Law

Taxation (International and Other Provisions) Act 2010

United Kingdom · statute

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In force since 2026-03-18, as the publisher states.

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Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 675 provisions
  1. Title and introductory text
  2. 1 Overview of Act
  3. 2 Giving effect to arrangements made in relation to other territories
  4. 3 Arrangements may include retrospective or supplementary provision
  5. 4 Meaning of “double taxation” in sections 2 and 3
  6. 5 Orders under section 2: contents and procedure
  7. 6 The effect given by section 2 to double taxation arrangements
  8. 7 General regulations
  9. 8 Interpretation: “unilateral relief arrangements” means rules 1 to 9, etc
  10. 9 Rule 1: the unilateral entitlement to credit for non-UK tax
  11. 10 Rule 2: accrued income profits
  12. 11 Rule 3: interaction between double taxation arrangements and rules 1 and 2
  13. 12 Rule 4: cases in which, and calculation of, credit allowed for tax on dividends
  14. 13 Rule 5: credit for tax charged directly on dividend
  15. 14 Rule 6: credit for underlying tax on dividend paid to 10% associate of payer
  16. 15 Rule 7: credit for underlying tax on dividend paid to sub-10% associate
  17. 16 Rule 8: credit for underlying tax on dividend paid by exchanged associate
  18. 17 Rule 9: credit in relation to dividends for spared tax
  19. 18 Entitlement to credit for foreign tax reduces UK tax by amount of the credit
  20. 19 Time limits for claims for relief under section 18(2)
  21. 20 Foreign tax includes tax spared because of international development relief
  22. 21 Meaning of “the arrangements”, “the non-UK territory”, “foreign tax” etc
  23. 23 Time limits for claims for relief under section 22(2)
  24. 25 Credit not allowed if relief allowed against overseas tax
  25. 26 Credit not allowed under arrangements unless taxpayer is UK resident
  26. 27 Credit not allowed if person elects against credit
  27. 28 Unilateral relief for Isle of Man or Channel Islands tax
  28. 29 Unilateral relief for tax on income from employment or office
  29. 30 Unilateral relief for non-UK tax on non-resident's UK branch or agency etc
  30. 31 Calculation of income or gain where remittance basis does not apply
  31. 32 Calculation of amount received where UK tax charged on remittance basis
  32. 33 Limit on credit: minimisation of the foreign tax
  33. 34 Reduction in credit: payment by reference to foreign tax
  34. 35 Disallowed credit: use as a deduction
  35. 36 Amount of limit
  36. 37 Credit against tax on trade income: further rules
  37. 38 Credit against tax on royalties: further rules
  38. 39 Credit reduced by reference to accrued income losses
  39. 40 Amount of limit
  40. 41 Amount of limit
  41. 42 Amount of limit
  42. 43 Profits attributable to permanent establishments for purposes of section 42(2)
  43. 44 Credit against tax on trade income
  44. 45 Credit against tax on trade income: anti-avoidance rules
  45. 46 Applying section 44(2): asset in hedging relationship with derivative contract
  46. 47 Applying section 44(2): royalty income
  47. 48 Applying section 44(2): “portfolio” of transactions, arrangements or assets
  48. 49 Restricting section 44(3) if company is a bank or connected with a bank
  49. 49A Limit on credit in cases involving qualifying loan relationships of CFCs
  50. 49B Applying section 42(2) to non-trading credits from loan relationships etc
  51. 50 Tax for period on loan relationships
  52. 51 Tax for period on intangible fixed assets
  53. 52 General deductions
  54. 53 Earlier years' non-trading deficits on loan relationships
  55. 54 Non-trading debits on loan relationships
  56. 55 Current year's non-trading deficits on loan relationships
  57. 56 Non-trading debits on intangible fixed assets
  58. 57 Credit in respect of dividend: taking account of underlying tax
  59. 58 Calculation if dividend paid by non-resident company to resident company
  60. 59 Meaning of “relevant profits” in section 58
  61. 60 Underlying tax to be left out of account on claim to that effect
  62. 61 Calculation if section 58 does not apply
  63. 62 Meaning of “relevant profits” in section 61
  64. 63 Non-UK company dividend paid to 10% investor: relief for UK and other tax
  65. 64 Meaning of “dividend-paying chain” of companies
  66. 65 Relief for underlying tax paid by company lower in dividend-paying chain
  67. 66 Limitations on section 65(4)
  68. 67 Restriction of relief if underlying tax at rate higher than rate of corporation tax
  69. 68 Meaning of “avoidance scheme” in section 67
  70. 69 Dividends paid out of transferred profits
  71. 70 Underlying tax reflecting interest on loans
  72. 71 Foreign taxation of group as single entity
  73. 71A Circumstances in which section 71B applies
  74. 71B Reduction of foreign tax paid on profits of overseas PE
  75. 72 Application of section 73(1)
  76. 73 Carry-forward and carry-back of unrelieved foreign tax
  77. 74 Rules for carrying back unrelieved foreign tax
  78. 75 Two or more establishments treated as a single establishment
  79. 76 Former and subsequent establishments regarded as distinct establishments
  80. 77 Claims for relief under section 73(1)
  81. 78 Meaning of “overseas permanent establishment”
  82. 79 Time limits for action if tax adjustment makes credit excessive or insufficient
  83. 80 Duty to give notice that adjustment has rendered credit excessive
  84. 81 Countering effect of avoidance arrangements
  85. 82 Conditions for the purposes of section 81(1)
  86. 83 Schemes and arrangements referred to in section 82(4)
  87. 84 Section 83(2) and (4): schemes enabling attribution of foreign tax
  88. 85 Section 83(2) and (4): schemes about effect of paying foreign tax
  89. 85A Section 83(2) and (4): schemes involving deemed foreign tax
  90. 86 Section 83(2) and (4): schemes about claims or elections etc
  91. 87 Section 83(2) and (4): schemes that would reduce a person's tax liability
  92. 88 Section 83(2) and (4): schemes involving tax-deductible payments
  93. 89 Contents of counteraction notice
  94. 90 Consequences of counteraction notices
  95. 91 Counteraction notices given before tax return made
  96. 92 Counteraction notices given after tax return made
  97. 93 Amendment, closure notices and discovery assessments in section 92 cases
  98. 94 Information made available for the purposes of section 92(4)
  99. 95 Interpretation of sections 89 to 94
  100. 96 Companies with overseas branches: restriction of credit
  101. 97 Companies with more than one category of business: restriction of credit
  102. 97A Commercial allocation of relevant income to different categories of long-term business
  103. 98 Attribution for section 97 purposes if category is gross roll-up business
  104. 99 Allocation of expenses etc in calculations under section 35 of CTA 2009
  105. 100 First limitation for purposes of section 99(2)
  106. 101 Second limitation for purposes of section 99(2)
  107. 102 Interpreting sections 99 to 101 for life assurance or gross roll-up business
  108. 103 Interpreting sections 99 to 101 ...
  109. 104 Interpreting sections 100 and 101: amounts referable to category of business
  110. 105 Meaning of “chargeable gain”
  111. 106 Chapters 1 and 2 apply to capital gains tax separately from other taxes
  112. 107 Disregard of foreign tax referable to derivative contract
  113. 108 Disregard of foreign tax attributable to interest under a loan relationship
  114. 109 Repo cases in which no disregard under section 108
  115. 110 Stock-lending cases in which no disregard under section 108
  116. 111 When payment to beneficiary treated as arising from foreign source
  117. 112 Deduction from income for foreign tax (instead of credit against UK tax)
  118. 113 Deduction from capital gain for foreign tax (instead of credit against UK tax)
  119. 114 Time limits for action if tax adjustment makes reduction too large or too small
  120. 115 Duty to give notice that adjustment has rendered reduction too large
  121. 116 Introduction to section 117
  122. 117 Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets
  123. 118 Introduction to section 119
  124. 119 Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets
  125. 120 Introduction to section 121
  126. 121 Tax treated as chargeable in respect of relevant transactions
  127. 122 Tax treated as chargeable in respect of gains on transfer of non-UK business
  128. 123 Interpretation of sections 116 to 122
  129. 124 Giving effect to solutions to cases and mutual agreements resolving cases
  130. 125 Effect of, and deadline for, presenting a case
  131. 126 Meaning of “the Arbitration Convention”
  132. 127 Giving effect to agreements, decisions and opinions under the Convention
  133. 128 Disclosure under the Convention
  134. 128A Power by regulations to give effect to international obligations etc
  135. 128B Giving effect to requirements under section 128A regulations
  136. 128C Disclosure under international obligations etc
  137. 129 Disclosure where relief given overseas for tax paid in the United Kingdom
  138. 130 Interpreting provision about UK taxation of profits of foreign enterprises
  139. 130A Interpreting provision about UK taxation of pensions etc
  140. 131 Interpreting provision about interest influenced by special relationship
  141. 132 Interpreting provision about royalties influenced by special relationship
  142. 133 Special relationship rule for royalties: matters to be shown by taxpayer
  143. 134 Correcting assessments where relief is available
  144. 135 Relief under this Part: introductory
  145. 136 Interpretation of Part
  146. 137 Income tax credit etc for special withholding tax
