 | |
|
SCHEDULE 17
|
| |
CONTROLLED FOREIGN COMPANIES |
| |
Section 747 |
| | 1. - (1) Section 747 of the Taxes Act 1988 (imputation of chargeable profits and creditable tax of controlled foreign companies) shall be amended as follows.
|
| |
(2) In subsection (1) (which provides that the provisions of the Chapter shall apply in relation to an accounting period of a company if the Board have reason to believe certain things and so direct)-
|
| |
(a) the words "the Board have reason to believe that", and |
| |
(b) the words "and the Board so direct,", |
| |
shall cease to have effect.
|
| |
(3) In subsection (3) (apportionment of controlled foreign company's chargeable profits and creditable tax among the persons with an interest in the company) for "Where, by virtue of a direction under subsection (1) above," there shall be substituted "Subject to section 748, where".
|
| |
(4) In subsection (4)-
|
| |
(a) in paragraph (a) (which provides for a sum to be assessed on and recovered from a company resident in the United Kingdom as if it were corporation tax) for "assessed on and recoverable from" there shall be substituted "chargeable on"; |
| |
(b) in the words following paragraph (b), for "to which the direction under subsection (1) above relates" there shall be substituted "which is mentioned in subsection (1) above". |
| |
(5) In subsection (5) (tax not to be assessed and recoverable from the resident company unless, among other things, at least 10 per cent. of the controlled foreign company's chargeable profits are apportioned to the resident company or persons connected or associated with it)-
|
| |
(a) for "assessed and recoverable from" there shall be substituted "chargeable on"; and |
| |
(b) for "10 per cent." there shall be substituted "25 per cent." |
| |
Section 747A |
| | 2. - (1) Section 747A of the Taxes Act 1988 (special rule for computing chargeable profits) shall be amended as follows.
|
| |
(2) In subsection (6), for "a direction has been given under section 747" there shall be substituted "an apportionment under section 747(3) has fallen to be made".
|
| |
(3) In subsection (8), for paragraphs (a) and (b) there shall be substituted the following paragraphs-
|
| |
 |
"(a) an apportionment under section 747(3) has fallen to be made, or |
| |
(b) it can reasonably be assumed that such an apportionment would have fallen to be made, but for the fact that the company pursued, within the meaning of Part I of Schedule 25, an acceptable distribution policy,". |
|
| |
(4) In subsection (9) (which defines a company's commencement day by reference to an appointed day) in paragraph (b), after "the appointed day" there shall be inserted "(which, for ease of reference, is 23rd March 1995)".
|
| |
Section 748 |
| | 3. - (1) Section 748 of the Taxes Act 1988 (limitations on direction-making power) shall be amended as follows.
|
| |
(2) In subsection (1) (no direction to be given if the conditions specified in any of the paragraphs of the subsection are satisfied) for the words preceding paragraph (a) there shall be substituted-
|
| |
|
"(1) No apportionment under section 747(3) falls to be made as regards an accounting period of a controlled foreign company if- ".
|
|
| |
(3) In paragraph (d) of that subsection (cases where chargeable profits do not exceed £20,000 etc) for "£20,000" there shall be substituted "£50,000".
|
| |
(4) After that paragraph there shall be inserted "or
|
| |
|
(e) as respects the accounting period, the company is, within the meaning of regulations made by the Board for the purposes of this paragraph, resident in a territory specified in the regulations and satisfies- |
| |
(i) such conditions with respect to its income or gains as may be so specified; and
|
| |
(ii) such other conditions (if any) as may be so specified."
|
|
| |
(5) After subsection (1) there shall be inserted-
|
| |
|
"(1A) Regulations under paragraph (e) of subsection (1) above may-
|
| |
(a) make different provision for different cases or with respect to different territories; |
| |
(b) make provision having effect in relation to accounting periods of controlled foreign companies ending not more than one year before the date on which the regulations are made; and |
| |
(c) contain such supplementary, incidental, consequential and transitional provision as the Board may think fit." |
|
| |
(6) Subsection (2) (which relates to directions under section 747) shall cease to have effect.
|
| |
(7) In subsection (3) (which refers to paragraphs (a) to (d) of subsection (1)) for "(d)" there shall be substituted "(e)".
