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Controlled foreign companies |
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Imputation of chargeable profits and creditable tax of controlled foreign companies |
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1 (1) | Section 747 of ICTA (imputation of chargeable profits and creditable tax of |
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controlled foreign companies) is amended as follows. |
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(2) | After subsection (3) insert— |
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“(3A) | In the case of an apportionment to a company resident in the United |
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Kingdom which has made an application under section 751A which |
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has been granted, subsection (3) above has effect subject to that |
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(3) | After subsection (5) insert— |
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“(5A) | Where the resident company has made an application under section |
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751A which has been granted, it shall be assumed for the purposes of |
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subsection (5) above that— |
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(a) | each of the persons who are connected or associated with the |
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resident company has made an application under that section |
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(b) | all the applications have been granted.” |
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2 | In section 749 of ICTA (residence), insert at the end— |
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“(10) | For the purposes of subsection (8) and (9) above, the effect of any |
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application under section 751A shall be disregarded.” |
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Elections and designations under section 749: supplementary provisions |
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3 | In section 749A of ICTA (elections and designations under section 749: |
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supplementary provisions), insert at the end— |
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“(9) | For the purposes of this section the effect of any application under |
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section 751A shall be disregarded.” |
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Territories with a lower level of taxation |
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4 | In section 750(3) of ICTA (territories with a lower level of taxation), after the |
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“and” at the end of paragraph (a) insert— |
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“(ab) | there shall be disregarded the effect of any application under |
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Reduction in chargeable profits for certain activities of EEA business establishments |
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5 | In ICTA, after section 751 insert— |
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“751A | Reduction in chargeable profits for certain activities of EEA |
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(1) | This section applies if— |
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(a) | an apportionment under section 747(3) falls to be made as |
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regards an accounting period (“the relevant accounting |
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period”) of a controlled foreign company, |
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(b) | throughout that period the controlled foreign company has a |
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business establishment in an EEA territory, |
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(c) | throughout that period there are individuals who work for |
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the controlled foreign company in that territory, and |
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(d) | a company resident in the United Kingdom (“the UK resident |
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company”) has a relevant interest in the controlled foreign |
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(2) | The UK resident company may make an application to the |
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Commissioners for Her Majesty’s Revenue and Customs for the |
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chargeable profits of the controlled foreign company for the relevant |
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accounting period to be reduced by an amount (“the specified |
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amount”) specified in the application (including to nil). |
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(3) | If the Commissioners grant the application— |
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(a) | those chargeable profits are treated as reduced by the |
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(b) | the controlled foreign company’s creditable tax (if any) for |
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that period is treated as reduced by so much of that tax as, on |
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a just and reasonable basis, relates to the reduction in those |
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| for the purpose of applying section 747(3) to (5) for determining the |
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sum (if any) chargeable on the UK resident company under section |
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747(4)(a) (but for no other purpose). |
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(4) | The Commissioners may grant the application only if they are |
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satisfied that the specified amount does not exceed the amount (if |
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any) equal to so much of those chargeable profits as can reasonably |
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be regarded as representing the net economic value which— |
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(a) | arises to the appropriate body of persons (taken as a whole), |
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(b) | is created directly by qualifying work. |
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(5) | For the purposes of subsection (4) “net economic value” does not |
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include any value which derives directly or indirectly from the |
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reduction or elimination of any liability of any person to any tax or |
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duty imposed under the law of any territory. |
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(6) | For the purposes of subsection (4) “the appropriate body of persons” |
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(a) | if the controlled foreign company is not a member of a group |
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of companies, the controlled foreign company and the |
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persons who have an interest in it at any time in the relevant |
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(b) | if the controlled foreign company is a member of a group of |
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companies, all the persons falling within paragraph (a) and |
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any other person who is a member of that group of |
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| and for the purposes of this subsection “group of companies” means |
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a company and any other companies of which it has control. |
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(7) | For the purposes of subsection (4) “qualifying work” means work |
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(a) | is done in any EEA territory in which the controlled foreign |
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company has a business establishment throughout the |
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relevant accounting period, and |
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(b) | is done in that territory by individuals working for the |
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controlled foreign company there. |
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(8) | Any reference in this section to a business establishment of a |
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controlled foreign company in an EEA territory is to be construed in |
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accordance with paragraph 7 of Schedule 25 (but as if the reference |
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in that paragraph to the territory in which the company is resident |
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were to the EEA territory). |
