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Finance Bill (HC Bill 49)

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(b) the assumption set out in section 371SF(1) is to be disapplied
to the extent necessary as a consequence.

(4) The claims which may be specified in a notice under subsection (1)
by virtue of paragraph (b) include claims under the provision
5mentioned in section 371SF(2)(b) or 371SK(5).

(5) A notice under subsection (1)

(a) may be given only by a company or companies determined
under subsection (6) or (7), and

(b) must be given—

(i) 10within 20 months after the end of the relevant
accounting period, or

(ii) within such longer period as an officer of Revenue
and Customs may allow.

(6) A company may give a notice if—

(a) 15the company would be a chargeable company were section
371BC (charging the CFC charge) to apply in relation to the
relevant accounting period, and

(b) the percentage of the CFC’s chargeable profits which would
be apportioned to the company at step 3 in section 371BC(1)
20would represent more than half of X%.

(7) 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 relevant accounting period, and

(b) 25the 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%.

(8) In subsections (6) and (7) “X%” means the total percentage of the
CFC’s chargeable profits which would be apportioned to chargeable
30companies at step 3 in section 371BC(1) were section 371BC
(charging the CFC charge) to apply in relation to the relevant
accounting period.

371SH Elections under section 9A of CTA 2010

(1) This section applies if—

(a) 35during the relevant accounting period or any earlier
accounting period of the CFC, a notice is given to an officer of
Revenue and Customs requesting that the CFC be assumed
to have made an election under section 9A of CTA 2010
(designated currency of a UK resident investment company)
40in the form specified in the notice, and

(b) the time at which the notice is given is a time at which,
applying the corporation tax assumptions apart from this
section, the CFC would have been able to make an election
under that section in the form specified in the notice (see, in
45particular, section 9A(2)).

(2) Assume—

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(a) that an election under section 9A of CTA 2010 has been made
by the CFC in the form specified in the notice under
subsection (1) at the time in question, and

(b) that, accordingly, sections 9A and 9B of that Act apply to
5determine the effect (if any) of that election.

(3) Subsection (2)(b) does not apply if—

(a) a notice is given to an officer of Revenue and Customs
revoking the notice under subsection (1), and

(b) the time at which the notice revoking the notice under
10subsection (1) is given is a time at which, applying the
corporation tax assumptions apart from this section and the
assumption in subsection (2)(a), the CFC would have been
able to revoke its assumed election under section 9A of CTA
2010.

(4) 15A notice under subsection (1) or (3) may be given only by a company
or companies determined under subsection (5) or (6).

(5) A company may give a notice if—

(a) the company would be likely to be a chargeable company in
relation to the applicable accounting period were section
20371BC (charging the CFC charge) to apply in relation to that
period, and

(b) the percentage of the CFC’s chargeable profits for the
applicable accounting period which would be likely to be
apportioned to the company at step 3 in section 371BC(1)
25would represent more than half of X%.

(6) Two or more companies may together give a notice if—

(a) the companies would all be likely to be chargeable companies
in relation to the applicable accounting period were section
371BC (charging the CFC charge) to apply in relation to that
30period, and

(b) the percentage of the CFC’s chargeable profits for the
applicable accounting period which would be likely to be
apportioned to the companies, taken together, at step 3 in
section 371BC(1) would represent more than half of X%.

(7) 35In subsections (5) and (6) (and this subsection)—

  • “the applicable accounting period” means the accounting
    period of the CFC during which the notice under subsection
    (1) or (3) (as the case may be) is given, and

  • “X%” means the total percentage of the CFC’s chargeable
    40profits for the applicable accounting period which would be
    likely to be apportioned to chargeable companies at step 3 in
    section 371BC(1) were section 371BC (charging the CFC
    charge) to apply in relation to the applicable accounting
    period.

371SI 45 Modification of sections 6 and 7 of CTA 2010

(1) This section applies if—

(a) in accordance with section 371SH, the CFC is assumed to
have made an election under section 9A of CTA 2010, but

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(b) applying the corporation tax assumptions apart from this
section, section 6 or 7 of CTA 2010 could not apply in relation
to the CFC for a period of account because the CFC does not
prepare its accounts in accordance with generally accepted
5accounting practice.