  147. 138 Amount and application of the deemed tax under section 137
  148. 139 Capital gains tax credit etc for special withholding tax
  149. 140 Provisions about the deemed tax under section 139
  150. 141 Credit under Chapter 2 of Part 2 to be allowed first
  151. 142 Conditions for purposes of section 143
  152. 143 Taking account of special withholding tax in calculating income or gains
  153. 144 Issue of certificate
  154. 145 Refusal to issue certificate and appeal against refusal
  155. 146 Application of this Part
  156. 147 Tax calculations to be based on arm's length, not actual, provision
  157. 148 The “participation condition”
  158. 148A Participation condition treated as met: transfer pricing notice
  159. 149 “Actual provision” and “affected persons”
  160. 150 “Transaction” and “series of transactions”
  161. 151 “Arm's length provision”
  162. 152 Arm's length provision where actual provision relates to securities
  163. 153 Arm's length provision where security issued and guarantee given
  164. 153A Certain guarantees not capable of being arm’s length
  165. 153B Election for deemed guarantee
  166. 154 Interpretation of sections 153A and 153B
  167. 155 “Potential advantage” in relation to United Kingdom taxation
  168. 156 “Losses” and “profits”
  169. 157 Direct participation
  170. 158 Indirect participation: defined by sections 159 to 161
  171. 159 Indirect participation: potential direct participant
  172. 160 Indirect participation: one of several major participants
  173. 161 Indirect participation: involvement in financing arrangements
  174. 162 Indirect participation: sections 148 , 175 and 219(2): further financing cases
  175. 162A Agreements for common management
  176. 162B Arrangements to avoid participation condition
  177. 163 Meaning of “connected” in sections 159 and 161
  178. 164 Part to be interpreted in accordance with OECD principles
  179. 164A UK to UK Exemption
  180. 165 Exemption for dormant companies
  181. 166 Exemption for small and medium-sized enterprises
  182. 167 Small and medium-sized enterprises: exceptions from exemption
  183. 167A Small enterprises: exception from exemption: transfer pricing notice
  184. 168 Medium-sized enterprises: exception from exemption: transfer pricing notice
  185. 169 Giving of transfer pricing notices
  186. 170 Appeals against transfer pricing notices
  187. 171 Tax returns where transfer pricing notice given
  188. 172 Meaning of “small enterprise” and “medium-sized enterprise”
  189. 173 Meaning of “qualifying territory” and “non-qualifying territory”
  190. 173A Exchange gains and losses arising as a result of qualifying loan relationships and derivative contracts
  191. 174 Claim by the affected person who is not potentially advantaged etc
  192. 174A Claims under section 174 where disadvantaged person within charge to income tax
  193. 175 Application of section 174 where guarantee disallowed
  194. 176 Claims under section 174: advantaged person must have made return
  195. 177 Time for making, or amending, claim under section 174
  196. 178 Meaning of “return” in sections 176 and 177
  197. 179 Compensating payment if advantaged person is controlled foreign company
  198. 180 Application of section 174(2)(a) in relation to transfers of trading stock etc
  199. 181 Section 182 applies to claims where actual provision relates to borrowing
  200. 182 Making of section 182 claims
  201. 183 Giving effect to section 182 claims
  202. 184 Amending a section 182 claim if it is followed by relevant notice
  203. 185 Notice to potential claimants
  204. 186 Extending claim period if notice under section 185 not given or given late
  205. 187 Tax treatment if actual interest exceeds arm's length interest
  206. 187A Excess interest treated as a ... distribution
  207. 188 Double taxation relief by way of credit for foreign tax
  208. 189 Double taxation relief by way of deduction for foreign tax
  209. 190 Meaning of “relevant notice”
  210. 191 When sections 192 to 194 apply
  211. 192 Attribution to guarantor company of things done by borrower
  212. 192A Provision for cases within Part 6A
  213. 193 Interaction between claims under sections 174 and 192(1)
  214. 194 Claims under section 192(1): general provisions
  215. 195 Qualifying conditions for purposes of section 196
  216. 196 Balancing payments between affected persons: no charge to, or relief from, tax
  217. 197 Qualifying conditions for purposes of section 198
  218. 198 Balancing payments by guarantor to borrower: no charge to, or relief from, tax
  219. 199 Pre-conditions for making election under section 200
  220. 200 Election to pay tax rather than make balancing payments
  221. 201 Pre-conditions for making election under section 202
  222. 202 Election, in guarantee case, to pay tax rather than make balancing payments
  223. 203 Elections under section 200 or 202
  224. 204 Meaning of “capital market condition” in sections 199 and 201
  225. 205 Provision made or imposed between ring-fence trade and other activities
  226. 206 Meaning of “oil-related ring-fence trade” in sections 205 and 218
  227. 206A Modification of basic rule where allowances restricted for certain expenditure
  228. 207 Application of Part to unit trusts
  229. 208 The determinations which require the Commissioners' sanction
  230. 209 Determinations exempt from requirement for Commissioners' sanction
  231. 210 The requirement for the Commissioners' sanction
  232. 211 Restriction of right to appeal against Commissioners' approval
  233. 212 Appeals
  234. 213 Capital allowances
  235. 214 Chargeable gains
  236. 215 Manner of making adjustments to give effect to Part
  237. 216 Meaning of “the relevant activities”
  238. 217 Meaning of “control” and “firm”
  239. 217A Introduction
  240. 217B Unassessed transfer pricing profits
  241. 217C Conditions for being assessed under this Part at the UTPP rate
  242. 217D Effective tax mismatch outcome
  243. 217E Tax design condition
  244. 217F Preliminary notices
  245. 217G Representations by the company
  246. 217H Assessment
  247. 217I Amendment of company tax return by company
  248. 217J Amendment of assessment by HMRC
  249. 217K No postponement except before assessment is finalised for tax on same profits
  250. 217L Closure notices: rules relating to period for amendments
  251. 217M Appeal against assessment
  252. 217N Review of assessment
  253. 217P Settling of appeal by agreement
  254. 217Q No repayment
  255. 217R Exclusion of reliefs, deductions and set-offs
  256. 217S Assessment otherwise than at UTPP rate: no deduction for excess losses
  257. 217T Interpretation
  258. 218 Meaning of “advance pricing agreement”
  259. 219 Meaning of “associate” in section 218(2)(e)
  260. 220 Effect of agreement on party to it
  261. 221 Effect of revocation of agreement or breach of its conditions
  262. 222 Effect of agreement on non-parties
  263. 223 Application for agreement
  264. 224 Provision in agreement about years ended or begun before agreement made
  265. 225 Modification and revocation of agreement
  266. 226 Annulment of agreement for misrepresentation
  267. 227 Penalty for misrepresentation in connection with agreement
  268. 228 Party to agreement: duty to provide information
  269. 229 Modifications of agreement for double taxation purposes
  270. 230 Interpretation of Part: meaning of “Commissioners” and “officer”
  271. 259A Overview of Part
  272. 259B “Tax” means certain taxes on income and includes foreign tax etc
  273. 259BA References to equivalent provision to this Part under the law of a territory outside the United Kingdom
  274. 259BB Meaning of “payment”, “quasi-payment”, “payer”, “payee” etc
  275. 259BC The basic rules
  276. 259BD Chargeable companies in respect of CFCs and foreign CFCs
  277. 259BE Meaning of “hybrid entity”, “investor” and “investor jurisdiction”
  278. 259BF Meaning of “permanent establishment”
  279. 259C Overview of Chapter
  280. 259CA Circumstances in which the Chapter applies
  281. 259CB Hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent
  282. 259CC Interpretation of section 259CB
  283. 259CD Counteraction where the payer is within the charge to corporation tax for the payment period
  284. 259CE Counteraction where a payee is within the charge to corporation tax
  285. 259D Overview of Chapter
  286. 259DA Circumstances in which the Chapter applies
  287. 259DB Meaning of “hybrid transfer arrangement”, “underlying instrument” etc
  288. 259DC Hybrid transfer deduction/non-inclusion mismatches and their extent
  289. 259DD Interpretation of section 259DC
  290. 259DE The financial trader exclusion
  291. 259DF Counteraction where the payer is within the charge to corporation tax for the payment period
  292. 259DG Counteraction where a payee is within the charge to corporation tax
  293. 259E Overview of Chapter
  294. 259EA Circumstances in which the Chapter applies
  295. 259EB Hybrid payer deduction/non-inclusion mismatches and their extent
  296. 259EC Counteraction where the hybrid payer is within the charge to corporation tax for the payment period
  297. 259ED Counteraction where a payee is within the charge to corporation tax
  298. 259F Overview of Chapter
  299. 259FA Circumstances in which the Chapter applies
  300. 259FB Counteraction of the excessive PE deduction
  301. 259FC Meaning of excessive PE inclusion income
  302. 259G Overview of Chapter
  303. 259GA Circumstances in which the Chapter applies
  304. 259GB Hybrid payee deduction/non-inclusion mismatches and their extent
  305. 259GC Counteraction where the payer is within the charge to corporation tax for the payment period
  306. 259GD Counteraction where the investor is within the charge to corporation tax
  307. 259GE Counteraction where a hybrid payee is an LLP