|
| |
(8) Also in subsection (3), for "no direction may be given under section 747(1) with respect to that accounting period if it appears to the Board that" there shall be substituted "no apportionment under section 747(3) falls to be made as regards that accounting period if it is the case that".
|
| |
(9) For the side-note to the section, there shall be substituted "Cases where section 747(3) does not apply."
|
| |
Section 749 |
| | 4. For section 749 of the Taxes Act 1988 (residence and interest) there shall be substituted-
|
| "Residence. |
749. - (1) Subject to subsections (2) to (4) and (6) below, in any accounting period in which a company is resident outside the United Kingdom, it shall be regarded for the purposes of this Chapter as resident in that territory in which, throughout that period, it is liable to tax by reason of domicile, residence or place of management.
|
|
(2) If, in the case of any company,-
|
| |
(a) there are in any accounting period two or more territories falling within subsection (1) above, and |
| |
(b) no election or designation made under paragraph (d) or (e) of subsection (3) below in relation to an earlier accounting period of the company has effect by virtue of section 749A(1) in relation to that accounting period, |
| |
subsection (3) below shall apply with respect to that company and that accounting period.
|
| |
(3) Where this subsection applies, the company shall in that accounting period be regarded for the purposes of this Chapter as resident in only one of those territories, namely-
|
| |
(a) if, throughout the accounting period, the company's place of effective management is situated in one of those territories only, in that territory; |
| |
(b) if, throughout the accounting period, the company's place of effective management is situated in two or more of those territories, in that one of them in which, at the end of the accounting period, the greater amount of the company's assets is situated; |
| |
(c) if neither paragraph (a) nor paragraph (b) above applies, in that one of the territories falling within subsection (1) above in which, at the end of the accounting period, the greater amount of the company's assets is situated; |
| |
|
| |
(i) paragraph (a) above does not apply, and
|
| |
(ii) neither paragraph (b) nor paragraph (c) above produces one, and only one, of those territories,
|
| |
in that one of them (if any) which is specified in an election made in relation to that accounting period by any one or more persons who together have a majority assessable interest in the company in that accounting period; and |
| |
(e) if, in a case falling within paragraph (d) above, the time by which any election under that paragraph in relation to that accounting period must be made in accordance with section 749A(3)(b) expires without such an election having been made, in that one of those territories which the Board justly and reasonably designates in relation to that accounting period. |
| |
(4) If, in the case of any company,-
|
| |
(a) there are in any accounting period two or more territories falling within subsection (1) above, and |
| |
(b) an election or designation made under paragraph (d) or (e) of subsection (3) above in relation to an earlier accounting period of the company has effect by virtue of section 749A(1) in relation to the accounting period mentioned in paragraph (a) above, |
| |
the company shall in that accounting period be regarded for the purposes of this Chapter as resident in that one of those territories which is the subject of the election or designation.
|
| |
(5) If, in the case of any company, there is in any accounting period no territory falling within subsection (1) above, then, for the purposes of this Chapter, it shall be conclusively presumed that the company is in that accounting period resident in a territory in which it is subject to a lower level of taxation.
|
| |
(6) In any case where it becomes necessary for the purposes of subsection (3) above to determine in which of two or more territories the greater amount of a company's assets is situated at the end of an accounting period-
|
| |
(a) account shall be taken only of those assets which, immediately before the end of that period, are situated in those territories; and |
| |
(b) the amount of them shall be determined by reference to their market value at that time. |
| |
(7) This section is without prejudice to the provision that may be made in regulations under section 748(1)(e).
|
| |
(8) For the purposes of this section, one or more persons together have a "majority assessable interest" in a controlled foreign company in an accounting period of the company if-
|
| |
(a) each of them has an assessable interest in the company in that accounting period; and |
| |
(b) it is likely that, were an apportionment of the chargeable profits of the company for that accounting period made under section 747(3), the aggregate of the amounts which would be apportioned to them is greater than 50 per cent. of the aggregate of the amounts which would be apportioned to all the persons who have an assessable interest in the company in that accounting period. |
| |
(9) For the purposes of subsection (8) above, a person has an "assessable interest" in a controlled foreign company in an accounting period of the company if he is one of the persons who it is likely would be chargeable to tax under section 747(4)(a) on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3).
|
