(b) references to the CFC’s accounting profits for an accounting
period are to be read as references to the adjusted relevant
profits amount determined before any deduction for interest.

18ID The tax exemption

(1) 5Chapter 14 of Part 9A of TIOPA 2010 (controlled foreign companies:
the tax exemption) applies for the purposes of section 18G (1)(c) with
the following modifications.

(2) At step 1 in section 371NB (1)—

(a) in the first paragraph, the reference to section 371TB of
10TIOPA 2010 is to be read as a reference to the assumption in
section 18I (3)(b) above relating to the CFC’s residence, and

(b) the second paragraph is to be omitted.

(3) References to the CFC’s local chargeable profits arising in the
accounting period are to be read as references to the adjusted
15relevant profits amount and, accordingly, sections 371NB (4) and
371NC (2) to (4) are to be omitted.

(4) In sections 371NC (5)(b) and 371NE (3) the reference to the CFC is to
be read as a reference to company X (ignoring the assumption in
section 18I (3)(a) above).”

7 20After section 18P(2) insert—

“(3) Subsection (2) does not apply in relation to—

(a) a chargeable gain accruing on the disposal of an asset used,
and used only, for the purposes of a trade so far as carried on
by the company in the relevant foreign territory through the
25company’s permanent establishment there, or

(b) a chargeable gain accruing on the disposal of currency or of a
debt within section 252(1) of TCGA 1992 where the currency
or debt is or represents money in use for the purposes of a
trade so far as carried on by the company in the relevant
30foreign territory through the company’s permanent
establishment there.”

Lloyd’s underwriters

8 In Chapter 5 of Part 4 of FA 1994 (Lloyd’s underwriters) after section 227B
insert—

“227C 35 Exemption for profits or losses of foreign permanent establishments

(1) This section applies for the purposes of section 18A(6) and (7) of the
Corporation Tax Act 2009 (exemption for profits or losses of foreign
permanent establishments: “relevant profits amount” and “relevant
losses amount”).

(2) 40Any regulations made under section 229(1)(d) below are to be
ignored.

(3) Profits or losses which are taken to arise to a corporate member in an
underwriting year from its membership of one or more syndicates
are to be left out of account in relation to any relevant accounting
45period so far as they are profits or losses of a previous underwriting

year which began before the relevant day (as defined in section 18F
of the 2009 Act (effect of election under section 18A)).

(4) Profits or losses arising to a corporate member from assets forming
part of a premium trust fund which are taken to be profits or losses
5of an underwriting year are to be left out of account in relation to any
relevant accounting period so far as they are allocated under the
rules or practice of Lloyds to a previous underwriting year which
began before the relevant day (as defined in section 18F of the 2009
Act).”

10Plant and machinery allowances

9 In section 15 of CAA 2001 (plant and machinery allowances: qualifying
activities) after subsection (2A) insert—

“(2B) Subsection (2A) does not apply to the business so far as it consists of
a plant or machinery lease under which the company is a lessor if any
15profits or losses arising from the lease are to be left out of account as
mentioned in section 18C(3) of CTA 2009.”

Part 3 Other amendments

TMA 1970

10 20TMA 1970 is amended as follows.

11 In section 55 (recovery of tax not postponed) in subsection (1) omit
paragraph (d).

12 In section 59E (provision about when corporation tax due and payable) in
subsection (11) for paragraph (b) substitute—

“(b) 25to any sum charged on a company at step 5 in section
371BC (1) of TIOPA 2010 (controlled foreign companies) as if
it were an amount of corporation tax;”.

13 In section 59F (arrangements for paying tax on behalf of group members) in
subsection (6) for paragraph (b) and the “and” after it substitute—

“(b) 30a sum charged on a company at step 5 in section 371BC (1) of
TIOPA 2010 (controlled foreign companies) as if it were an
amount of corporation tax, and”.

ICTA

14 In ICTA omit Chapter 4 of Part 17 (controlled foreign companies).

35FA 1998

15 FA 1998 is amended as follows.

16 In section 32 (unrelieved surplus advance corporation tax) for subsection (5)
substitute—

“(5) The provision which may be made by regulations under this section
40includes provision for or in connection with enabling unrelieved

surplus advance corporation tax to be set against liability to a sum
charged at step 5 in section 371BC (1) of the Taxation (International
and Other Provisions) Act 2010 (controlled foreign companies) as if
it were an amount of corporation tax for an accounting period.”

(1) 5Schedule 18 (company tax returns) is amended as follows.