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(9) | For the purposes of this section individuals are not to be regarded as |
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working for a company in any territory unless— |
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(a) | they are employed by the company in the territory, or |
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(b) | they are otherwise directed by the company to perform |
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duties on its behalf in the territory. |
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751B | Section 751A: supplementary |
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(1) | An application by a company under section 751A— |
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(a) | must be made in such form as the HMRC Commissioners |
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(b) | must be accompanied by such documents (or copies of |
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documents) in the company’s possession or power as those |
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Commissioners may reasonably require for the purpose of |
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determining whether to grant the application, and |
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(c) | must contain such information as those Commissioners may |
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reasonably require for that purpose. |
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(2) | An application by a company under section 751A— |
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(a) | may be made at any time on or before the filing date (within |
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the meaning of Schedule 18 to the Finance Act 1998) for the |
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relevant company tax return of the company, and |
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(b) | may be amended or withdrawn at any time before the |
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application is determined by those Commissioners. |
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(3) | If an application by a company under section 751A is granted after |
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the company has delivered its relevant company tax return, it has 30 |
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days beginning with the day on which the application is granted in |
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which to amend that return to give effect to section 751A. |
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(4) | The time limits otherwise applicable to an amendment of a company |
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tax return do not prevent an amendment being made under |
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(5) | If the HMRC Commissioners refuse an application by a company |
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under section 751A, the company may appeal to the Special |
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Commissioners against the refusal. |
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(6) | Notice of an appeal must be given in writing to the HMRC |
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Commissioners within 30 days after the application is refused. |
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(a) | if the Special Commissioners are satisfied that the relevant |
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amount is a different amount from the amount specified in |
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the application, they must direct the HMRC Commissioners |
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to grant the application as if the amount specified in it were |
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(b) | if the Special Commissioners are satisfied that the relevant |
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amount is the amount specified in the application, they must |
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direct the HMRC Commissioners to grant the application, |
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(c) | in any other case, the Special Commissioners must confirm |
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(8) | For the purposes of subsection (7) “the relevant amount” means the |
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amount (if any) equal to so much of the chargeable profits mentioned |
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in subsection (4) of section 751A as can reasonably be regarded as |
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representing the value mentioned in that subsection. |
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(9) | Part 5 of the Management Act (appeals against assessments to tax), |
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apart from section 50, applies in relation to an appeal under this |
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section as it applies in relation to an appeal against an assessment to |
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(10) | In this section “relevant company tax return”, in relation to a |
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company, means the return for the accounting period for which— |
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(a) | any sum is chargeable on the company under section |
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(b) | any sum would be so chargeable but for section 751A, |
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| in respect of the chargeable profits of the controlled foreign company |
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for the accounting period mentioned in section 751A(1). |
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(11) | In this section “the HMRC Commissioners” means the |
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Commissioners for Her Majesty’s Revenue and Customs.” |
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6 | In section 756 of ICTA (interpretation and construction of Chapter 4 of Part |
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17), after subsection (1) insert— |
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“(1A) | In this Chapter “EEA territory”, in relation to any time, means a |
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territory which is an EEA state at that time other than the United |
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(1B) | But a territory is not to be regarded for the purposes of subsection |
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(1A) above as an EEA state at any time if— |
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(a) | it is not a member State at that time, and |
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(b) | there are no arrangements made in relation to the territory |
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having effect by virtue of section 173 of the Finance Act 2006 |
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(international tax enforcement arrangements) at that time.” |
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7 (1) | Part 2 of Schedule 25 to ICTA (supplementary provision in relation to cases |
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where apportionment under section 747(3) does not apply: exempt |
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activities) is amended as follows. |
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(2) | In paragraph 5, after sub-paragraph (1) insert— |
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“(1A) | Except as provided in paragraph 8 below, the provisions of this |
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Part of this Schedule apply in relation to a company which is |
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resident in an EEA territory in the same way as they apply in |
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relation to a company which is resident elsewhere.” |
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(3) | In paragraph 8, in sub-paragraph (1), after “fulfilled” insert “in relation to a |
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company which is not resident in an EEA territory”. |
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(4) | Insert at the end of that paragraph— |
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“(5) | The condition in paragraph 6(1)(b) above shall not be regarded as |
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fulfilled in relation to a company which is resident in an EEA |
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territory unless there are sufficient individuals working for the |
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company in the territory who have the competence and authority |
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to undertake all, or substantially all, of the company’s business. |
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(6) | For the purposes of sub-paragraph (5) above, individuals are not |
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to be regarded as working for a company in any territory unless— |
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(a) | they are employed by the company in the territory, or |
