(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), and

(b) before paragraph (k) (as inserted by paragraph 136 of Schedule 16 to
15this Act) insert—

“(ja) 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).

27 (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) Section 371RB of TIOPA 2010 (read with section 371RD of that Act)
45applies for the purposes of this section.

(5) Section 371RD of TIOPA 2010 applies for the purpose of determining
if the requirements of subsection (3)(b) and (c) are met in any case.

(6) In subsections (4) and (5) references to section 371RD of TIOPA 2010
are to that section omitting subsection (3)(c) and (d).”

5FA 2009

32 Part 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) 10after sub-paragraph (2) insert—

“(3) The amendments made by this Part have no effect in
relation to a qualifying holding company.”

34 Omit paragraph 15.

35 In paragraph 16—

(a) 15in paragraph (a) after “2009” insert “but before 1 January 2013”, and

(b) omit 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 20CTA 2010 is amended as follows.

38 In 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) 25No 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
is attributable to the CFC’s chargeable profits so far as, in turn,
attributable to the carrying on of the relevant activity.”

39 (1) Section 938M (group mismatch schemes: controlled foreign companies) is
30amended as follows.

(2) In subsection (1) for the words from the beginning to “company” substitute
“Section 371SL(1) of TIOPA 2010 (assumption that a CFC”.

(3) In subsection (2)—

(a) for “chargeable profits” substitute “assumed taxable total profits”,
35and

(b) for “Chapter 4 of Part 17 of ICTA” substitute “Part 9A of TIOPA
2010”.

40 In section 1139 (definition of “tax advantage”) in subsection (2) —

(a) omit the “or” after paragraph (d), and

(b) after 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”.

5TIOPA 2010

41 TIOPA 2010 is amended as follows.

42 (1) Section 179 (compensating payment if advantaged person is controlled
foreign company) is amended as follows.

(2) For subsection (1) substitute—

“(1) 10Subsection (2) applies if—

(a) the actual provision is provision made or imposed in relation
to a CFC,

(b) for the purpose of determining the CFC’s assumed taxable
total profits for an accounting period, the CFC’s profits and
15losses are to be calculated in accordance with section 147(3)
or (5) in the case of that provision,

(c) in relation to the accounting period, sums are charged on
chargeable companies at step 5 in section 371BC(1), and

(d) in consequence of the application of section 147(3) or (5) as
20mentioned in paragraph (b), the total of those sums is more
than it would otherwise be.”

(3) In subsection (2) for “controlled foreign company” substitute “CFC”.

(4) In subsection (3)—

(a) in paragraph (a) for “companies mentioned in subsection (1)(c)”
25substitute “chargeable companies on which a sum is charged”, and

(b) in paragraph (b) for “tax chargeable under section 747(4) of ICTA”
substitute “the CFC charge”.

(5) For subsection (4) substitute—

“(4) In this section terms which are defined in Part 9A have the same
30meaning as they have in that Part.

(5) For the purposes of subsections (1)(c) and (d) and (3)(a) assume that
any claims made under Chapter 9 of Part 9A for the accounting
period were not made.”

43 In Chapter 4 of Part 7 (exemption for financing income) after section 298
35insert—

“298A Application of Chapter to financing income amounts determined
under section 314A

(1) The Commissioners may by regulations amend this Chapter—

(a) to enable a financing income amount determined in
40accordance with section 314A for the relevant period of
account (or a proportion of such an amount so determined) to
be specified in a statement of allocated exemptions under
section 292(4)(b), and

(b) to require, where a financing income amount so determined
(or a proportion of such an amount so determined) is
specified in such a statement, the sum charged on the
company as mentioned in section 314A(1)(a) to be re-
5determined at step 5 in section 371BC(1) on the basis set out
in subsection (2) below.

(2) The basis referred to in subsection (1)(b) is—

(a) the relevant finance profits (see section 314A(1)(d)) are to be
left out of the CFC’s chargeable profits mentioned in
10paragraph (a) at step 5 in section 371BC(1), and

(b) the CFC’s creditable tax mentioned in paragraph (b) at that
step is to be reduced so far as it is just and reasonable for it to
be reduced having regard to the amounts left out of the CFC’s
chargeable profits.

(3) 15For a case where only a proportion (“X%”) of a financing income
amount is specified in a statement of allocated exemptions under
section 292(4)(b), in subsection (2)(a) the reference to the relevant
finance profits is to be read as a reference to X% of those profits.

