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197 Controlled foreign companies: exempt activities | |
(1) Schedule 42 to this Act (which amends Part 2 of Schedule 25 to the Taxes Act | |
1988 (exempt activities)) shall have effect. | |
(2) The amendments made by that Schedule have effect in relation to accounting | |
periods of a controlled foreign company beginning on or after 27th November | 5 |
2002. | |
(3) In this section “accounting period” and “controlled foreign company” have the | |
same meaning as in Chapter 4 of Part 17 of the Taxes Act 1988. | |
(4) This section shall be taken to have come into force on 27th November 2002. | |
198 Application of CFC provisions to Hong Kong and Macao companies | 10 |
(1) In Part 2 (exempt activities) of Schedule 25 to the Taxes Act 1988 (cases where | |
section 747(3) does not apply), in paragraph 5 insert after sub-paragraph (2)— | |
“(3) In the case of a controlled foreign company— | |
(a) which is, by virtue of section 749(5), presumed to be resident | |
in a territory in which it is subject to a lower level of taxation, | 15 |
(b) the business affairs of which are, throughout the accounting | |
period in question, effectively managed in a special | |
administrative region, and | |
(c) which is liable to tax for that period in that region, | |
references in the following provisions of this Part of this Schedule to | 20 |
the territory in which that company is resident shall be construed as | |
references to that region. | |
(4) In sub-paragraph (3) above “special administrative region” means | |
the Hong Kong or the Macao Special Administrative Region of the | |
People’s Republic of China. | 25 |
(5) Where sub-paragraph (3) above applies, it applies in place of sub- | |
paragraph (2).”. | |
(2) This section shall be deemed to have had effect— | |
(a) as from 1st July 1997, so far as relating to the Hong Kong Special | |
Administrative Region; | 30 |
(b) as from 20th December 1999, so far as relating to the Macao Special | |
Administrative Region. | |
Administrative matters | |
199 Deduction of tax from interest: recognised clearing houses etc | |
(1) Section 349 of the Taxes Act 1988 (payment of annual interest etc) is amended | 35 |
as follows. | |
(2) In subsection (3) (cases where obligation to make interest payments net of tax | |
does not apply), at the end insert “or— | |
(j) to interest paid by a recognised clearing house or recognised | |
investment exchange carrying on business as provider of a | 40 |
central counterparty clearing service, in the ordinary course of | |
that business, on margin or other collateral deposited with it by | |
users of the service; or | |
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(k) to interest treated by virtue of section 730A(2)(a) or (b) (repos) | |
as paid by a recognised clearing house or recognised | |
investment exchange in respect of contracts made by it as | |
provider of a central counterparty clearing service.”. | |
(3) In subsection (6) (definitions), at the appropriate places insert— | 5 |
““central counterparty clearing service” means the service | |
provided by a clearing house or investment exchange to the | |
parties to a transaction where there are contracts between each | |
of the parties and the clearing house or investment exchange (in | |
place of, or as an alternative to, a contract directly between the | 10 |
parties);”; | |
““recognised clearing house” and “recognised investment | |
exchange” have the same meaning as in the Financial Services | |
and Markets Act 2000 (see section 285 of that Act);”. | |
(4) This section applies in relation to payments of interest on or after 14th April | 15 |
2003. | |
200 Authorised unit trusts: interest distributions paid gross | |
(1) Chapter 3 of Part 12 of the Taxes Act 1988 (unit trust schemes) is amended as | |
follows. | |
(2) In section 468L(4) (obligation to deduct tax from interest distributions to be | 20 |
subject to provision made by sections 468M and 468N), for “sections 468M and | |
468N” substitute “section 468M”. | |
(3) For sections 468M and 468N substitute— | |
“468M Cases where no obligation to deduct tax | |
(1) Where an interest distribution is made for a distribution period to a unit | 25 |
holder, any obligation to deduct under section 349(2) does not apply to | |
the interest distribution if— | |
(a) the unit holder is a company or the trustees of a unit trust | |
scheme, or | |
(b) either the residence condition or the reputable intermediary | 30 |
condition is on the distribution date fulfilled with respect to the | |
unit holder. | |
(2) Section 468O makes provision about the circumstances in which the | |
residence condition or the reputable intermediary condition is fulfilled | |
with respect to a unit holder.”. | 35 |
(4) Section 468O (residence condition) is amended as follows. | |
(5) In subsection (1), for “sections 468M and 468N” substitute “section 468M”. | |
(6) After that subsection insert— | |
“(1A) For the purposes of section 468M, the reputable intermediary condition | |
is fulfilled with respect to a unit holder if— | 40 |
(a) the interest distribution is paid on behalf of the unit holder to a | |
company, | |