  308. 259H Overview of Chapter
  309. 259HA Circumstances in which the Chapter applies
  310. 259HB Multinational payee deduction/non-inclusion mismatches and their extent
  311. 259HC Counteraction of the multinational payee deduction/non-inclusion mismatch
  312. 259I Overview of Chapter
  313. 259IA Circumstances in which the Chapter applies
  314. 259IB Counteraction where the investor is within the charge to corporation tax
  315. 259IC Counteraction where the hybrid entity is within the charge to corporation tax
  316. 259ICA Deemed dual inclusion income for the purposes of section 259IC
  317. 259ID Section 259ID income for the purposes of section 259IC
  318. 259J Overview of Chapter
  319. 259JA Circumstances in which the Chapter applies
  320. 259JB Counteraction where mismatch arises because of a dual resident company
  321. 259JC Counteraction where mismatch arises because of a relevant multinational and the UK is the parent jurisdiction
  322. 259JD Counteraction where mismatch arises because of a relevant multinational and is not counteracted in the parent jurisdiction
  323. 259JE Meaning of excessive PE inclusion income
  324. 259K Overview of Chapter
  325. 259KA Circumstances in which the Chapter applies
  326. 259KB Meaning of “dual territory double deduction”, “excessive PE deduction” and “PE jurisdiction”
  327. 259KC Denial of the relevant deduction in relation to the imported mismatch payment
  328. 259KD Deductions from dual inclusion income
  329. 259KE Limit on reduction under section 259KC
  330. 259KF Provision for cases within Part 4
  331. 259L Adjustments where suppositions cease to be reasonable
  332. 259LA Deduction from taxable total profits where an amount of ordinary income arises late
  333. 259LB Adjustments in light of later treatment for accounting purposes
  334. 259ZM Overview of Chapter
  335. 259ZMA Circumstances in which Chapter applies
  336. 259ZMB Claims for allocation of DII surplus
  337. 259ZMC The unused part of the DII surplus
  338. 259ZMD The unused part of the DII shortfall
  339. 259ZME Groups of companies
  340. 259ZMF Meaning of “dual inclusion income” and “counteraction amount”
  341. 259M Countering the effect of avoidance arrangements
  342. 259MA Meaning of “transparent fund”
  343. 259MB Application of Chapters 3, 4, 5 and 7
  344. 259MC Application of Chapter 9
  345. 259MD Application of Chapter 11
  346. 259N Meaning of “financial instrument”
  347. 259NA Meaning of “relevant investment fund”
  348. 259NB Control groups
  349. 259NC Related persons
  350. 259ND Meaning of “50% investment” and “25% investment”
  351. 259NDA Meaning of “qualifying institutional investor” etc
  352. 259NE Treatment of a person who is a member of a partnership
  353. 259NEZA Securitisation companies
  354. 259NEA Priority
  355. 259NEB Relevant debt relief circumstances: introductory
  356. 259NEC Release of debts
  357. 259NED Release of connected companies debts
  358. 259NEE Release of connected companies debts during creditor’s insolvency
  359. 259NEF Corporate rescue: debt released shortly after connection arises
  360. 259NF Definitions
  361. 354 Power to make regulations about tax treatment of participants
  362. 355 Meaning of “offshore fund”
  363. 356 Meaning of “mutual fund”
  364. 357 Exceptions to definition of “mutual fund”
  365. 358 Meaning of “relevant income-producing asset”
  366. 359 Power to make regulations about exceptions to definition of “mutual fund”
  367. 360 Treatment of umbrella arrangements
  368. 361 Treatment of arrangements comprising more than one class of interest
  369. 362 Meaning of “participant” and “participation”
  370. 363 Meaning of “umbrella arrangements” and “part of umbrella arrangements”
  371. 363A Residence of undertakings for collective investment in transferable securities and alternative investment funds
  372. 364 Oil activities
  373. 365 Alternative finance arrangements
  374. 366 Power to amend the alternative finance provisions
  375. 367 Leasing arrangements: finance leases and loans
  376. 368 Sale and lease-back etc
  377. 369 Factoring of income etc
  378. 370 UK representatives of non-UK residents
  379. 371 Miscellaneous relocations
  380. 371AA Overview of Part
  381. 371BA Introduction to the CFC charge
  382. 371BB The CFC charge gateway
  383. 371BC Charging the CFC charge
  384. 371BD Chargeable companies
  385. 371BE Companies which are managers of offshore funds etc
  386. 371BF Companies which are participants in offshore funds
  387. 371BG Companies holding shares as trading assets etc
  388. 371BH Companies carrying on BLAGAB
  389. 371BI Banking companies
  390. 371CA Does Chapter 4 apply?
  391. 371CB Does Chapter 5 apply?
  392. 371CC Incidental non-trading finance profits: the 5% rule
  393. 371CD Incidental non-trading finance profits: the further 5% rule
  394. 371CE Does Chapter 6 apply?
  395. 371CEA Section 371CE: meaning of “group treasury company”
  396. 371CF Does Chapter 7 apply?
  397. 371CG Does Chapter 8 apply?
  398. 371DA Introduction to Chapter
  399. 371DB The steps
  400. 371DC Exclusion: UK activities a minority of total activities
  401. 371DD Exclusion: economic value
  402. 371DE Exclusion: independent companies' arrangements
  403. 371DF Exclusion: trading profits (the basic rule)
  404. 371DG Exclusion: trading profits (business premises condition)
  405. 371DH Exclusion: trading profits (income condition)
  406. 371DI Exclusion: trading profits (management expenditure condition)
  407. 371DJ Exclusion: trading profits (IP condition)
  408. 371DK Exclusion: trading profits (export of goods condition)
  409. 371DL Exclusion: trading profits (anti-avoidance)
  410. 371EA The basic rule
  411. 371EB UK activities
  412. 371EC Capital investment from the UK
  413. 371ED Arrangements in lieu of dividends etc to UK resident companies etc
  414. 371EE Leases to UK resident companies etc
  415. 371FA The basic rule
  416. 371FB Qualifying loan relationships
  417. 371FC Loans from foreign permanent establishments of UK resident companies
  418. 371FD Exclusion: banking business
  419. 371FE Exclusion: insurance business
  420. 371GA The basic rule
  421. 371HA The basic rule
  422. 371IA The basic rule
  423. 371IB Loans funded out of qualifying resources
  424. 371IC What is the “qualifying value” of “relevant pre-acquisition funds or other assets”?
  425. 371ID The 75% exemption
  426. 371IE The “matched interest profits” exemption
  427. 371IF Determining the profits of a qualifying loan relationship
  428. 371IG What is a “qualifying loan relationship”?
  429. 371IH Exclusions from definition of “qualifying loan relationship”
  430. 371II Power to amend definitions
  431. 371IJ Claims
  432. 371JA Introduction to Chapter
  433. 371JB The basic rule
  434. 371JC When does an exempt period begin?
  435. 371JD How long is an exempt period?
  436. 371JE Adjustment of profits passing through the CFC charge gateway
  437. 371JF Anti-avoidance
  438. 371JG Amendment of company tax returns
  439. 371KA Introduction to Chapter
  440. 371KB The basic rule
  441. 371KC How to determine the territory in which a CFC is resident
  442. 371KD What is “the threshold amount”?
  443. 371KE Category A income: the basic rule
  444. 371KF Category A income: permanent establishments in excluded territories
  445. 371KG Category B income
  446. 371KH Category C income
  447. 371KI Category D income
  448. 371KJ The IP condition
  449. 371LA Introduction to Chapter
  450. 371LB The basic rule
  451. 371LC Anti-avoidance
  452. 371MA Introduction to Chapter
  453. 371MB The basic rule
  454. 371MC Anti-avoidance
  455. 371NA Introduction to Chapter
  456. 371NB The basic rule
  457. 371NC Reductions to “the local tax amount”
  458. 371ND What are “designer rate tax provisions”?
  459. 371NE How to determine “the corresponding UK tax”
  460. 371OA Application of Chapter
  461. 371OB Provision about interpretation
  462. 371OC “Relevant interests” of UK resident companies
  463. 371OD “Relevant interests” of persons related to UK resident companies
  464. 371OE Other “relevant interests”
  465. 371PA What is “creditable tax”?
  466. 371QA Application of Chapter
  467. 371QB Provision about interpretation
  468. 371QC The basic rules
  469. 371QD Apportionments to be made in proportion to shareholding
  470. 371QE Indirect shareholdings
  471. 371QF Variable shareholdings
  472. 371QG Anti-avoidance
  473. 371RA Overview of Chapter
  474. 371RB Legal and economic control
  475. 371RC Legal and economic control: the 40% rule
  476. 371RD Legal and economic control: supplementary provision
  477. 371RE Control determined by reference to accounting standards
  478. 371RF Power to amend section 371RE etc
  479. 371RG Companies in which a UK resident company has more than a 50% investment
  480. 371SA Overview of Chapter
  481. 371SB What are “assumed taxable total profits” and “assumed total profits”?
  482. 371SC What are “the corporation tax assumptions”?
  483. 371SD UK residence etc
  484. 371SE Close company
  485. 371SF Claims and elections
  486. 371SG Disapplication of assumption in section 371SF(1)
  487. 371SH Elections under section 9A of CTA 2010
  488. 371SI Modification of sections 6 and 7 of CTA 2010
  489. 371SJ Elections for leases to be treated as long funding leases
  490. 371SK Intangible fixed assets
  491. 371SKA Restrictions on certain deductions: deductions allowances
  492. 371SL Group relief etc
  493. 371SLA Corporate interest restriction
  494. 371SM Capital allowances
  495. 371SN Unremittable overseas income
  496. 371SO Tax advantages
  497. 371SP Disguised interest: application of Chapter 2A of Part 6 of CTA 2009
  498. 371SQ Shares accounted for as liabilities: application of section 521C of CTA 2009
  499. 371SR Double taxation relief: countering effect of avoidance arrangements