(2) If sterling is the CFC’s designated currency for the period of account,
assume that section 6 of CTA 2010 applies in relation to the CFC as if
the words “in accordance with generally accepted accounting
practice” were—

(a) 10omitted from subsection (1A)(a), and

(b) in subsection (2), inserted after “its accounts in sterling”.

(3) If the CFC’s designated currency for the period of account is a
currency other than sterling, assume that section 7 of CTA 2010
applies in relation to the CFC as if the words “in accordance with
15generally accepted accounting practice” were—

(a) omitted from subsection (1A)(a), and

(b) at step 1 in subsection (2), inserted after “that currency”.

371SJ Elections for leases to be treated as long funding leases

(1) This section applies if—

(a) 20a notice is given to an officer of Revenue and Customs
requesting that the CFC be assumed to have made a long
funding lease election in the form specified in the notice, and

(b) the time at which the notice is given is a time at which,
applying the corporation tax assumptions apart from this
25section, the CFC would have been able to make a long
funding lease election in the form specified in the notice.

(2) Assume—

(a) that a long funding lease election has been made by the CFC
in the form specified in the notice under subsection (1) at the
30time in question, and

(b) that, accordingly, regulation 2(5) of the 2007 Regulations
applies to determine the effect (if any) of that election.

(3) Subsection (2)(b) does not apply if—

(a) a notice is given to an officer of Revenue and Customs
35withdrawing the notice under subsection (1), and

(b) the time at which the notice withdrawing the notice under
subsection (1) is given is a time at which, applying the
corporation tax assumptions apart from this section and the
assumption in subsection (2)(a), the CFC would have been
40able to withdraw its assumed long funding lease election.

(4) A notice under subsection (1) or (3) may be given only by a company
or companies determined under subsection (5) or (6).

(5) A company may give a notice if—

(a) the company would be likely to be a chargeable company in
45relation to the applicable accounting period were section
371BC (charging the CFC charge) to apply in relation to that
period, and

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(b) the percentage of the CFC’s chargeable profits for the
applicable accounting period which would be likely to be
apportioned to the company at step 3 in section 371BC(1)
would represent more than half of X%.

(6) 5Two or more companies may together give a notice if—

(a) the companies would all be likely to be chargeable companies
in relation to the applicable accounting period were section
371BC (charging the CFC charge) to apply in relation to that
period, and

(b) 10the percentage of the CFC’s chargeable profits for the
applicable accounting period which would be likely to be
apportioned to the companies, taken together, at step 3 in
section 371BC(1) would represent more than half of X%.

(7) In this section—

(a) 15“the 2007 Regulations” means the Long Funding Leases
(Elections) Regulations 2007 (S.I. 2007/304),

(b) terms defined in the 2007 Regulations have the same
meaning as they have in the 2007 Regulations,

(c) “the applicable accounting period” means the CFC’s
20accounting period in which falls the effective date specified
in the notice under subsection (1), and

(d) “X%” means the total percentage of the CFC’s chargeable
profits for the applicable accounting period which would be
likely to be apportioned to chargeable companies at step 3 in
25section 371BC(1) were section 371BC (charging the CFC
charge) to apply in relation to the applicable accounting
period.

(8) The Treasury may by regulations amend this section as they consider
appropriate to take account of any regulations made by them from
30time to time under paragraph 16 of Schedule 8 to FA 2006 (elections
for leases to be treated as long funding leases).

371SK Intangible fixed assets

(1) This section applies for the purpose of applying Part 8 of CTA 2009
(intangible fixed assets).

(2) 35Assume that any intangible fixed asset acquired or created by the
CFC before its first accounting period was acquired or created by the
CFC at the beginning of that accounting period at a cost equal to its
value recognised for accounting purposes at that time.

(3) In subsection (2) references to the CFC’s first accounting period are
40to the CFC’s accounting period which begins when it becomes a
CFC.

(4) The assumption in subsection (2) does not affect the determination of
the question whether Part 8 of CTA 2009 applies to an asset in
accordance with section 882 of that Act (application of Part 8 to assets
45created or acquired on or after 1 April 2002).