(2) In paragraph 1 for “section 747(4)(a) of the Taxes Act 1988 (tax on profits of
controlled foreign company)” substitute “step 5 in section 371BC (1) of the
Taxation (International and Other Provisions) Act 2010 (controlled foreign
companies)”.

(3) 10In paragraph 8(1), in the third step, for paragraph 2 substitute—

“2. Any sum charged at step 5 in section 371BC (1) of the Taxation
(International and Other Provisions) Act 2010 (controlled foreign
companies).”

FA 2000

18 15Schedule 22 to FA 2000 (tonnage tax) is amended as follows.

(1) Paragraph 54 is amended as follows.

(2) In sub-paragraph (1)—

(a) for “under section 747 of the Taxes Act 1988” substitute “at step 5 in
section 371BC (1) of the Taxation (International and Other
20Provisions) Act 2010 (“TIOPA 2010”)”,

(b) for “controlled foreign company” (in both places) substitute “CFC”,
and

(c) at the end insert “; and, accordingly, the tonnage tax company is not
to be a chargeable company for the purposes of Part 9A of TIOPA
252010 in relation to the CFC’s accounting period in question.”

(3) For sub-paragraphs (2) to (5) substitute—

“(2) In relation to a CFC which—

(a) is a member of a tonnage tax group, and

(b) is a tonnage tax company by virtue of the group’s tonnage
30tax election, or would be if it were within the charge to
corporation tax,

the corporation tax assumptions within the meaning of Part 9A of
TIOPA 2010 are to be taken to include the following assumption.

(3) The CFC is to be assumed to be a single company that is a tonnage
35tax company.

(4) Nothing in section 371SL (1) of TIOPA 2010 affects sub-paragraphs
(2) and (3) above.

(5) In this paragraph “CFC” has the same meaning as in Part 9A of
TIOPA 2010.”

(1) 40Paragraph 57 is amended as follows.

(2) In sub-paragraph (1)(b) for the words from “controlled” to the end substitute
“CFC apportioned to the company at step 3 in section 371BC (1) of the
Taxation (International and Other Provisions) Act 2010.”

(3) For sub-paragraph (4) substitute—

“(4) For the purposes of sub-paragraph (1)(b)—

(a) “tonnage profits” means so much of the CFC’s chargeable
profits for its accounting period in question as, applying
5the corporation tax assumptions, are calculated in
accordance with paragraph 4 of this Schedule; and

(b) so much of those chargeable profits as are tonnage profits
shall be treated as apportioned at step 3 in section 371BC (1)
of the Taxation (International and Other Provisions) Act
102010 in the same proportions as those profits (taken
generally) are apportioned.

(4A) In sub-paragraphs (1)(b) and (4) terms defined in Part 9A of the
Taxation (International and Other Provisions) Act 2010 have the
same meaning as in that Part.”

15FA 2002

21 In FA 2002 omit section 90 (controlled foreign companies and treaty non-
resident companies).

ITA 2007

(1) Section 725 of ITA 2007 (transfer of assets abroad: reduction in amount
20charged where controlled foreign company involved) is amended as
follows.

(2) For subsection (1) substitute—

“(1) This section applies if—

(a) under Part 9A of TIOPA 2010 (controlled foreign companies),
25the CFC charge is charged in relation to a CFC’s accounting
period, and

(b) apart from this section, the amount of income treated as
arising to an individual under section 721 for a tax year
would be or include a sum forming part of the CFC’s
30chargeable profits for that accounting period.”

(3) In subsection (2)—

(a) for “controlled foreign company’s” (in both places) substitute
“CFC’s”, and

(b) in the definition of “CA” for “chargeable amount” substitute “CFC’s
35chargeable profits for that accounting period so far as apportioned to
chargeable companies at step 3 in section 371BC (1) of TIOPA 2010”.

(4) For subsection (3) substitute—

“(3) Terms used in this section which are defined in Part 9A of TIOPA
2010 have the same meaning as in that Part.”

40FA 2007

(1) Paragraph 3 of Schedule 11 to FA 2007 (technical provision made by
insurers) is amended as follows.

(2) In sub-paragraph (1) for paragraph (b) and the “or” after it substitute—

“(b) a CFC (within the meaning of Part 9A of the Taxation
(International and Other Provisions) Act 2010) which
carries on general business, or”.

(3) 5In sub-paragraph (2) for paragraph (b) substitute—

“(b) a company which for the purposes of Part 9A of the
Taxation (International and Other Provisions) Act 2010 has
an interest in a CFC (within the meaning of that Part)
which carries on general business.”

