(a)
in paragraph (a) after “2009” insert “but before 1 January 2013”, and
(b)
omit paragraph (b) and the “and” before it.
20
36
In the cross-heading before paragraph 17 for “during three years before 1 July
2012” substitute “from 1 July 2009”.
CTA 2010
37
CTA 2010 is amended as follows.
38
In section 398D (restriction on use of losses) for subsection (6) substitute—
25
“(6)
Subsection (6A) applies if A is a CFC within the meaning of Part 9A
of TIOPA 2010 and the CFC charge is charged in relation to the
accounting period ending with the relevant day.
(6A)
No sum may be set off under section 371UD of TIOPA 2010 against
the sum charged on a chargeable company so far as the sum charged
30
is attributable to the CFC’s chargeable profits so far as, in turn,
attributable to the carrying on of the relevant activity.”
39
In section 1139 (definition of “tax advantage”) in subsection (2) —
(a)
omit the “or” after paragraph (d), and
(b)
after paragraph (d) insert—
35
“(da)
the avoidance or reduction of a charge or assessment
to a charge under Part 9A of TIOPA 2010 (controlled
foreign companies), or”.
TIOPA 2010
40
TIOPA 2010 is amended as follows.
40

Finance (No. 4) Bill
Schedule 20 — Controlled foreign companies and foreign permanent establishments
Part 4 — Commencement provision
520

41    (1)
Section 314 (financing income amounts) is amended as follows.
      (2)
In subsection (1) after “D” insert “or that is determined in accordance with
section 314A”.
42
After section 314 insert—
“314A
The finance income amounts of a chargeable company under Part 9A
5
(1)
This section applies if—
(a)
a sum is charged on a company at step 5 in section 371BC(1)
(controlled foreign companies: charging the CFC charge),
(b)
the relevant corporation tax accounting period (as defined in
section 371BC(3)) is a relevant accounting period of the
10
company in relation to a period of account of the worldwide
group, and
(c)
the CFC’s chargeable profits mentioned in paragraph (a) at
step 5 in section 371BC(1) include amounts (“the relevant
finance profits”) which fall only within Chapter 5 or 6 of Part
15
9A or which are qualifying loan relationship profits within
the meaning of Chapter 9 of Part 9A.
(2)
An amount equal to P% of the relevant finance profits is to be taken
to be a financing income amount of the company for the period of
account of the worldwide group.
20
(3)
“P%” has the meaning given by section 371BC(3).
(4)
In subsection (1)(c) the reference to amounts which fall within
Chapter 5 or 6 of Part 9A is limited to amounts—
(a)
which so fall by virtue of section 297 or 299 of CTA 2009 (but
not, in the case of section 299, as applied by section 574 of that
25
Act), and
(b)
which are not excluded credits (as defined in section 314(3)
above).”
Part 4
Commencement provision
30
Commencement provision relating to controlled foreign companies etc
43    (1)
The CFC charge is charged in relation to accounting periods of CFCs
beginning on or after 1 January 2013.
      (2)
The first accounting period of a company which is a CFC at the beginning of
1 January 2013 begins at that time.
35
      (3)
Sub-paragraph (2) is subject to paragraph 44 below.
      (4)
This paragraph is to be read as if contained in Part 9A of TIOPA 2010.
44    (1)
The repeal of Chapter 4 of Part 17 of ICTA by paragraph 14 above has no
effect for accounting periods within the meaning of that Chapter (see section
751) beginning before 1 January 2013.
40
      (2)
Sub-paragraphs (3) and (4) apply to a company which—

Finance (No. 4) Bill
Schedule 20 — Controlled foreign companies and foreign permanent establishments
Part 4 — Commencement provision
521

