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(2) Those assets are, in relation to times on or after that date, to be regarded for
the purposes of this Part as assets forming part of the long-term business
fixed capital of the company (whether or not they would otherwise be so
regarded).

(3) 5An asset is an “asset of the shareholder fund of an insurance company for the
period of account ending immediately before 1 January 2013” if it is shown
in any of lines 11 to 102 of Form 13 in the company’s periodical return
ending immediately before that date in respect of assets other than those of
its long-term business.

(4) 10But an asset is not to be regarded as an asset of the shareholder fund for that
period of account if for any accounting period ending before 1 January
2013—

(a) income arising from the asset was, or chargeable gains or allowable
losses accruing on any part disposal of the asset for the purposes of
15TCGA 1992 were, taken into account for the purposes of the charge
to corporation tax on the I minus E basis, or

(b) income arising from the asset was taken into account in calculating
the profits of the company in respect of its life assurance business in
accordance with the provisions applicable for the purposes of the
20taxation of such profits under section 35 of CTA 2009 (charge on
trade profits).

Part 3 Supplementary

General transitional provision in relation to provisions re-enacted in Part

252

of this Act

36 (1) This paragraph applies where any provision of this Part of this Act re-enacts
(with or without modification) an enactment repealed by this Part of this
Act.

(2) The repeal and re-enactment does not affect the continuity of the law.

(3) 30Any subordinate legislation or other thing which—

(a) has been made or done, or has effect as if made or done, under or for
the purposes of the repealed provision, and

(b) is in force or effective in relation to accounting periods of insurance
companies ending on 31 December 2012,

35has effect in relation to subsequent accounting periods of insurance
companies as if made or done under or for the purposes of the
corresponding provision of this Part of this Act.

(4) Any reference (express or implied) in any enactment, instrument or
document to a provision of this Part of this Act is to be read as including, in
40relation to times, circumstances or purposes in relation to which the
corresponding repealed provision had effect, a reference to that
corresponding provision.

(5) Any reference (express or implied) in any enactment, instrument or
document to a repealed provision is to be read, in relation to times,
45circumstances or purposes in relation to which the corresponding provision

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of this Part of this Act has effect, as a reference or (as the context may require)
as including a reference to that corresponding provision.

(6) This paragraph is subject to any specific transitional, transitory or saving
provision made by or under this Schedule.

(7) The generality of this paragraph is not to be affected by specific transitional,
5transitory or saving provision made by or under this Schedule.

(8) This paragraph has effect instead of section 17(2) of the Interpretation Act
1978.

Power to make supplementary transitional provision etc

37 (1) The Treasury may by regulations make further transitional, transitory or
10saving provision in connection with the coming into force of any of the
provisions of this Part of this Act.

(2) The provision that may be made by the regulations includes provision
(whether by way of textual amendment or otherwise) altering or
supplementing the effect of any provision made by or under this Schedule.

(3) 15The regulations may be made so as to have effect in relation to any period
beginning before but ending on or after the day on which the regulations are
made (as well as in relation to periods no part of which falls before that day).

38 Any regulations made by the Treasury under any provision of this Schedule
may—

(a) 20make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional,
transitory or saving provision.

Interpretation

39 The following expressions have the same meaning in this Schedule as they
25have in Chapter 1 of Part 12 of ICTA

Section 176

SCHEDULE 18 35Part

3

: consequential amendments

Income and Corporation Taxes Act 1988

1 ICTA is amended as follows.

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2 Omit section 459 (unregistered friendly societies: exemption from tax).

3 Omit section 460 (exemption from tax in respect of life or endowment
business).

4 Omit section 461 (taxation in respect of other business).

5 5Omit sections 461A to 461C (taxation in respect of other business:
incorporated friendly societies qualifying for exemption).

6 Omit section 461D (transfers of business).

7 Omit section 462 (conditions for tax exempt business).

8 Omit section 463 (long-term business of friendly societies: application of
10Corporation Tax Acts).

9 Omit section 464 (maximum benefits payable to members).

10 Omit section 465 (old societies).

11 Omit section 465A (assets of branch of registered friendly society to be
treated as assets of society after incorporation).

12 15Omit section 466 (interpretation of Chapter 2 of Part 12).

13 (1) Schedule 15 (qualifying policies) is amended as follows.