10CTA 2009

24 CTA 2009 is amended as follows.

25 In section A1 (overview of the Corporation Tax Acts) in subsection (2)—

(a) omit paragraph (b),

(b) omit the “and” after paragraph (i), and

(c) 15after paragraph (j) insert “, and

(k) Part 9A of that Act (controlled foreign companies).”

26 In section 486D (disguised interest: arrangement with no tax avoidance
purpose) omit subsections (5) and (6).

(1) Section 486E (disguised interest: excluded shares) is amended as follows.

(2) 20In subsection (7)(c) for “relevant controlled foreign company” substitute
“CFC within the meaning of Part 9A of TIOPA 2010”.

(3) For subsections (9) and (10) substitute—

“(9) For the purposes of subsection (7)(b) a company (“C”) is a relevant
joint venture company if—

(a) 25the holding company is one of two persons who, taken
together, control C,

(b) the holding company has interests, rights and powers
representing at least 40% of the holdings, rights and powers
in respect of which the holding company and the second
30person fall to be taken as controlling C, and

(c) the second person has interests, rights and powers
representing—

(i) at least 40%, but

(ii) no more than 55%,

35of the holdings, rights and powers in respect of which the
holding company and the second person fall to be taken as
controlling C.

(10) For the purposes of subsection (9)—

(a) section 371RB of TIOPA 2010 (read with section 371RD of that
40Act) applies for the purpose of determining if two persons,
taken together, control a company, and

(b) section 371RD of that Act applies for the purpose of
determining if the requirements of paragraphs (b) and (c) are
met in any case.”

(4) 45Omit subsection (11).

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
5companies) after section 931C insert—

“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
10period,

(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
15profits which are chargeable profits of the CFC for its
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) 20If part of the distribution is not paid in respect of chargeable profits—

(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) 25In this section references to chargeable profits of the CFC are limited
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) 30Condition B is that—

(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
35which the recipient and the second person fall to be taken as
controlling the payer, and

(c) the second person has interests, rights and powers
representing—

(i) at least 40%, but

(ii) 40no more than 55%,

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)—

(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
5determining if the requirements of paragraphs (b) and (c) are
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 10Part 2 of Schedule 16 to FA 2009 (amendment of exempt activities
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) 15The amendments made by this Part have no effect in
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) 20omit paragraph (b) and the “and” before it.

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 25In section 398D (restriction on use of losses) for subsection (6) substitute—

“(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
30the sum charged on a chargeable company so far as the sum charged
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) 35after paragraph (d) insert—

“(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 40TIOPA 2010 is amended as follows.

(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 5 The finance income amounts of a chargeable company under Part 9A

(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
10section 371BC (3)) is a relevant accounting period of the
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
15finance profits”) which fall only within Chapter 5 or 6 of Part
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
20account of the worldwide group.

(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
25not, in the case of section 299, as applied by section 574 of that
Act), and

(b) which are not excluded credits (as defined in section 314(3)
above).”

Part 4 30Commencement provision

Commencement provision relating to controlled foreign companies etc

(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
351 January 2013 begins at that time.

(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.

(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
40751) beginning before 1 January 2013.

(2) Sub-paragraphs (3) and (4) apply to a company which—

(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) 5The company is not to have an accounting period within the meaning of Part
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
10meaning of Part 9A of TIOPA 2010 begins at that time.

(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) 15is, at the end of 31 December 2012, a life assurance subsidiary.

(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) 20“Life assurance subsidiary” means a company in which a life assurance
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) 25The amendments made by paragraphs 11, 12, 13, 16, 17, 19, 20, 21, 22, 23, 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
30Chapter 4 of Part 17 of ICTA continue to have effect accordingly
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
35dividends or other distributions received before 1 January 2013 (and the
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
40come into force on 30 June 2012.

Commencement provision relating to foreign permanent establishments

(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.

(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

5Exempt periods

(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) 10the exempt period does not end at or before the end of the company’s
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
15within the meaning of Part 9A of TIOPA 2010 begins at that time
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
20paragraph 15F of Schedule 25 to ICTA and, for this purpose, assume that
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
25subsection (1)(b) and (c) were omitted.

(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.

30Designer rate tax provisions

(1) The Controlled Foreign Companies (Designer Rate Tax Provisions)
Regulations 2000 (S.I. 2000/3158S.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) 35The power of the HMRC Commissioners to make regulations under that
section includes power to revoke or amend the 2000 Regulations for the
purposes of that section.