(5) Assume also that the CFC—

(a) has not claimed any relief under Chapter 7 of Part 8 of CTA
2009 (roll-over relief in case of reinvestment), or

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(b) made any provisional declaration of entitlement to such
relief.

(6) Subsection (5) is subject to section 371SG(4).

371SL Group relief etc

(1) 5Assume that the CFC is neither a member of a group of companies
nor a member of a consortium for the purposes of any provision of
the Tax Acts.

(2) Subsection (3) applies if—

(a) under Part 5 of CTA 2010 (group relief) the CFC actually
10surrenders any relief which is allowed to another company
by way of group relief, but

(b) applying the corporation tax assumptions apart from
subsection (3), the relief would reduce the CFC’s assumed
taxable total profits for the relevant accounting period.

(3) 15Assume that the relief is to be ignored in determining the CFC’s
assumed taxable total profits for the relevant accounting period.

371SM Capital allowances

(1) This section applies if, before the CFC’s first accounting period, the
CFC incurred any capital expenditure on the provision of plant or
20machinery for the purposes of its trade.

(2) For the purposes of Part 2 of CAA 2001 (plant and machinery
allowances) assume that the plant or machinery—

(a) was provided for purposes wholly other than those of the
trade, and

(b) 25was not brought into use for the purposes of the trade until
the beginning of the CFC’s first accounting period,

and that section 13 of CAA 2001 (use for qualifying activity of plant
or machinery provided for other purposes) applies accordingly.

(3) In this section references to the CFC’s first accounting period are to
30the CFC’s accounting period which begins when it becomes a CFC.

(4) This section is to be read as if it were contained in Part 2 of CAA 2001.

371SN Unremittable overseas income

(1) For the purposes of Part 18 of CTA 2009 (unremittable overseas
income) assume that in section 1274(1)(a), (3) and (4) of that Act
35references to the United Kingdom are references to the relevant
territories.

(2) “The relevant territories” means—

(a) the United Kingdom,

(b) the territory in which the CFC is taken to be resident for the
40relevant accounting period as determined under Chapter 20,
and

(c) any other territory in which the CFC is in fact resident at any
time during the relevant accounting period.

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371SO Tax advantages

(1) This section applies if there is an arrangement or other conduct a
purpose of which is to obtain a tax advantage within section
1139(2)(da) of CTA 2010 by obtaining by any means what would,
5applying the corporation tax assumptions apart from this section, be
a tax advantage within section 1139(2)(a) to (d) of that Act.

(2) So far as they would not otherwise do so, the Corporation Tax Acts
are to be assumed to apply in relation to the arrangement or other
conduct in the same way as they would apply were the purpose of
10obtaining a tax advantage within section 1139(2)(da) of CTA 2010 the
purpose of obtaining an actual tax advantage within section
1139(2)(a) to (d) of that Act by the means in question.

371SP Disguised interest: application of Chapter 2A of Part 6 of CTA 2009

(1) This section applies if—

(a) 15applying the corporation tax assumptions apart from this
section, Chapter 2A of Part 6 of CTA 2009 (disguised interest)
would, but for section 486D(1) of that Act, apply in relation to
a return produced for the CFC by an arrangement to which
the CFC is a party, and

(b) 20it is reasonable to assume that the main purpose, or one of the
main purposes, of the CFC being a party to the arrangement
is to obtain a tax advantage within section 1139(2)(da) of CTA
2010 for any person by obtaining what would, applying the
corporation tax assumptions apart from this section, be a
25relevant tax advantage in relation to the CFC.

(2) Chapter 2A of Part 6 of CTA 2009 is to be assumed to apply in
relation to the return.

(3) In subsection (1)(b) the reference to obtaining what would be a
relevant tax advantage is to be read in accordance with section
30486D(4) of CTA 2009.

(4) This section is without prejudice to the generality of section 371SO.

371SQ Shares accounted for as liabilities: application of section 521C of CTA
2009

(1) This section applies if—

(a) 35applying the corporation tax assumptions apart from this
section, section 521C of CTA 2009 (shares accounted for as
liabilities) would, but for section 521C(1)(f) of that Act, apply
to a share held by the CFC, and

(b) the main purpose, or one of the main purposes, for which the
40CFC holds the share is to obtain a tax advantage within
section 1139(2)(da) of CTA 2010 for any person by obtaining
what would, applying the corporation tax assumptions apart
from this section, be a relevant tax advantage in relation to
the CFC.