(b) the company either is subject to the EC Money Laundering | |
Directive, or to equivalent non-EC provisions, or is an | |
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associated company resident in a regulating country or territory | |
of a company which is so subject, and | |
(c) the trustees of the authorised unit trust have reasonable | |
grounds for believing that the unit holder is not ordinarily | |
resident in the United Kingdom. | 5 |
(1B) For the purposes of subsection (1A)(b) above— | |
(a) a company is subject to the EC Money Laundering Directive if | |
it is a credit institution or financial institution as defined by | |
Article 1 of Directive 91/308/EEC, as amended by Directive | |
2001/97/EC, | 10 |
(b) a company is subject to equivalent non-EC provisions if it is | |
required by the law of any country or territory which is not a | |
member State to comply with requirements similar to those | |
which, under Article 3 of that Directive (as so amended), | |
member States must ensure are complied with by credit | 15 |
institutions and financial institutions, | |
(c) a company is to be treated as another’s associated company if it | |
would be so treated for the purposes of Part 11 (see section 416), | |
and | |
(d) a country or territory is a regulating country or territory if it | 20 |
either is a member State or imposes requirements similar to | |
those which, under Article 3 of that Directive (as so amended), | |
member States must ensure are complied with by credit | |
institutions and financial institutions. | |
(1C) If Directive 91/308/EEC ceases to have effect, or is further amended, | 25 |
the Treasury may by order make consequential amendments in | |
subsections (1A) and (1B) above.”. | |
(7) In the sidenote, insert at the end “and reputable intermediary condition”. | |
(8) In section 468P(1) (residence declarations)— | |
(a) for “468O” substitute “468O(1)”, and | 30 |
(b) for “subsections (2) to (4)” substitute “subsection (2) or (3)”. | |
(9) After section 468P insert— | |
“468PA Section 468O(1A): consequences of reasonable but incorrect belief | |
Where— | |
(a) an interest distribution is made to a unit holder by the trustees | 35 |
of an authorised unit trust, | |
(b) the trustees, in reliance on the reputable intermediary condition | |
being fulfilled with respect to the unit holder, do not comply | |
with the obligation under section 349(2) to make a deduction | |
from the interest distribution, | 40 |
(c) that obligation would apply but for that condition being so | |
fulfilled, and | |
(d) (contrary to the belief of the trustees) the unit holder is in fact | |
ordinarily resident in the United Kingdom, | |
section 350 and Schedule 16 have effect as if that obligation applied. | 45 |
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468PB Regulations supplementing sections 468M to 468PA | |
(1) The Board may by regulations make provision for giving effect to | |
sections 468M to 468PA. | |
(2) The regulations may, in particular, include provision modifying the | |
application of those sections in relation to interest distributions made to | 5 |
or received under a trust. | |
(3) The regulations may, in particular, include provision for the giving by | |
officers of the Board of notices requiring trustees of authorised unit | |
trusts to supply information and make available books, documents and | |
other records for inspection on behalf of the Board. | 10 |
(4) The regulations may— | |
(a) make provision in relation to times before they are made, | |
(b) make different provision for different cases, and | |
(c) make such supplementary, incidental, consequential or | |
transitional provision as appears to the Board to be | 15 |
appropriate.”. | |
(10) Section 98 of the Taxes Management Act 1970 (c. 9) (penalties: provisions | |
requiring information etc in response to notices) is amended as follows. | |
(11) In subsection (4A)(b), for “or (4D)” substitute “, (4D) or (4E)”. | |
(12) After subsection (4D) insert— | 20 |
“(4E) A payment is within this subsection if— | |
(a) it is an interest distribution made to a unit holder by the trustees | |
of an authorised unit trust, | |
(b) the trustees, in purported reliance on the reputable | |
intermediary condition being fulfilled with respect to the unit | 25 |
holder, do not comply with the obligation under section 349(2) | |
of the principal Act to make a deduction from the interest | |
distribution, | |
(c) that obligation would apply if that condition were not so | |
fulfilled, and | 30 |
(d) the trustees did not believe that the unit holder was not | |
ordinarily resident in the United Kingdom or could not | |
reasonably have so believed (so that that condition was not so | |
fulfilled). | |
Expressions used in this subsection have the same meaning as in | 35 |
Chapter 3 of Part 12 of the principal Act.”. | |
(13) In the first column of the Table, after the entry relating to regulations under | |
section 431E(1) or 441A(3) of the principal Act, insert— | |
“section 468P(6); | |
regulations under section 468PB(3);”. | 40 |
(14) This section has effect in relation to interest distributions made on or after 16th | |
October 2002. | |
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