(4) The Commissioners may by regulations amend this Chapter to
20require, where a financing income amount determined in accordance
with section 314A for the relevant period of account is reduced under
section 296, the sum charged on the company as mentioned in
section 314A(1)(a) to be re-determined in accordance with provision
made by regulations under subsection (1)(b) as if the proportion of
25the financing income amount represented by the amount of the
reduction were specified in a statement of allocated exemptions
under section 292(4)(b).

(5) The Commissioners may by regulations amend this Part or Part 9A
in consequence of provision made by regulations under subsection
30(1) or (4).”

44 (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”.

45 After section 314 insert—

“314A 35 The financing 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) 40the relevant corporation tax accounting period (as defined in
section 371BC(3)) is a relevant accounting period of the
company in relation to a period of account of the worldwide
group,

(c) the CFC’s accounting period in relation to which the sum is
45charged ends in the period of account of the worldwide
group, and

(d) 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
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
5account of the worldwide group.

(3) “P%” has the meaning given by section 371BC(3), subject to sections
371BG(3)(a) and 371BH(3)(b).

(4) In subsection (1)(d) the reference to amounts which fall within
Chapter 5 or 6 of Part 9A or which are qualifying loan relationship
10profits is limited to amounts—

(a) which so fall or which are such profits 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 Act), and

(b) which are not excluded credits (as defined in section 314(3)
15above).”

Insurance Companies (Reserve) (Tax) Regulations 1996 (S.I. 1996/2991)

46 The Insurance Companies (Reserve) (Tax) Regulations 1996 (S.I. 1996/2991)
are amended as follows.

47 (1) Regulation 8A is amended as follows.

(2) 20In paragraph (1)—

(a) in sub-paragraph (a) for “controlled foreign company” substitute
“CFC (within the meaning of Part 9A of the Taxation (International
and Other Provisions) Act 2010)”, and

(b) in sub-paragraph (b) for “controlled foreign company” substitute
25“CFC”.

(3) In paragraph (4)—

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

(b) for “the company” substitute “the CFC”.

48 In regulation 8B for “controlled foreign company” substitute “CFC (within
30the meaning of Part 9A of the Taxation (International and Other Provisions)
Act 2010)”.

Part 4 Commencement provision

Commencement provision relating to controlled foreign companies etc

49 (1) 35The 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.

(3) Sub-paragraph (2) is subject to paragraph 50 below.

(4) 40This paragraph is to be read as if contained in Part 9A of TIOPA 2010.

50 (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.

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

(a) 5has 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
109A 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.

(5) 15Sub-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.

(6) 20The company’s accounting period mentioned in sub-paragraph (5)(a) ends
at the end of 31 December 2012 (and, accordingly, paragraph 49(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
25company 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,
3026, 27(2) and (4), 28, 29, 38, 39, 42, 47 and 48 above are to be ignored so far as
appropriate in consequence of the sub-paragraphs above.

51 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
35notwithstanding the repeal of that Chapter by paragraph 14 above).

52 The amendment made by paragraph 30 above has no effect in relation to
dividends or other distributions received before 1 January 2013.

53 The amendment made by paragraph 31 above has no effect in relation to
dividends or other distributions received before 1 January 2013 (and the
40relevant provisions of Chapter 4 of Part 17 of ICTA continue to have effect
accordingly notwithstanding the repeal of that Chapter by paragraph 14
above).

54 The amendments made by paragraphs 33 to 36 above are treated as having
come into force on 30 June 2012.

Commencement provision relating to foreign permanent establishments

55 (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) 5The 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

First accounting periods

56 (1) 10This paragraph applies in relation to a CFC the first accounting period of
which is determined in accordance with paragraph 49(2) or 50(4) above.

(2) For the purposes of sections 371SD(6), 371SK(3) and 371SM(3) of TIOPA
2010, assume that the CFC became a CFC at the time mentioned in
paragraph 49(2) or 50(4) (as the case may be).