(2) 45Section 521C of CTA 2009 is to be assumed to apply to the share.

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(3) In subsection (1)(b) the reference to obtaining what would be a
relevant tax advantage is to be read in accordance with section
521E(4) of CTA 2009.

(4) This section is without prejudice to the generality of section 371SO.

371SR 5 Double taxation relief: counteraction notices

(1) This section applies if it is reasonable to suppose that, applying the
corporation tax assumptions apart from this section, each of
conditions A to D of section 82 (double taxation relief: conditions to
be met for giving of counteraction notice) would or might be met in
10relation to the CFC in relation to the relevant accounting period.

(2) Assume that such adjustments are to be made as are necessary for
counteracting what, applying the corporation tax assumptions apart
from this section, would be the effects of the scheme or arrangement
in question in the relevant accounting period that would be referable
15to the purpose referred to in condition B of section 82.

Chapter 20

Residence of CFCs

371TA The basic rule

(1) For the purposes of this Part a CFC is taken to be resident for an
accounting period (“the relevant accounting period”) in—

(a) 20the territory determined by applying section 371TB, or

(b) if no territory can be determined by applying that section—

(i) if subsection (2) applies, the territory in which the
CFC is taken to be resident under the double taxation
arrangements in question, or

(ii) 25otherwise, the territory in which the CFC is
incorporated or formed.

(2) This subsection applies if the CFC is incorporated or formed in the
United Kingdom but is taken to be non-UK resident by virtue of
section 18 of CTA 2009 (companies treated as non-UK resident under
30double taxation arrangements).

(3) This section is subject to section 371KC and step 1 in section
371NB(1).

371TB How to determine the territory in which the CFC is resident

(1) The CFC is taken to be resident in the territory under the law of
35which, at all times during the relevant accounting period, the CFC is
liable to tax by reason of domicile, residence or place of management.

(2) If there are two or more territories (each of which is called an
“eligible territory”) falling within subsection (1), the CFC is taken to
be resident in only one of the eligible territories.

(3) 40To determine that territory, go through the following subsections.

If two or more subsections apply, the earlier or earliest subsection
takes precedence.

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(4) If an election or designation under subsection (8) or (9) has effect for
the relevant accounting period by virtue of section 371TC(9)(b), the
CFC is taken to be resident in the eligible territory which is the
subject of the election or designation.

(5) 5If, at all times during the relevant accounting period, the CFC’s place
of effective management is situated in one of the eligible territories
only, the CFC is taken to be resident in that territory.

(6) If—

(a) at all times during the relevant accounting period, the CFC’s
10place of effective management is situated in two or more of
the eligible territories, and

(b) immediately before the end of the relevant accounting
period, over 50% of the amount of the CFC’s assets is situated
in one of those eligible territories,

15the CFC is taken to be resident in the territory in which over 50% of
the amount of the CFC’s assets is situated.

For this purpose, the amount of the CFC’s assets is determined by
reference to their market value immediately before the end of the
relevant accounting period.

(7) 20If, immediately before the end of the relevant accounting period,
over 50% of the amount of the CFC’s assets is situated in one of the
eligible territories, the CFC is taken to be resident in that territory.

For this purpose, the amount of the CFC’s assets is determined by
reference to their market value immediately before the end of the
25relevant accounting period.

(8) If, in accordance with section 371TC(1), an election specifying an
eligible territory is made, the CFC is taken to be resident in that
territory.

(9) If an officer of Revenue and Customs designates an eligible territory
30on a just and reasonable basis (see section 371TC(6) to (8)), the CFC
is taken to be resident in that territory.

371TC Elections and designations about residence

(1) An election under section 371TB(8)

(a) may be made only by a company or companies determined
35under subsection (2) or (3),

(b) must be made by notice to an officer of Revenue and
Customs,

(c) must be made no later than 12 months after the end of the
relevant accounting period,

(d) 40must state, in relation to each company making the election,
the percentage of the CFC’s chargeable profits for the
relevant accounting period which would be likely to be
apportioned to the company at step 3 in section 371BC(1)
were section 371BC (charging the CFC charge) to apply in
45relation to the relevant accounting period,

(e) must be signed on behalf of each company making the
election, and

(f) is irrevocable.