  500. 371TA The basic rule
  501. 371TB How to determine the territory in which the CFC is resident
  502. 371TC Elections and designations about residence
  503. 371UA Introduction to Chapter
  504. 371UB Application of the Taxes Acts to the CFC charge
  505. 371UBA Payments in respect of a charge on a banking company: information to be provided
  506. 371UC Just and reasonable apportionments
  507. 371UD Relief against sum charged
  508. 371UE Appeals affecting more than one person
  509. 371UF Recovery of sum charged from other UK resident companies
  510. 371VA Definitions
  511. 371VB Accounting periods
  512. 371VC Accounting profits
  513. 371VD Adjustments to accounting profits
  514. 371VE Cell companies etc
  515. 371VF Connected persons etc
  516. 371VG Finance profits
  517. 371VH Interests in companies
  518. 371VI Property business profits
  519. 371VIA Relevant finance leases
  520. 371VJ Regulations
  521. 372 Overview
  522. 373 Meaning of “subject to interest restrictions”, “the total disallowed amount” etc
  523. 374 Interest restriction returns
  524. 375 Disallowance of deductions: full interest restriction return submitted
  525. 376 Disallowance of deductions: no return, or non-compliant return, submitted
  526. 377 Disallowance of deductions: identification of the tax-interest amounts to be left out of account
  527. 378 Disallowed tax-interest expense amounts carried forward
  528. 379 Reactivation of interest
  529. 380 Reactivation of deductions: identification of the tax-interest amounts to be brought into account
  530. 381 Set-off of disallowances and reactivations in the same accounting period
  531. 382 The tax-interest expense amounts of a company
  532. 383 Relevant loan relationship debits
  533. 384 Relevant derivative contract debits
  534. 385 The tax-interest income amounts of a company
  535. 386 Relevant loan relationship credits
  536. 387 Relevant derivative contract credits
  537. 388 Double taxation relief
  538. 389 The “net tax-interest expense” or “net tax-interest income” of a company
  539. 390 The worldwide group's aggregate net tax-interest expense and income
  540. 391 Meaning of “impairment loss”
  541. 391A Amounts capitalised in carrying value of intangible fixed assets
  542. 392 The interest capacity of a worldwide group for a period of account
  543. 393 Amount of interest allowance for a period that is “available” in a later period
  544. 394 When interest allowance is “used”
  545. 395 Amount of interest allowance for a period of account that is “unexpired” in later period
  546. 395A Carry forward of interest allowance: new holding company
  547. 396 The interest allowance of a worldwide group for a period of account
  548. 397 Basic interest allowance calculated using fixed ratio method
  549. 398 Basic interest allowance calculated using group ratio method
  550. 399 The group ratio percentage
  551. 400 The debt cap
  552. 400A Carry forward of excess debt cap: new holding company
  553. 401 Effect of group ratio (blended) election on group ratio percentage
  554. 402 Effect of group ratio (blended) election on group ratio debt cap
  555. 403 Calculations under sections 401 and 402: investor worldwide groups
  556. 404 Meaning of “investor”, “related party investor” and investor's “share”
  557. 405 The aggregate tax-EBITDA of a worldwide group
  558. 406 The tax-EBITDA of a company
  559. 407 Amounts not brought into account in determining a company's tax-EBITDA
  560. 408 Excluded relevant intangibles debits and excluded relevant intangibles credits
  561. 409 Double taxation relief
  562. 410 Net group-interest expense
  563. 411 “Relevant expense amount” and “relevant income amount”
  564. 412 Section 411: interpretation
  565. 413 Adjusted net group-interest expense
  566. 414 Qualifying net group-interest expense
  567. 415 Section 414: interpretation
  568. 416 Group-EBITDA
  569. 417 The capital (expenditure) adjustment
  570. 418 The capital (fair value movement) adjustment
  571. 419 The capital (disposals) adjustment
  572. 420 Derivative contracts subject to fair value accounting
  573. 421 Derivative contracts subject to fair value accounting: interpretation
  574. 422 Group-EBITDA (chargeable gains) election
  575. 423 Capitalised interest brought into account for tax purposes in accordance with GAAP
  576. 424 Employers' pension contributions
  577. 424A Unpaid employees’ remuneration
  578. 425 Employee share acquisitions
  579. 426 Changes in accounting policy
  580. 427 Group interest and group-EBITDA
  581. 428 Section 427: associated worldwide groups
  582. 429 Meaning of “non-consolidated associate”
  583. 430 Interest allowance (consolidated partnerships) election
  584. 431 Interpretation of Chapter
  585. 432 Overview of Chapter
  586. 433 Meaning of “qualifying infrastructure company”
  587. 434 Elections under section 433
  588. 435 Group elections modifying the operation of sections 433 and 434
  589. 436 Meaning of “qualifying infrastructure activity”
  590. 437 Section 436: supplementary
  591. 438 Exemption for interest payable to third parties etc
  592. 438A Application of section 438: certain creditors treated as qualifying infrastructure companies
  593. 439 Exemption in respect of certain pre-13 May 2016 loan relationships
  594. 440 Loans etc made by qualifying infrastructure companies to be ignored
  595. 441 Tax-EBITDA of qualifying infrastructure company to be nil
  596. 442 Amounts of qualifying infrastructure company left out of account for other purposes
  597. 443 Interest capacity for group with qualifying infrastructure company etc
  598. 444 Joint venture companies
  599. 445 Joint venture groups
  600. 446 Joint ventures: supplementary
  601. 447 Partnerships and other transparent entities
  602. 448 Decommissioning
  603. 449 Minor definitions for purposes of this Chapter
  604. 450 Banking companies
  605. 451 Oil and gas
  606. 452 Real Estate Investment Trusts
  607. 453 Insurance entities
  608. 454 Members of Lloyd's
  609. 454A Investments held by investment managers
  610. 455 Shipping companies subject to tonnage tax
  611. 456 Creditor relationships of companies determined on basis of fair value accounting
  612. 457 Elections under section 456: deemed debits and credits
  613. 458 Co-operative and community benefit societies etc
  614. 459 Charities
  615. 460 Long funding operating leases and finance leases
  616. 461 Counteracting effect of avoidance arrangements
  617. 462 Expressions relating to “related parties”: introduction
  618. 463 Whether a person is generally a “related party” of another
  619. 464 Meaning of “25% investment”
  620. 465 Attribution of rights and interests
  621. 466 Certain loan relationships etc to be treated as made between related parties
  622. 467 Holdings of debt and equity in same proportions
  623. 468 Debts with same rights where unrelated parties hold more than 50%
  624. 469 Debt restructuring
  625. 470 Ordinary independent financing arrangements by banks and others
  626. 471 Loans made by relevant public bodies
  627. 472 Finance leases granted before 20 March 2017
  628. 473 Meaning of “a worldwide group”, “ultimate parent” etc
  629. 474 Interpretation of section 473: “relevant entity”
  630. 475 Meaning of “non-consolidated subsidiary” and “consolidated subsidiary”
  631. 476 Continuity of identity of a worldwide group through time
  632. 477 Treatment of stapled entities
  633. 478 Treatment of business combinations
  634. 479 “Financial statements” of a worldwide group
  635. 480 “Period of account” of worldwide group
  636. 481 Actual financial statements not drawn up on acceptable principles
  637. 482 Actual financial statements drawn up on acceptable principles but consolidating wrong subsidiaries
  638. 483 Actual financial statements covering more than one worldwide group
  639. 484 No actual financial statements: ultimate parent draws up financial statements
  640. 485 No actual financial statements: other cases
  641. 486 Election altering period of account deemed under section 485
  642. 487 Actual financial statements ignored if for too long a period or too late
  643. 488 Meaning of “IAS financial statements”
  644. 489 References to amounts recognised in financial statements
  645. 490 Meaning of “relevant accounting period”
  646. 491 Meaning of “relevant public body”
  647. 492 Meaning of “UK group company”
  648. 493 Embedded derivatives
  649. 494 Other interpretation
  650. 495 Financial statements: different treatment by group or members
  651. 496 Parties to capital market arrangements
  652. 497 Change in accounting standards
  653. 498 Regulations
  654. 499 Orders and regulations
  655. 500 Abbreviated references to Acts
  656. 501 Minor and consequential amendments
  657. 502 Transitional provisions and savings
  658. 503 Repeals and revocations
  659. 504 Index of defined expressions
  660. 505 Extent
  661. 506 Commencement
  662. 507 Short title
  663. Schedule A1 Assessment of unassessed transfer pricing profits: partnerships and Lloyd’s syndicates
  664. SCHEDULE 1 Oil activities: new Chapter 16A of Part 2 of ITTOIA 2005
  665. SCHEDULE 2 Alternative finance arrangements
  666. SCHEDULE 3 Leasing arrangements: finance leases and loans
  667. SCHEDULE 4 Sale and lease-back etc: new Part 12A of ITA 2007
  668. SCHEDULE 5 Factoring of income etc: new Chapters 5B and 5C of Part 13 of ITA 2007
  669. SCHEDULE 6 UK Representatives of non-UK residents
  670. SCHEDULE 7 Miscellaneous relocations
  671. SCHEDULE 7A Interest restriction returns
  672. SCHEDULE 8 Minor and consequential amendments
  673. SCHEDULE 9 Transitionals and savings etc
  674. SCHEDULE 10 Repeals and revocations
  675. SCHEDULE 11 Index of defined expressions used in Parts 2 to 8