15Elections under section 9A of CTA 2010

57 (1) This paragraph applies if—

(a) during a company’s accounting period within the meaning of
Chapter 4 of Part 17 of ICTA a notice is given in relation to the
company under paragraph 4(2C) of Schedule 24 to ICTA,

(b) 20as a result of that, the company is to be assumed under paragraph
4(2C) of Schedule 24 to ICTA to have made an election under section
9A of CTA 2010,

(c) the assumed election—

(i) does not cease to have effect before the end of the company’s
25last accounting period within the meaning of Chapter 4 of
Part 17 of ICTA to begin before 1 January 2013, and

(ii) apart from the repeal of that Chapter by paragraph 14 above,
would not have ceased to have effect at the end of that period,
and

(d) 30the company is a CFC immediately after the end of its last accounting
period mentioned in paragraph (c) and its first accounting period
within the meaning of Part 9A of TIOPA 2010 begins at that time
accordingly.

(2) In the application of Part 9A of TIOPA 2010 in relation to the company as a
35CFC, the assumption mentioned in sub-paragraph (1)(b) is to continue to be
made as if it were required to be made by section 371SH(2) of TIOPA 2010.

Exempt periods

58 (1) This paragraph applies if—

(a) there is an exempt period in relation to a company under Part 3A of
40Schedule 25 to ICTA (cases in which section 747(3) of ICTA does not
apply) which begins before 1 January 2013,

(b) the exempt period—

(i) does not end before the end of the company’s last accounting
period within the meaning of Chapter 4 of Part 17 of ICTA to
begin before 1 January 2013, and

(ii) apart from the repeal of that Chapter by paragraph 14 above,
5would not have ended at the end of that period, 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
accordingly.

(2) 10The 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
Chapter 4 of Part 17 of ICTA continues to apply in relation to the company
15as 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.

(5) Section 371JE of TIOPA 2010 applies in relation to the exempt period as if
20subsection (1)(b) were omitted.

(6) Section 371JF of TIOPA 2010 does not affect the application of the exempt
period exemption or section 371JE of TIOPA 2010 by virtue of this
paragraph.

Designer rate tax provisions

59 (1) 25The 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
30section includes power to revoke or amend the 2000 Regulations for the
purposes of that section.

Section 183

SCHEDULE 21 Relief in respect of decommissioning expenditure

Restriction of relief available in respect of decommissioning expenditure

1 35Part 8 of CTA 2010 (oil activities) is amended as follows.

2 In section 330 (supplementary charge in respect of ring fence trades), at the
end of subsection (2) insert—

“See also sections 330A and 330B (which provide for the amount of
adjusted ring fence profits to be further adjusted where
40decommissioning expenditure has been taken into account).”

3 After section 330 insert—

“330A Decommissioning expenditure taken into account in calculating ring
fence profits

(1) This section applies where—

(a) 5any decommissioning expenditure is taken into account in
calculating the amount mentioned in paragraph (a) of
subsection (3) of section 330 or the amount mentioned in
paragraph (b) of that subsection, and

(b) if that expenditure were not so taken into account, the
10amount of the adjusted ring fence profits of the company for
the accounting period would be greater than nil.

(2) In calculating for the purposes of section 330(1) the amount of the
adjusted ring fence profits of the company for the accounting period,
there is to be added an amount equal to the appropriate fraction of
15the used-up amount of that expenditure.

(3) For the purposes of this section—

• “the appropriate fraction” is

  
  
  

  —

  20where SC is the percentage specified in section 330(1) for the
  accounting period, and

• “the used-up amount”, in relation to any expenditure, is the
  difference between—

  (a)

  the adjusted ring fence profits of the company for the
  25accounting period determined in the absence of this
  section (which may be nil), and

  (b)

  what the adjusted ring fence profits of the company
  for that accounting period would be if that
  expenditure were not taken into account as
  30mentioned in subsection (1).

(4) In determining for the purposes of this section whether, and to what
extent, any losses which have been taken into account as mentioned
in subsection (1) are attributable to decommissioning expenditure—

(a) assume that any amounts of any other expenditure which
35could be taken into account in calculating those losses are
taken into account before any amounts of decommissioning
expenditure, and

(b) where any losses have been surrendered in accordance with
Part 5, the company must specify, in accordance with a basis
40determined jointly by the company, the surrendering
company (if different) and any other claimant company,
whether any of those losses is attributable to
decommissioning expenditure.

(5) But if paragraph (a) of subsection (4) would work unfavourably in
45the company’s case, the company may elect for that paragraph not to
apply in relation to it and for any amounts of expenditure which
could be taken into account in calculating those losses instead to be
taken into account in the order specified in the election.