Finance (No.2) Bill

Finance (No.2) Bill - continued	House of Commons
SCHEDULE 17, CONTROLLED FOREIGN COMPANIES - continued

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Determinations requiring the sanction of the Board

11. After section 754A of the Taxes Act 1988 there shall be inserted-

"Determinations requiring the sanction of the Board.	754B. - (1) This section has effect where a determination requiring the Board's sanction is made for any of the following purposes, that is to say-
	(a) the giving of a closure notice; or
	(b) the making of a discovery assessment.
	(2) If the closure notice or, as the case may be, notice of the discovery assessment is given to any person without-
	(a) the determination, so far as it is taken into account in the closure notice or the discovery assessment, having been approved by the Board, or
	(b) notification of the Board's approval having been served on that person at or before the time of the giving of the notice,
	the closure notice or, as the case may be, the discovery assessment shall be deemed to have been given or made (and in the case of an assessment notified) in the terms (if any) in which it would have been given or made had that determination not been taken into account.
	(3) A notification under subsection (2)(b) above-
	(a) must be in writing;
	(b) must state that the Board have given their approval on the basis that-
	(i) an amount of chargeable profits, and
	(ii) an amount of creditable tax (which may be nil),
	for the accounting period of the controlled foreign company in question fall to be apportioned under section 747(3) to the person in question;
	(c) must state the amounts mentioned in sub-paragraphs (i) and (ii) of paragraph (b) above; and
	(d) subject to paragraphs (a) to (c) above, may be in such form as the Board may determine.
	(4) For the purposes of this section, the Board's approval of a determination requiring their sanction-
	(a) must be given specifically in relation to the case in question and must apply to the amount determined; but
	(b) subject to that, may be given by the Board (either before or after the making of the determination) in any such form or manner as they may determine.
	(5) In this section references to a determination requiring the Board's sanction are references (subject to subsection (6) below) to any determination of the amount of chargeable profits or creditable tax for an accounting period of a controlled foreign company which falls to be apportioned to a particular person under section 747(3).
	(6) For the purposes of this section, a determination shall be taken, in relation to a closure notice or a discovery assessment, not to be a determination requiring the Board's sanction if-
	(a) an agreement about the relevant amounts has been made between an officer of the Board and the person in whose case it is made;
	(b) that agreement is in force at the time of the giving of the closure notice or, as the case may be, notice of the assessment; and
	(c) the matters to which the agreement relates include the amount determined.
	(7) In paragraph (a) of subsection (6) above, "the relevant amounts" means-
	(a) the amount of chargeable profits, and
	(b) the amount of creditable tax (which may be nil),
	for the accounting period of the controlled foreign company in question which fall to be apportioned under section 747(3) to the person mentioned in that paragraph.
	(8) For the purposes of subsection (6) above an agreement made between an officer of the Board and any person ("the taxpayer") in relation to any matter shall be taken to be in force at any time if, and only if-
	(a) the agreement is one which has been made or confirmed in writing;
	(b) that time is after the end of the period of thirty days beginning-
	(i) in the case of an agreement made in writing, with the day of the making of the agreement, and
	(ii) in any other case, with the day of the agreement's confirmation in writing; and
	(c) the taxpayer has not, before the end of that period of thirty days, served a notice on an officer of the Board stating that he is repudiating or resiling from the agreement.
	(9) The references in subsection (8) above to the confirmation in writing of an agreement are references to the service on the taxpayer by an officer of the Board of a notice-
	(a) stating that the agreement has been made; and
	(b) setting out the terms of the agreement.
	(10) The matters that may be questioned on so much of any appeal by virtue of any provision of the Management Act or Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters) as relates to a determination the making of which has been approved by the Board for the purposes of this section shall not include the Board's approval, except to the extent that the grounds for questioning the approval are the same as the grounds for questioning the determination itself.
	(11) In this section-
	"closure notice" means a notice under paragraph 32 of Schedule 18 to the Finance Act 1998 (completion of enquiry and statement of conclusions);
	"discovery assessment" means a discovery assessment or discovery determination under paragraph 41 of that Schedule (including an assessment by virtue of paragraph 52 of that Schedule)."