Proposed changes to this act

No one has proposed a change to this act yet.

675 provisions

354 Power to make regulations about tax treatment of participants

(1) The Treasury may by regulations make provision about the treatment of participants in an offshore fund for the purposes of enactments relating to income tax, corporation tax or capital gains tax. (2) Regulations under subsection (1) may, in particular, make special provision about the treatment of participants in an offshore fund comprising— (a) a part of umbrella arrangements (see section 360), or (b) arrangements relating to a class of interest in other arrangements (see section 361). (3) Regulations under subsection (1) may, in particular— (a) make provision for an offshore fund, or a trustee or officer of an offshore fund, to make elections relating to the treatment of participants in the offshore fund for the purposes of income tax, corporation tax or capital gains tax, (b) make provision about the supply of information by offshore funds, or trustees or officers of offshore funds— (i) to Her Majesty's Revenue and Customs, or (ii) to participants, (c) make provision about the preparation of accounts and the keeping of records by offshore funds or trustees or officers of offshore funds, and (d) make other provision about the administration of offshore funds. (4) Regulations under subsection (1) may, in particular, make provision consequential on the repeal by the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) of Chapter 5 of Part 17 of ICTA (offshore funds). (5) Regulations under subsection (1) may, in particular— (a) provide for Her Majesty's Revenue and Customs to exercise a discretion in dealing with any matter, (b) make provision by reference to standards or other documents issued by any person, (c) modify an enactment (whenever passed or made), (d) make different provision for different cases or different purposes, and (e) make incidental, consequential, supplementary and transitional provision and savings. (6) Regulations under subsection (1) may, in particular, provide for provisions to have effect in relation to the tax year, or accounting periods, current on the day on which the regulations are made. (7) In this section— “enactment” includes subordinate legislation (within the meaning of the Interpretation Act 1978), and “modify” includes amend, repeal or revoke.

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355 Meaning of “offshore fund”

(1) In section 354 “offshore fund” means— (a) a mutual fund constituted by a body corporate resident outside the United Kingdom, (b) a mutual fund under which property is held on trust for the participants where the trustees of the property are not resident in the United Kingdom, or (c) a mutual fund constituted by other arrangements that create rights in the nature of co-ownership where the arrangements take effect by virtue of the law of a territory outside the United Kingdom. (2) Subsection (1)(c) does not include a mutual fund constituted by two or more persons carrying on a trade or business in partnership. (3) In this section— “body corporate” does not include a limited liability partnership, and “co-ownership” is not restricted to the meaning of that term in the law of any part of the United Kingdom. (4) See also section 151W(b) of TCGA 1992, section 564U(b) of ITA 2007 and section 519(4)(b) of CTA 2009 (which have the effect that investment bond arrangements are not an offshore fund for the purposes of section 354).

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356 Meaning of “mutual fund”

(1) In section 355 “mutual fund” means arrangements with respect to property of any description (including money) that meet conditions A, B and C. (2) Subsection (1) is subject— (a) to the exceptions made by or under sections 357 and 359, and (b) to sections 360 and 361. (3) Condition A is that the purpose or effect of the arrangements is to enable the participants— (a) to participate in the acquisition, holding, management or disposal of the property, or (b) to receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. (4) Condition B is that the participants do not have day-to-day control of the management of the property. (5) For the purposes of condition B a participant does not have day-to-day control of the management of property by virtue of having a right to be consulted or to give directions. (6) Condition C is that, under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis calculated entirely, or almost entirely, by reference to— (a) the net asset value of the property that is the subject of the arrangements, or (b) an index of any description. (7) The Treasury may by regulations amend condition C. (8) Regulations under subsection (7) may only be made if a draft of the statutory instrument containing the regulations has been laid before and approved by a resolution of the House of Commons.

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357 Exceptions to definition of “mutual fund”

(1) Arrangements are not a mutual fund for the purposes of section 355 if— (a) condition D is met, and (b) condition E or F is met. (2) Condition D is that, under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis mentioned in section 356(6) only in the event of the winding up, dissolution or termination of the arrangements. (3) Condition E is that the arrangements are not designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements. (4) Condition F is that— (a) the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements, (b) subsection (5), (6) or (7) applies, and (c) the arrangements are not designed to produce a return for participants that equates, in substance, to the return on an investment of money at interest. (5) This subsection applies if none of the assets that are the subject of the arrangements is a relevant income-producing asset (see section 358). (6) This subsection applies if, under the terms of the arrangements, the participants in the arrangements are not entitled to the income from the assets that are the subject of the arrangements or any benefit arising from such income. (7) This subsection applies if— (a) under the terms of the arrangements, after deductions for reasonable expenses, any income produced by the assets that are the subject of the arrangements is required to be paid or credited to the participants, and (b) a participant who is an individual resident in the United Kingdom would be charged to income tax on the amounts paid or credited. (8) For the purposes of this section the fact that arrangements provide for a vote or other action that may lead to the winding up, dissolution or termination of the arrangements does not, by itself, mean that the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements.

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358 Meaning of “relevant income-producing asset”

(1) This section has effect for the purposes of section 357. (2) An asset is a relevant income-producing asset if it produces income on which, if it were held directly by an individual resident in the United Kingdom, the individual would be charged to income tax (but see subsections (3) and (4)). (3) An asset is not a relevant income-producing asset if the asset is hedged, provided that no income is expected to arise from— (a) the asset (taking account of the hedging), or (b) any product of the hedging arrangements. (4) Cash awaiting investment is not a relevant income-producing asset, provided that the cash, and any income that it produces while awaiting investment, is invested as soon as reasonably practicable in assets that are not relevant income-producing assets (as defined by this section).