(a)
has an accounting period within the meaning of Chapter 4 of Part 17
of ICTA beginning before 1 January 2013 but ending on or after that
date, and
(b)
is not, at the end of 31 December 2012, a life assurance subsidiary.
      (3)
The company is not to have an accounting period within the meaning of Part
5
9A of TIOPA 2010 before its accounting period mentioned in sub-paragraph
(2)(a) ends.
      (4)
If the company is a CFC immediately after the end of its accounting period
mentioned in sub-paragraph (2)(a), its first accounting period within the
meaning of Part 9A of TIOPA 2010 begins at that time.
10
      (5)
Sub-paragraph (6) applies to a company which—
(a)
apart from sub-paragraph (6), would have an accounting period
within the meaning of Chapter 4 of Part 17 of ICTA beginning before
1 January 2013 but ending on or after that date, and
(b)
is, at the end of 31 December 2012, a life assurance subsidiary.
15
      (6)
The company’s accounting period mentioned in sub-paragraph (5)(a) ends
at the end of 31 December 2012 (and, accordingly, paragraph 43(2) above
applies in relation to the company if it is a CFC at the beginning of 1 January
2013).
      (7)
“Life assurance subsidiary” means a company in which a life assurance
20
company has a relevant interest as determined in accordance with Chapter
15 of Part 9A of TIOPA 2010.
      (8)
“Life assurance company” means a company carrying on life assurance
business within the meaning of Part 2 of this Act (see section 56).
      (9)
The amendments made by paragraphs 11, 12, 13, 16, 17, 19, 20, 21, 22, 23, 25,
25
26, 27(2) and (4), 28, 29 and 38 above are to be ignored so far as appropriate
in consequence of the sub-paragraphs above.
45
The amendment made by paragraph 27(3) above has no effect for relevant
periods beginning before 1 January 2013 (and the relevant provisions of
Chapter 4 of Part 17 of ICTA continue to have effect accordingly
30
notwithstanding the repeal of that Chapter by paragraph 14 above).
46
The amendment made by paragraph 30 above has no effect in relation to
dividends or other distributions received before 1 January 2013.
47
The amendment made by paragraph 31 above has no effect in relation to
dividends or other distributions received before 1 January 2013 (and the
35
relevant provisions of Chapter 4 of Part 17 of ICTA continue to have effect
accordingly notwithstanding the repeal of that Chapter by paragraph 14
above).
48
The amendments made by paragraphs 33 to 36 above are treated as having
come into force on 30 June 2012.
40
Commencement provision relating to foreign permanent establishments
49    (1)
The amendments made by paragraphs 3, 5 and 9 above come into force on 1
January 2013; but the amendment made by paragraph 5(3) above has no
effect in relation to elections made before that date.

Finance (No. 4) Bill
Schedule 20 — Controlled foreign companies and foreign permanent establishments
Part 5 — Transitional provision
522

      (2)
The amendments made by paragraphs 4 and 6 to 8 above have effect for
relevant accounting periods beginning on or after 1 January 2013.
Part 5
Transitional provision
Exempt periods
5
50    (1)
This paragraph applies if—
(a)
there is an exempt period in relation to a company under Part 3A of
Schedule 25 to ICTA (cases in which section 747(3) of ICTA does not
apply) which begins before 1 January 2013,
(b)
the exempt period does not end at or before the end of the company’s
10
last accounting period within the meaning of Chapter 4 of Part 17 of
ICTA, and
(c)
the company is a CFC immediately after the end of its last accounting
period mentioned in paragraph (b) and its first accounting period
within the meaning of Part 9A of TIOPA 2010 begins at that time
15
accordingly.
      (2)
The remainder of the exempt period is to be treated as an exempt period of
the company for the purposes of Chapter 10 of Part 9A of TIOPA 2010.
      (3)
The remainder of the exempt period is to be determined in accordance with
paragraph 15F of Schedule 25 to ICTA and, for this purpose, assume that
20
Chapter 4 of Part 17 of ICTA continues to apply in relation to the company
as if that Chapter had not been repealed by paragraph 14 above; and section
371JD of TIOPA 2010 is to be ignored accordingly.
      (4)
Section 371JB of TIOPA 2010 applies in relation to the exempt period as if
subsection (1)(b) and (c) were omitted.
25
      (5)
Section 371JE of TIOPA 2010 applies in relation to the exempt period as if
subsection (1)(b) were omitted.
      (6)
Section 371JF of TIOPA 2010 does not affect the application of the exempt
period exemption by virtue of this paragraph.
Designer rate tax provisions
30
51    (1)
The Controlled Foreign Companies (Designer Rate Tax Provisions)
Regulations 2000 (S.I. 2000/3158) are to have effect for the purposes of
section 371ND of TIOPA 2010 as if they had been made by the HMRC
Commissioners under that section.
      (2)
The power of the HMRC Commissioners to make regulations under that
35
section includes power to revoke or amend the 2000 Regulations for the
purposes of that section.