(2) In paragraph 3—

(a) in sub-paragraphs (1) and (4)(c), for “tax exempt life or endowment
business” substitute “exempt BLAGAB or eligible PHI business”,

(b) 20in sub-paragraph (8)(b)(i), for “a new society” substitute “a society
other than an old society”, and

(c) in sub-paragraph (8)(b)(ii), for “a society other than a new society”
substitute “an old society”.

(3) In paragraph 4(3)(b)(ii), for “a new society” substitute “a society other than
25an old society”.

(4) Omit paragraph 5.

(5) In paragraph 6—

(a) in sub-paragraph (1)—

(i) omit “(as defined in section 466)” in both places, and

(ii) 30for “tax exempt life or endowment business” substitute
“exempt BLAGAB or eligible PHI business”, and

(b) in sub-paragraph (2), for “section 464” substitute “section 160 of the
Finance Act 2012”.

(6) After paragraph 6 insert—

6A 35Any expression—

(a) which is used in any provision made by any of paragraphs
3 to 6, and

(b) which is used in Part

3

40 of the Finance Act 2012,

has the same meaning in that provision as it has in that Part.

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Taxation of Chargeable Gains Act 1992

14 TCGA 1992 is amended as follows.

15 In section 100(2B)(b) (exemption for authorised unit trusts etc), for “section
466(2) of the Taxes Act” substitute “section 172 of the Finance Act 2012”.

16 5In section 171(5) (transfers within a group: general provisions), for “section
461B of the Taxes Act” substitute “section 165 of the Finance Act 2012”.

Income Tax (Trading and Other Income) Act 2005

17 ITTOIA 2005 is amended as follows.

18 (1) Section 531 (gains from contracts for life insurance etc: cases where income
10tax not treated as paid) is amended as follows.

(2) In subsection (3)(a), for “tax exempt life or endowment business” substitute
“exempt BLAGAB or eligible PHI business”.

(3) In subsection (4), for the definition of “tax exempt life or endowment
business” substitute—

Corporation Tax Act 2009

19 20CTA 2009 is amended as follows.

20 In section A1(2) (overview of the Corporation Tax Acts), after paragraph (k)
(as inserted by paragraph 136(b) of Schedule 16 to this Act) insert “, and

(l) Part

3

25 of that Act (friendly societies carrying on long-term
business).

21 In section 564(1) (section 563: interpretation), for “section 460 of ICTA
substitute “section 158 of FA 2012”.

22 In section 931S(3) (company distributions: meaning of “small company”), in
30the definition of “friendly society”, for “section 466(2) of ICTA” substitute
“section 172 of FA 2012”.

Consequential repeals

23 In consequence of the amendments made by this Schedule, omit the
following provisions—

(a) 35in FA 1990—

(i) section 49(1) to (4),

(ii) section 50, and

(iii) paragraph 6 of Schedule 9,

(b) in FA 1991, paragraphs 1 to 3 of Schedule 9,

(c) 40in FA 1995, paragraphs 1 and 2 of Schedule 10,

(d) in FA 1996, section 171,

(e) in FA 2007—

(i) section 44,

(ii) paragraphs 40 and 43 of Schedule 7, and

(iii) 45Schedule 12, and

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(f) in FA 2008—

(i) section 44, and

(ii) Schedule 18.

Section 177

SCHEDULE 19 5Part

3

: transitional provision

Approvals given for purposes of section 461 or 461C of ICTA

1 Anything which, as a result of section 461(11) or 461A(4) of ICTA, is treated
as having been done by HMRC Commissioners on a particular date under a
10provision of ICTA repealed by this Act is to continue to be treated as having
been done by them on that date under the provision of this Part
corresponding to that repealed provision, despite the fact that neither
section 461(11) nor section 461A(4) of ICTA is rewritten in this Act.

General transitional provision in relation to provisions re-enacted in Part

153

of this Act

2 (1) This paragraph applies where any provision of this Part of this Act re-enacts
(with or without modification) an enactment repealed by this Part of this
Act.

(2) The repeal and re-enactment does not affect the continuity of the law.

(3) 20Any subordinate legislation or other thing which—

(a) has been made or done, or has effect as if made or done, under or for
the purposes of the repealed provision, and

(b) is in force or effective in relation to accounting periods of friendly
societies ending on 31 December 2012,

25has effect in relation to subsequent accounting periods of friendly societies
as if made or done under or for the purposes of the corresponding provision
of this Part of this Act.

(4) Any reference (express or implied) in any enactment, instrument or
document to a provision of this Part of this Act is to be read as including, in
30relation to times, circumstances or purposes in relation to which the
corresponding repealed provision had effect, a reference to that
corresponding provision.