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359 Power to make regulations about exceptions to definition of “mutual fund”

(1) The Treasury may by regulations amend or repeal any provision of section 357 or 358. (2) The Treasury may by regulations provide that arrangements are not a mutual fund for the purposes of section 355— (a) in specified circumstances, or (b) if they are of a specified description. (3) Regulations under this section may include provision having effect in relation to the tax year, or accounting periods, current on the day on which the regulations are made. (4) Regulations under subsection (1) may only be made if a draft of the statutory instrument containing the regulations has been laid before and approved by a resolution of the House of Commons.

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360 Treatment of umbrella arrangements

(1) This section has effect for the purposes of this Part. (2) In the case of umbrella arrangements (see section 363)— (a) each part of the umbrella arrangements is to be treated as separate arrangements, and (b) the umbrella arrangements are to be disregarded. (3) Subsection (2)(a) is subject to section 361.

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361 Treatment of arrangements comprising more than one class of interest

(1) This section has effect for the purposes of this Part. (2) Where there is more than one class of interest in arrangements (the “main arrangements”)— (a) the arrangements relating to each class of interest are to be treated as separate arrangements, and (b) the main arrangements are to be disregarded. (3) In relation to umbrella arrangements, “class of interest” does not include a part of the umbrella arrangements (but there may be more than one class of interest in a part of umbrella arrangements).

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362 Meaning of “participant” and “participation”

(1) In this Part references to “participant”, in relation to arrangements (or a fund), are to a person taking part in the arrangements (or the arrangements constituting the fund), whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise. (2) In this Part references (however expressed) to participation, in relation to arrangements (or a fund), are to be read in accordance with subsection (1).

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363 Meaning of “umbrella arrangements” and “part of umbrella arrangements”

(1) In this Part “umbrella arrangements” means arrangements which provide for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them. (2) In this Part references to a part of umbrella arrangements are to the arrangements relating to a separate pool.

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363A Residence of undertakings for collective investment in transferable securities and alternative investment funds

(1) This section applies to— (a) a UCITS which is authorised in a foreign country or territory pursuant to Article 5 of the UCITS Directive, and (b) an AIF which is authorised or registered in a foreign country or territory, or is not authorised or registered but has its registered office in a foreign country or territory, unless the UCITS or AIF is an excluded entity. (2) If the UCITS or AIF is a body corporate which (apart from this section) would be treated as resident in the United Kingdom for the purposes of any enactment (within the meaning of section 354) relating to income tax, corporation tax or capital gains tax, the body corporate is instead to be treated as if it were not resident in the United Kingdom. (2A) A UCITS or AIF is “an excluded entity” if it— (a) is a unit trust scheme the trustees of which are UK resident, (b) is resident in the United Kingdom by virtue of section 14 of CTA 2009, (c) is, or has been, an investment trust with respect to an accounting period, or (d) is or has been— (i) a company UK REIT in relation to an accounting period, or (ii) a member of a group of companies at a time when the group is or was a group UK REIT in relation to an accounting period. (2B) The Treasury may, by regulations, modify this section so as to— (a) add a description of UCITS or AIF as an excluded entity, (b) provide that a description of UCITS or AIF is no longer an excluded entity, or (c) vary a description of an excluded entity. (3) If, by virtue of section 99 ... of TCGA 1992, that Act applies in relation to the UCITS or AIF as if it were a company, that Act applies as if the company were not resident in the United Kingdom (if it would not otherwise do so). (4) In this section— "AIF” has the meaning given in regulation 3 of the Alternative Investment Fund Managers Regulations 2013, “foreign country or territory” means a country or territory outside the United Kingdom, “investment trust with respect to an accounting period” is to be construed in accordance with section 1158 of CTA 2010, “UCITS” means an undertaking for collective investment in transferable securities, “the UCITS Directive” means Directive 2009/65/EC of the European Parliament and of the Council, “company UK REIT in relation to an accounting period” and “group UK REIT in relation to an accounting period” are to be construed in accordance with section 527 of CTA 2010.

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364 Oil activities

Schedule 1, which inserts a new Chapter 16A (oil activities) in Part 2 (trading income) of ITTOIA 2005, has effect.

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365 Alternative finance arrangements

Schedule 2, which— (a) inserts a new Part 10A in ITA 2007 (see Part 1 of the Schedule), (b) inserts a new Chapter 4 in Part 4 of TCGA 1992 (see Part 2 of the Schedule), and (c) makes other amendments (see Part 3 of the Schedule), has effect.

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366 Power to amend the alternative finance provisions

(1) The Treasury may by order amend the alternative finance provisions. (2) The amendments which may be made by such an order include— (a) the variation of provision already included in the alternative finance provisions, and (b) the introduction into the alternative finance provisions of new provision relating to alternative finance arrangements. (3) In subsection (2)(b) “alternative finance arrangements” means arrangements which in the Treasury's opinion— (a) equate in substance to a loan, deposit or other transaction of a kind that generally involves the payment of interest, but (b) achieve a similar effect without including provision for the payment of interest. (4) An order under subsection (1) may, in particular— (a) make provision of a kind similar to provision already made by the alternative finance provisions, (b) make other provision about the treatment for the purposes of the Tax Acts of arrangements to which the order applies, (c) make provision generally or only in relation to specified cases or circumstances, (d) make different provision for different cases or circumstances, and (e) make incidental, supplemental, consequential and transitional provision and savings. (5) An order making consequential provision under subsection (4)(e) may, in particular, include provision amending a provision of the Tax Acts. (6) In this section “the alternative finance provisions” means— (a) section 367A of ICTA, (b) Chapter 4 of Part 4 of TCGA 1992, (c) sections 372A to 372D, Part 10A and section 1005(2A) of ITA 2007, (d) Chapter 6 of Part 6 of CTA 2009, (e) sections 110, 256 to 259 and 1019 of CTA 2010. (7) An order under this section that— (a) includes such amendments as are mentioned in subsection (2)(b), or (b) amends an enactment not contained in the alternative finance provisions but contained in an Act, may only be made if a draft of the statutory instrument containing the order has been laid before and approved by a resolution of the House of Commons.

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367 Leasing arrangements: finance leases and loans

Schedule 3, which inserts— (a) a new Part 11A in ITA 2007 (leasing arrangements: finance leases and loans), and (b) a new section 37A in TCGA 1992 (consideration on disposal of certain leases), has effect.

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368 Sale and lease-back etc

Schedule 4, which inserts a new Part 12A in ITA 2007 (sale and lease-back etc), has effect.

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369 Factoring of income etc

Schedule 5, which inserts new Chapters 5B and 5C (finance arrangements, and loan or credit transactions) in Part 13 of ITA 2007 (anti-avoidance), has effect.

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370 UK representatives of non-UK residents

Schedule 6, which inserts— (a) new Chapters 2B and 2C in Part 14 of ITA 2007 (income tax: UK representatives of non-UK residents), and (b) a new Part 7A in TCGA 1992 (capital gains tax: UK representatives of non-UK residents), has effect.

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371 Miscellaneous relocations

Schedule 7 (amendments to relocate some miscellaneous tax enactments) has effect.

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371AA Overview of Part

(1) A charge (“the CFC charge”) is charged under this Part on UK resident companies which have certain interests in CFCs. (2) The CFC charge is charged by reference to the chargeable profits of CFCs. (3) A “CFC” is a non-UK resident company which is controlled by a UK resident person or persons (but see subsection (6)). (4) Chapter 2 sets out the basic details of the CFC charge, including— (a) the CFC charge gateway (through which profits of a CFC must pass in order to be chargeable profits), and (b) the steps to be taken for charging the CFC charge. (5) Chapter 2 is supplemented by Chapters 3 to 17; in particular— (a) Chapter 3 sets out how to determine which (if any) of Chapters 4 to 8 apply in relation to the profits of a CFC, (b) so far as applicable, Chapters 4 to 8 set out how to determine which profits (if any) of a CFC pass through the CFC charge gateway, with— (i) Chapter 4 dealing with profits attributable to UK activities, (ii) Chapter 5 dealing with non-trading finance profits, (iii) Chapter 6 dealing with trading finance profits, (iv) Chapter 7 dealing with profits derived from captive insurance business, and (v) Chapter 8 dealing with cases involving solo consolidation, (c) Chapter 9 sets out exemptions for profits from qualifying loan relationships, (d) Chapters 10 to 14 set out full exemptions from the CFC charge, (e) Chapter 15 sets out how to determine the persons whose interests in a CFC are relevant to the charging of the CFC charge, (f) Chapter 16 sets out how to determine the creditable tax of CFCs (for which credit is given against chargeable profits), and (g) Chapter 17 sets out how to apportion a CFC's chargeable profits and creditable tax among the persons who have relevant interests in the CFC. (6) Chapter 18 explains the concept of “control” and also sets out certain cases in which a non-UK resident company is to be taken to be a CFC even though it is not controlled by a UK resident person or persons. (7) Chapter 19 explains the concepts of “assumed taxable total profits”, “assumed total profits” and “the corporation tax assumptions” which are referred to in this Part. (8) Chapter 20 contains rules for determining the territory in which a CFC is resident for the purposes of this Part. (9) Chapter 21 contains provision about the management of the CFC charge, including the collection of sums charged. (10) Chapter 22 contains supplementary provision, including definitions of terms used in this Part. (11) Nothing in this Part affects— (a) the liability to corporation tax of a non-UK resident company in accordance with section 5(2) and (3) of CTA 2009 (non-UK resident companies within the charge to corporation tax), or (b) the determination of such a company's chargeable profits for corporation tax purposes in accordance with Chapter 4 of Part 2 of CTA 2009. (12) This Part is part of the Corporation Tax Acts.