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(2) A company may make an election if it is likely that, were section
371BC (charging the CFC charge) to apply in relation to the relevant
accounting period, the company would be a chargeable company
whose apportioned percentage of the CFC’s chargeable profits for
5the relevant accounting period would represent more than half of
X%.

(3) Two or more companies may together make an election if it is likely
that, were section 371BC (charging the CFC charge) to apply in
relation to the relevant accounting period, the companies would all
10be chargeable companies whose apportioned percentage of the
CFC’s chargeable profits for the relevant accounting period would,
taken together, represent more than half of X%.

(4) In subsections (2) and (3) “X%” means the total percentage of the
CFC’s chargeable profits for the relevant accounting period which
15would be likely to be apportioned to chargeable companies were
section 371BC (charging the CFC charge) to apply in relation to the
relevant accounting period.

(5) In subsections (2) to (4) references to apportioned percentages of the
CFC’s chargeable profits for the relevant accounting period are to the
20percentages apportioned at step 3 in section 371BC(1).

(6) A designation under section 371TB(9) is irrevocable.

(7) An officer of Revenue and Customs must give notice of a designation
to each company which the officer considers would be likely to be a
chargeable company were the CFC charge to be charged in relation
25to the relevant accounting period.

(8) The notice must specify—

(a) the date on which the designation was made,

(b) the CFC’s name,

(c) the relevant accounting period, and

(d) 30the territory designated.

(9) An election or designation has effect in relation to—

(a) the relevant accounting period, and

(b) each successive accounting period of the CFC until
subsection (10) applies to an accounting period,

35regardless of any change in the persons who have interests in the
CFC or any change in those interests.

(10) This subsection applies to an accounting period (“the later period”)
if—

(a) one or more of the territories which were eligible territories
40in relation to the relevant accounting period does not fall
within section 371TB(1) in relation to the later period, or

(b) some other territory also falls within section 371TB(1) in
relation to the later period.

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Chapter 21

Management

371UA Introduction to Chapter

(1) The HMRC Commissioners are responsible for the management of
the CFC charge, including the collection of sums charged.

(2) 5In this Chapter—

  • “closure notice” means a notice under paragraph 32 of Schedule
    18 to FA 1998 (completion of enquiry and statement of
    conclusions),

  • “discovery assessment” means a discovery assessment or
    10discovery determination under paragraph 41 of that
    Schedule (including an assessment by virtue of paragraph 52
    of that Schedule), and

  • “the Taxes Acts” has the same meaning as in TMA 1970.

371UB Application of the Taxes Acts to the CFC charge

(1) 15The provision of step 5 in section 371BC(1) relating to the charging of
a sum as if it were an amount of corporation tax is to be taken as
applying all enactments applying generally to corporation tax.

(2) This is subject to—

(a) the provisions of the Taxes Acts, and

(b) 20any necessary modifications.

(3) The enactments referred to in subsection (1) include—

(a) those relating to returns of information and the supply of
accounts, statements and reports,

(b) those relating to the assessing, collecting and receiving of
25corporation tax,

(c) those conferring or regulating a right of appeal, and

(d) those concerning administration, penalties, interest on
unpaid tax and priority of tax in cases of insolvency under the
law of any part of the United Kingdom.

(4) 30In particular, TMA 1970 is to have effect as if—

(a) any reference to corporation tax included a reference to a sum
charged at step 5 in section 371BC(1) as if it were an amount
of corporation tax, and

(b) any reference to profits of a company included, in the case of
35a chargeable company in relation to a CFC’s accounting
period, references to the percentage of the CFC’s chargeable
profits in respect of which the company is charged at step 5
in section 371BC(1).

(5) Nothing in—

(a) 40paragraph 10 of Schedule 18 to FA 1998 (claims or elections in
company tax returns), or

(b) Schedule 1A to TMA 1970 (claims or elections not included in
returns),

applies to an election under section 371TB(8).