(5) Any reference (express or implied) in any enactment, instrument or
document to a repealed provision is to be read, in relation to times,
35circumstances or purposes in relation to which the corresponding provision
of this Part of this Act has effect, as a reference or (as the context may require)
as including a reference to that corresponding provision.

(6) This paragraph is subject to any specific transitional, transitory or saving
provision made by or under this Schedule.

(7) 40The generality of this paragraph is not to be affected by specific transitional,
transitory or saving provision made by or under this Schedule.

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(8) This paragraph has effect instead of section 17(2) of the Interpretation Act
1978.

Section 180

SCHEDULE 20 Controlled foreign companies and foreign permanent establishments

5Part 1 Controlled foreign companies

1 After Part 9 of TIOPA 2010 insert—

Part 9A

Controlled foreign companies

Chapter 1


10

Overview

371AA Overview of Part

(1) A charge (“the CFC charge”) is charged under this Part on UK
resident companies which have certain interests in CFCs.

(2) 15The CFC charge is charged by reference to the chargeable profits of
CFCs.

(3) A “CFC” is a non-UK resident company which is controlled by a UK
resident person or persons (but see subsection (6)).

(4) Chapter 2 sets out the basic details of the CFC charge, including—

(a) 20the CFC charge gateway (through which profits of a CFC
must pass in order to be chargeable profits), and

(b) the steps to be taken for charging the CFC charge.

(5) Chapter 2 is supplemented by Chapters 3 to 17; in particular—

(a) Chapter 3 sets out how to determine which (if any) of
25Chapters 4 to 8 apply in relation to the profits of a CFC,

(b) so far as applicable, Chapters 4 to 8 set out how to determine
which profits (if any) of a CFC pass through the CFC charge
gateway, with—

(i) Chapter 4 dealing with profits attributable to UK
30activities,

(ii) Chapter 5 dealing with non-trading finance profits,

(iii) Chapter 6 dealing with trading finance profits,

(iv) Chapter 7 dealing with profits derived from captive
insurance business, and

(v) 35Chapter 8 dealing with cases involving solo
consolidation,

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(c) Chapter 9 sets out exemptions for profits from qualifying
loan relationships,

(d) Chapters 10 to 14 set out full exemptions from the CFC
charge,

(e) 5Chapter 15 sets out how to determine the persons whose
interests in a CFC are relevant to the charging of the CFC
charge,

(f) Chapter 16 sets out how to determine the creditable tax of
CFCs (for which credit is given against chargeable profits),
10and

(g) Chapter 17 sets out how to apportion a CFC’s chargeable
profits and creditable tax among the persons who have
relevant interests in the CFC.

(6) Chapter 18 explains the concept of “control” and also sets out certain
15cases in which a non-UK resident company is to be taken to be a CFC
even though it is not controlled by a UK resident person or persons.

(7) Chapter 19 explains the concepts of “assumed taxable total profits”,
“assumed total profits” and “the corporation tax assumptions” which
are referred to in this Part.

(8) 20Chapter 20 contains rules for determining the territory in which a
CFC is resident for the purposes of this Part.

(9) Chapter 21 contains provision about the management of the CFC
charge, including the collection of sums charged.

(10) Chapter 22 contains supplementary provision, including definitions
25of terms used in this Part.

(11) Nothing in this Part affects—

(a) the liability to corporation tax of a non-UK resident company
in accordance with section 5(2) and (3) of CTA 2009 (non-UK
resident companies within the charge to corporation tax), or

(b) 30the determination of such a company’s chargeable profits for
corporation tax purposes in accordance with Chapter 4 of
Part 2 of CTA 2009.

(12) This Part is part of the Corporation Tax Acts.

Chapter 2

The CFC charge

371BA 35 Introduction to the CFC charge

(1) The CFC charge is charged in relation to accounting periods of CFCs
in accordance with section 371BC.

(2) Section 371BC applies in relation to a CFC’s accounting period if
(and only if)—

(a) 40the CFC has chargeable profits for the accounting period, and

(b) none of the exemptions set out in Chapters 10 to 14 applies for
the accounting period.

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(3) A CFC’s chargeable profits for an accounting period are its assumed
taxable total profits for the accounting period determined on the
basis—

(a) that the CFC’s assumed total profits for the accounting
5period are limited to only so much of those profits as pass
through the CFC charge gateway, and

(b) that amounts are to be relieved against the assumed total
profits at step 2 in section 4(2) of CTA 2010 only so far as it is
just and reasonable for them to be so relieved having regard
10to paragraph (a).