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371BA Introduction to the CFC charge

(1) The CFC charge is charged in relation to accounting periods of CFCs in accordance with section 371BC. (2) Section 371BC applies in relation to a CFC's accounting period if (and only if)— (a) the CFC has chargeable profits for the accounting period, and (b) none of the exemptions set out in Chapters 10 to 14 applies for the accounting period. (3) A CFC's chargeable profits for an accounting period are its assumed taxable total profits for the accounting period determined on the basis— (a) that the CFC's assumed total profits for the accounting period are limited to only so much of those profits as pass through the CFC charge gateway, and (b) that amounts are to be relieved against the assumed total profits at step 2 in section 4(2) of CTA 2010 only so far as it is just and reasonable for them to be so relieved having regard to paragraph (a). (4) “The CFC charge gateway” is explained in section 371BB. (5) Subsection (3) is subject to section 371SB(7) and (8) (which relates to settlement income included in a CFC's chargeable profits).

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371BB The CFC charge gateway

(1) Take the following steps to determine the extent to which a CFC's assumed total profits for an accounting period pass through the CFC charge gateway. Step 1 In accordance with Chapter 3, determine which (if any) of Chapters 4 to 8 apply for the accounting period. If none of those Chapters applies, none of the CFC's assumed total profits pass through the CFC charge gateway and step 2 is not to be taken. Step 2 Determine the extent to which the CFC's assumed total profits fall within any of the Chapters which applies for the accounting period. The CFC's assumed total profits pass through the CFC charge gateway so far as they fall within any of those Chapters. (2) Subsection (1) is subject to— (a) Chapter 9 (exemptions for profits from qualifying loan relationships), and (b) section 371JE (which provides for adjustments of profits which would otherwise pass through the CFC charge gateway linked to the exemption set out in Chapter 10).

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371BC Charging the CFC charge

(1) Take the following steps if, as provided for by section 371BA(2), this section applies in relation to a CFC's accounting period. Step 1 In accordance with Chapter 15, determine the persons (“the relevant persons”) who have relevant interests in the CFC at any time during the accounting period. If none of the relevant persons is a company which meets the UK residence condition (see subsection (2)), the CFC charge is not charged in relation to the accounting period and no further steps are to be taken. Step 2 In accordance with Chapter 16, determine the CFC's creditable tax for the accounting period. Step 3 In accordance with Chapter 17, apportion the CFC's chargeable profits and creditable tax among the relevant persons. Step 4 Take each relevant person which is a company meeting the UK residence condition and, in accordance with section 371BD, determine if the company is a chargeable company. If there are no chargeable companies, the CFC charge is not charged in relation to the accounting period and step 5 is not to be taken. Step 5 The CFC charge is charged on each chargeable company as follows. A sum equal to— corporation tax at the appropriate rate on P% of the CFC's chargeable profits, less Q% of the CFC's creditable tax, is charged on the chargeable company as if it were an amount of corporation tax charged on the company for the relevant corporation tax accounting period. This step is subject to sections 371BG to 371BI . (2) A company meets the UK residence condition if it is UK resident at a time during the accounting period when it has a relevant interest in the CFC. (3) For the purpose of taking step 5 in subsection (1) in relation to a chargeable company (“CC”)— “the appropriate rate”, subject to subsection (4) and section 371BH, means— the rate of corporation tax applicable to CC's profits of the relevant corporation tax accounting period on which corporation tax is chargeable (see section 4(1) and (2) of CTA 2010), or if there is more than one such rate, the average rate over the whole of the relevant corporation tax accounting period, “P%” means the percentage of the CFC's chargeable profits apportioned to CC, “Q%” means the percentage of the CFC's creditable tax apportioned to CC, and “the relevant corporation tax accounting period” means CC's accounting period for corporation tax purposes during which the CFC's accounting period ends. (4) In determining “the appropriate rate”, it must be assumed that all of CC's profits of the relevant corporation tax accounting period on which corporation tax is chargeable are chargeable at the main rate rather than the Northern Ireland rate.

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371BD Chargeable companies

(1) A company (“C”) which meets the UK residence condition is a chargeable company for the purposes of step 4 in section 371BC(1) if the total of the following percentages is at least 25%— (a) the percentage of the CFC's chargeable profits apportioned to C at step 3 in section 371BC(1), and (b) the percentages (if any) of those profits which are apportioned at that step to relevant persons who, at any time during the accounting period, are connected or associated with C. (2) Subsection (1) is subject to sections 371BE and 371BF.

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371BE Companies which are managers of offshore funds etc

(1) A company (“C”) is not a chargeable company for the purposes of step 4 in section 371BC(1) if— (a) the CFC is an offshore fund (as defined in section 355), (b) the genuine diversity of ownership condition set out in regulation 75 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) is met in relation to the fund, (c) C meets the fund management condition, and (d) apart from this section, a sum of no more than £500,000 would be charged on C as a chargeable company at step 5 in section 371BC(1). (2) In applying regulation 75 of the 2009 Regulations for the purposes of subsection (1)(b), the reference in paragraph (1) to the period of account is to be read as a reference to the accounting period. (3) C meets the fund management condition if at all times during the accounting period when C has relevant interests in the offshore fund— (a) the assets of the offshore fund are managed by C or a person connected with C, (b) C or the person connected with C receives out of those assets fees for managing those assets, and (c) C holds its relevant interests only or mainly for the purpose of attracting participants (as defined in section 362) to the fund who are not connected with C. (4) If the accounting period is less than 12 months, the amount specified in subsection (1)(d) is to be reduced proportionately.

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371BF Companies which are participants in offshore funds

(1) A company (“C”) is not a chargeable company for the purposes of step 4 in section 371BC(1) if— (a) the CFC is an offshore fund (as defined in section 355), (b) at the relevant time and at all subsequent relevant times, C reasonably believes that the requirement of section 371BD(1) will not be met in relation to it, and (c) the meeting of that requirement in relation to C is in no way attributable to any step— (i) which was taken by C or any person connected or associated with C, and (ii) which, at the time it was taken, could reasonably have been expected to cause that requirement to be met. (2) “The relevant time” means— (a) the beginning of the accounting period, or (b) if C has no relevant interests in the offshore fund at the beginning of the accounting period, the time when C first has a relevant interest during the accounting period. (3) “Subsequent relevant time” means any time during the accounting period at which there is an increase or some other change in the relevant interests in the offshore fund which C has.

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371BG Companies holding shares as trading assets etc

(1) Subsection (2) applies if conditions A to C are met in relation to a relevant interest, or a part of a relevant interest, which a chargeable company (“CC”) has in the CFC at all times during the CFC's accounting period. (2) Step 5 in section 371BC(1) is to be taken in relation to CC on the following basis. (3) That basis is— (a) so much of P% as is attributable to CC having the relevant interest, or the part of a relevant interest, during the CFC's accounting period is to be left out of P%, and (b) so much of Q% as is so attributable is to be left out of Q%. (4) Condition A is that, at all times during the CFC's accounting period, CC has the relevant interest, or the part of a relevant interest, by virtue of its holding shares (“the relevant shares”) in the CFC (directly or indirectly). (5) Condition B is that any increase in the value of the relevant shares at any time during the relevant corporation tax accounting period is (or would be) income, or brought into account in determining any income, of CC chargeable to corporation tax for that period. (6) Condition C is that any dividend or other distribution received at any time during the relevant corporation tax accounting period by CC from the CFC (directly or indirectly) by virtue of its holding the relevant shares is (or would be) income, or brought into account in determining any income, of CC chargeable to corporation tax for that period. (7) Subsection (8) applies if— (a) CC has the relevant interest, or the part of a relevant interest, by virtue of section 371OB(3) or (4), (b) the CFC is an offshore fund (as defined in section 355) which does not meet the qualifying investments test in section 493 of CTA 2009, and (c) conditions B and C would be met but for the offshore fund not meeting that test. (8) Conditions B and C are to be taken to be met. (9) This section is subject to section 371BH.