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(b) | they are otherwise directed by the company to perform |
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duties on its behalf in the territory.” |
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Abolition of public quotation exemption |
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8 (1) | In section 748(1) of ICTA (cases where apportionment under section 747(3) |
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does not apply), omit paragraph (c) (together with the “or” at the end of it). |
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(2) | In Schedule 25 to ICTA (supplementary provision in relation to cases where |
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apportionment under section 747(3) does not apply), omit Part 3 (the public |
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9 | In paragraph 44(3) of Schedule 18 to FA 1998 (discovery assessment: |
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situation not disclosed by return or related documents etc), in the definition |
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of “relevant claim”, insert at the end “or an application under section 751A |
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of the Taxes Act 1988 made by or on behalf of the company which affects the |
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company’s tax return for the period in question”. |
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10 (1) | The amendments made by this Schedule have effect in relation to accounting |
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periods of controlled foreign companies beginning on or after 6th December |
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(2) | In the case of an accounting period (a “straddling period”) of a controlled |
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(a) | beginning before 6th December 2006, and |
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(b) | ending on or after that date, |
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| the amendments made by this Schedule have effect as if, for the purposes of |
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Chapter 4 of Part 17 of ICTA, so much of the straddling period as falls before |
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that date, and so much of the straddling period as falls on or after that date, |
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were separate accounting periods. |
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(3) | The company’s chargeable profits for the straddling period, and its |
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creditable tax (if any) for that period, are to be apportioned to the two |
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separate accounting periods on a just and reasonable basis. |
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(4) | Each of the following expressions— |
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“controlled foreign company”, and |
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| has the same meaning in this paragraph as in Chapter 4 of Part 17 of ICTA. |
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Venture capital schemes etc |
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Limit on number of employees of company in which investment is made |
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Corporate venturing scheme |
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1 (1) | Part 3 of Schedule 15 to FA 2000 (requirements as to issuing company) is |
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(2) | In paragraph 15 (introduction to Part) after paragraph (f) insert— |
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“(fa) | number of employees (see paragraph 22A); and”. |
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(3) | After paragraph 22 insert— |
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“The number of employees requirement |
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22A (1) | If the issuing company is a single company, the full-time |
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equivalent employee number for it must be less than 50 when the |
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relevant shares are issued. |
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(2) | If the issuing company is a parent company, the sum of— |
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(a) | the full-time equivalent employee number for it, and |
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(b) | the full-time equivalent employee numbers for each of its |
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| must be less than 50 when the relevant shares are issued. |
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(3) | The full-time equivalent employee number for a company is |
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| Find the number of full-time employees of the company. |
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| Add, for each employee of the company who is not a full-time |
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employee, such fraction as is just and reasonable. |
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| The result is the full-time equivalent employee number. |
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(4) | In this paragraph references to an employee— |
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(a) | include a director, but |
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(i) | an employee on maternity or paternity leave, or |
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(ii) | a student on vocational training.” |
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(4) | The amendments made by this paragraph do not have effect in relation to |
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shares issued before the day on which this Act is passed. |
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Enterprise investment scheme |
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2 (1) | Chapter 4 of Part 5 of ITA 2007 (the issuing company) is amended as follows. |
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(2) | In section 180 (overview of Chapter 4), after paragraph (e) insert— |
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“(ea) | number of employees (see section 186A),”. |
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(3) | After section 186 insert— |
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“186A | The number of employees requirement |
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(1) | If the issuing company is a single company, the full-time equivalent |
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employee number for it must be less than 50 when the relevant |
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(2) | If the issuing company is a parent company, the sum of— |
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(a) | the full-time equivalent employee number for it, and |
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(b) | the full-time equivalent employee numbers for each of its |
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| must be less than 50 when the relevant shares are issued. |
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(3) | The full-time equivalent employee number for a company is |
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| Find the number of full-time employees of the company. |
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| Add, for each employee of the company who is not a full-time |
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employee, such fraction as is just and reasonable. |
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| The result is the full-time equivalent employee number. |
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(4) | In this section references to an employee— |
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(a) | include a director, but |
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(i) | an employee on maternity or paternity leave, or |
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(ii) | a student on vocational training.” |
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(4) | The amendments made by this paragraph do not have effect in relation to— |
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(a) | shares issued before the day on which this Act is passed, or |
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(b) | shares issued to the managers of an approved fund which closed |
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(5) | For the purposes of sub-paragraph (4)(b)— |
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(a) | “the managers of an approved fund” has the same meaning as in |
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section 251 of ITA 2007, and |
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(b) | the reference to shares issued to the managers of an approved fund |
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is to shares issued to those managers as nominee for an individual |
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who has invested in the fund. |
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