(4) “The CFC charge gateway” is explained in section 371BB.

(5) Subsection (3) is subject to section 371SB(7) and (8) (which relates to
settlement income included in a CFC’s chargeable profits).

371BB The CFC charge gateway

(1) 15Take the following steps to determine the extent to which a CFC’s
assumed total profits for an accounting period pass through the CFC
charge gateway.

Step 1

In accordance with Chapter 3, determine which (if any) of Chapters
204 to 8 apply for the accounting period.

Step 2

Determine the extent to which the CFC’s assumed total profits fall
within any of the Chapters which applies for the accounting period.

(2) Subsection (1) is subject to—

(a) 25Chapter 9 (exemptions for profits from qualifying loan
relationships), and

(b) section 371JE (which provides for adjustments of profits
which would otherwise pass through the CFC charge
gateway linked to the exemption set out in Chapter 10).

371BC 30 Charging the CFC charge

(1) Take the following steps if, as provided for by section 371BA(2), this
section applies in relation to a CFC’s accounting period.

Step 1

In accordance with Chapter 15, determine the persons (“the relevant
35persons”) who have relevant interests in the CFC at any time during
the accounting period.

Step 2

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In accordance with Chapter 16, determine the CFC’s creditable tax
for the accounting period.

Step 3

In accordance with Chapter 17, apportion the CFC’s chargeable
5profits and creditable tax among the relevant persons.

Step 4

Take each relevant person which is a company meeting the UK
residence condition and, in accordance with section 371BD,
determine if the company is a chargeable company.

10Step 5

The CFC charge is charged on each chargeable company as follows.

A sum equal to—

is charged on the chargeable company as if it were an amount of
corporation tax charged on the company for the relevant corporation
tax accounting period.

(2) A company meets the UK residence condition if it is UK resident at a
20time during the accounting period when it has a relevant interest in
the CFC.

(3) For the purpose of taking step 5 in subsection (1) in relation to a
chargeable company (“CC”)—

371BD Chargeable companies

(1) 40A company (“C”) which meets the UK residence condition is a
chargeable company for the purposes of step 4 in section 371BC(1) if
the total of the following percentages is at least 25%—

(a) the percentage of the CFC’s chargeable profits apportioned
to C at step 3 in section 371BC(1), and

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(b) the percentages (if any) of those profits which are
apportioned at that step to relevant persons who, at any time
during the accounting period, are connected or associated
with C.

(2) 5Subsection (1) is subject to sections 371BE and 371BF.

371BE Companies which are managers of offshore funds etc

(1) A company (“C”) is not a chargeable company for the purposes of
step 4 in section 371BC(1) if—

(a) the CFC is an offshore fund (as defined in section 355),

(b) 10the genuine diversity of ownership condition set out in
regulation 75 of the Offshore Funds (Tax) Regulations 2009
(S.I. 2009/3001) is met in relation to the fund,

(c) C meets the fund management condition, and

(d) apart from this section, a sum of no more than £500,000
15would be charged on C as a chargeable company at step 5 in
section 371BC(1).

(2) In applying regulation 75 of the 2009 Regulations for the purposes of
subsection (1)(b), the reference in paragraph (1) to the period of
account is to be read as a reference to the accounting period.

(3) 20C meets the fund management condition if at all times during the
accounting period when C has relevant interests in the offshore
fund—

(a) the assets of the offshore fund are managed by C or a person
connected with C,

(b) 25C or the person connected with C receives out of those assets
fees for managing those assets, and

(c) C holds its relevant interests only or mainly for the purpose
of attracting participants (as defined in section 362) to the
fund who are not connected with C.

(4) 30If the accounting period is less than 12 months, the amount specified
in subsection (1)(d) is to be reduced proportionately.

371BF Companies which are participants in offshore funds

(1) A company (“C”) is not a chargeable company for the purposes of
step 4 in section 371BC(1) if—

(a) 35the CFC is an offshore fund (as defined in section 355),

(b) at the relevant time and at all subsequent relevant times, C
reasonably believes that the requirement of section 371BD(1)
will not be met in relation to it, and

(c) the meeting of that requirement in relation to C is in no way
40attributable to any step—

(i) which was taken by C or any person connected or
associated with C, and

(ii) which, at the time it was taken, could reasonably have
been expected to cause that requirement to be met.

(2) 45“The relevant time” means—

(a) the beginning of the accounting period, or

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