Section 755

12. Section 755 of the Taxes Act 1988 (information relating to controlled foreign companies) shall cease to have effect.

Treatment of chargeable profits and creditable tax apportioned to company carrying on life assurance business

13. After section 755 of the Taxes Act 1988 there shall be inserted-

"Treatment of chargeable profits and creditable tax apportioned to company carrying on life assurance business.	755A. - (1) This section applies in any case where-
	(a) an amount ("the apportioned profit") of a controlled foreign company's chargeable profits for an accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom ("the UK company");
	(b) the UK company carries on life assurance business in that one of its accounting periods ("the relevant accounting period") in which ends the accounting period of the controlled foreign company; and
	(c) the property or rights which represent the UK company's relevant interest in the controlled foreign company constitute to any extent assets of the UK company's long term business fund.
	(2) Subsections (3) and (4) below apply if, in the case of the relevant accounting period, the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business.
	(3) Where this subsection applies, the "appropriate rate" for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 in relation to the policy holders' part of any BLAGAB apportioned profit shall be-
	(a) if a single rate of tax under section 88A(1) of the Finance Act 1989 (lower corporation tax rate on certain insurance company profits) is applicable in relation to the relevant accounting period, that rate; or
	(b) if more than one such rate of tax is applicable in relation to the relevant accounting period, the average of those rates over the whole of that period.
	(4) Where this subsection applies, the "appropriate rate" for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 shall be nil in relation to so much of the apportioned profit as is referable to-
	(a) pension business,
	(b) life reinsurance business, or
	(c) overseas life assurance business,
	carried on by the UK company.
	(5) If, in the case of the relevant accounting period, the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, the "appropriate rate" for the purposes of-
	(a) section 747(4)(a), and
	(b) paragraph 1 of Schedule 26,
	shall be nil in relation to so much of the apportioned profit as is referable to the UK company's relevant interest so far as represented by assets of its long term business fund.
	(6) If, in the case of the relevant accounting period,-
	(a) the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business,
	(b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company, and
	(c) the apportioned profit is to any extent referable to a category of business specified in paragraphs (a) to (c) of subsection (4) above,
	so much of the creditable tax so apportioned as is attributable to the apportioned profit so far as so referable shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
	(7) If, in the case of the relevant accounting period,-
	(a) the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, and
	(b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company,
	so much of the creditable tax so apportioned as is attributable to so much of the apportioned profit as is referable to the UK company's relevant interest so far as represented by assets of the UK company's long term business fund shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
	(8) Any set off under paragraph 1 or 2 of Schedule 26 against the UK company's liability to tax under section 747(4)(a) in respect of the apportioned profit shall be made against only so much of that liability as is attributable to the eligible part of the apportioned profit.
	(9) Accordingly, in the application of paragraph 2 of Schedule 26 in relation to the apportioned profit, in the definition of "the relevant maximum" in sub-paragraph (3)-
	(a) the reference to the liability to tax referred to in sub-paragraph (1) of that paragraph shall be taken as a reference to only so much of that liability as is attributable to the eligible part of the apportioned profit; and
	(b) in paragraph (a), for the amount there described there shall be substituted a reference to the eligible part of the apportioned profit.
	(10) For the purposes of this section, the "eligible part" of the apportioned profit is any BLAGAB apportioned profit, other than the policy holders' part.
	(11) For the purposes of this section, the "policy holders' part" of any BLAGAB apportioned profit is-
	(a) in a case where subsection (4) of section 88A of the Finance Act 1989 applies, the whole; and
	(b) in any other case, the fraction described in subsection (5)(b) of that section.
	(12) In this section-
	"BLAGAB apportioned profit" means so much of the apportioned profit as is referable to basic life assurance and general annuity business carried on by the UK company;
	"long term business fund" has the meaning given by section 431(2).
	(13) For the purposes of this section, the part of the apportioned profit which is referable to-
	(a) pension business,
	(b) life reinsurance business,
	(c) overseas life assurance business, or
	(d) basic life assurance and general annuity business,
	carried on by the UK company is the part which would have been so referable under section 432A had the apportioned profit been a dividend paid to the UK company at the end of the accounting period mentioned in subsection (1)(a) above in respect of the property or rights which represent the UK company's relevant interest in the controlled foreign company.
	(14) For the purposes of this section, any attribution of creditable tax to a particular part of the apportioned profit shall be made in the proportion which that part of the apportioned profit bears to the whole of the apportioned profit."

Prepared 24 June 1998