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371BH Companies carrying on BLAGAB

(1) Subsection (2) applies in relation to a chargeable company (“CC”) if— (a) CC carries on basic life assurance and general annuity business during the relevant corporation tax accounting period, (b) the I-E rules apply to CC for the relevant corporation tax accounting period, and (c) the following are met in relation to a relevant interest, or a part of a relevant interest, which CC has in the CFC at all times during the CFC's accounting period— (i) condition D, (ii) condition E or F (or both), and (iii) condition G. (2) An additional sum is charged on CC at step 5 in section 371BC(1) and, for this purpose, step 5 is to be taken on the following basis. (3) That basis is— (a) in paragraph (a) at step 5, the reference to the appropriate rate is to be read as a reference to— (i) the policyholders' rate of tax under section 102 of FA 2012 applicable to the I-E profit for the relevant corporation tax accounting period, or (ii) if there is more than one such rate, the average rate over the whole of the relevant corporation tax accounting period, and (b) any reduction of P% or Q% under section 371BG(3) by reference to any relevant interest of CC is to be ignored, but— (i) P% is to be reduced so that it represents only the policyholders' share of the BLAGAB component of the apportioned profit (see subsections (10) to (12)), and (ii) Q% is to be reduced by the same proportion as P% is reduced under sub-paragraph (i). (4) Condition D is that, at all times during the CFC's accounting period, CC has the relevant interest, or the part of a relevant interest, by virtue of its holding shares (“the relevant shares”) in the CFC (directly or indirectly). (5) Condition E is met if the following requirement is met in relation to a time during the relevant corporation tax accounting period. (6) The requirement is that any increase (or any part of any increase) in the value of the relevant shares which occurs at that time is not (or would not be) brought into account at step 1 in section 73 of FA 2012 in determining whether CC has an I-E profit for the relevant corporation tax accounting period. (7) Condition F is met if the following requirement is met in relation to a time during the relevant corporation tax accounting period. (8) The requirement is that any dividend or other distribution (or any part of any dividend or other distribution) received at that time by CC from the CFC (directly or indirectly) by virtue of its holding the relevant shares is not (or would not be) brought into account at step 1 in section 73 of FA 2012 in determining whether CC has an I-E profit for the relevant corporation tax accounting period. (9) Condition G is that the assets which represent the relevant interest, or the part of a relevant interest, during the CFC's accounting period are (to any extent) assets held by CC for the purposes of CC's long-term business. (10) “The apportioned profit” means so much of P% as is attributable to CC having the relevant interest, or the part of a relevant interest, during the CFC's accounting period. (11) Take the following steps to determine the “BLAGAB component” of the apportioned profit. Step 1 Assume that the apportioned profit is income falling within section 74(1)(j) of FA 2012 paid to CC at the end of the CFC's accounting period. Step 2 Calculate how much of that income would be referable, in accordance with Chapter 4 of Part 2 of FA 2012, to CC's basic life assurance and general annuity business. That amount is the “BLAGAB component” of the apportioned profit. (12) The “policyholders' share” of the BLAGAB component of the apportioned profit is equal to the policyholders' share of the I - E profit for the relevant corporation tax accounting period as determined in accordance with the rules contained in Chapter 5 of Part 2 of FA 2012.

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371BI Banking companies

(1) In relation to a chargeable company that is a banking company for the relevant corporation tax accounting period, step 5 in section 371BC(1) is to be taken in accordance with subsections (2) to (5). (2) The amount given by paragraph (a) at step 5 is to be increased by an amount equal to— ( P C P − S A S A ) × S P where— “PCP” is P% of the CFC's chargeable profits; “SASA” is so much (if any) of the chargeable company's available surcharge allowance as the company specifies for the purposes of this subsection in its company tax return for the relevant corporation tax accounting period; “SP” is the percentage specified in section 269DA(1) of CTA 2010 (surcharge on banking companies). (3) Subsection (5) applies in relation to the chargeable company if— (a) there are arrangements that result in a relevant transfer, and (b) the main purpose, or one of the main purposes, of the arrangements is to avoid, or reduce, a sum being charged on the chargeable company at step 5 in section 371BC(1) in consequence of subsection (2). (4) There is a “relevant transfer” if there is, in substance— (a) a transfer (directly or indirectly) of all or a significant part of the chargeable profits of the CFC, for the CFC's accounting period, to a non-banking company, or (b) a transfer (directly or indirectly) of a loss or deductible amount to the CFC, for the CFC's accounting period, from a non-banking company, resulting in the elimination or significant reduction of the CFC's chargeable profits for that period. (5) For the purposes of subsection (2), the CFC's chargeable profits are to be taken to be what they would have been had the relevant transfer not taken place. (6) Subsections (7) to (9) apply in relation to an accounting period of a CFC (“the relevant CFC accounting period”) where— (a) a company (“C”)— (i) has an accounting period for corporation tax purposes during which the relevant CFC accounting period ends, and (ii) is a banking company for that accounting period, (b) there are arrangements that— (i) do not result in a relevant transfer, but (ii) disregarding subsections (7) to (9), would result in some or all of the CFC's chargeable profits for the relevant CFC accounting period being apportioned to one or more non-banking companies at step 3 in section 371BC(1) instead of being apportioned to C, and (c) the main purpose, or one of the main purposes, of the arrangements is to avoid, or reduce, a sum being charged on C at step 5 in section 371BC(1) in consequence of subsection (2) (whether in relation to the relevant CFC accounting period or any other accounting period of the CFC). (7) If the arrangements would otherwise result in C not having a relevant interest in the CFC, C is to be treated as having the relevant interest in the CFC. (8) The CFC's chargeable profits and creditable tax for the relevant CFC accounting period are to be apportioned in accordance with section 371QC(2) (and not section 371QD if that section would otherwise apply). (9) The apportionments must (in particular) be made in a way which, so far as practicable, counteracts the result of the arrangements mentioned in subsection (6)(b)(ii). (10) In this section— “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable); “available surcharge allowance” means available surcharge allowance under section 269DE or (as the case may be) 269DJ of CTA 2010; “banking company” has the same meaning as in Chapter 4 of Part 7A of CTA 2010 (see section 269DO of that Act); “deductible amount” means— an expense of a trade, other than an amount treated as such an expense by section 450(a) of CAA 2001 (research and development allowances treated as expenses in calculating profits of a trade), an expense of a UK property business or overseas property business, an expense of management of a company's investment business within the meaning of section 1219 of CTA 2009, a non-trading debit within the meaning of Parts 5 and 6 of CTA 2009 (loan relationships and relationships treated as such) (see section 301(2) of that Act), or a non-trading debit within the meaning of Part 8 of CTA 2009 (intangible fixed assets) (see section 746 of that Act); “company tax return” has the same meaning as in Schedule 18 to FA 1998; “non-banking company” means a company that, at any time when the arrangements mentioned in subsection (3) or (as the case may be) (6) have effect, is neither— a banking company, nor a CFC in relation to which a banking company is a chargeable company. (11) Sections 269DE(6) and 269DJ(5) of CTA 2010 contain restrictions on the amount of available surcharge allowance that can be specified and section 269DK of that Act makes provision about what happens if those restrictions are exceeded.

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371CA Does Chapter 4 apply?

(1) Chapter 4 (profits attributable to UK activities) applies for a CFC's accounting period unless condition A, B, C or D is met. (2) Condition A is that, at no time during the accounting period, does the CFC hold assets or bear risks under an arrangement to which both subsections (3) and (4) apply. (3) This subsection applies to an arrangement if— (a) the main purpose, or one of the main purposes, of the arrangement is to reduce or eliminate any liability of any person to tax or duty imposed under the law of the United Kingdom, and (b) in consequence of the arrangement, at any time the CFC expects its business to be more profitable than it would otherwise be (other than negligibly so). (4) This subsection applies to an arrangement if— (a) there is an expectation that, as a consequence of the arrangement, one or more persons will have liabilities to tax or duty imposed under the law of any territory reduced or eliminated, and (b) it is reasonable to suppose that, but for that expectation, the arrangement would not have been made. (5) Condition B is that, at no time during the accounting period, does the CFC have any UK managed assets or bear any UK managed risks (see subsection (9)). (6) Condition C is that, at all times during the accounting period, the CFC has itself the capability to ensure that the CFC's business would be commercially effective were— (a) the UK managed assets of the CFC, and (b) the UK managed risks borne by the CFC, to stop being UK managed. (7) In subsection (6) the reference to the capability of the CFC includes (in particular) its capability to select persons not connected with it to provide it with goods or services and to manage the transactions it has with persons not connected with it. (8) In determining if the requirements of subsection (6) are met at any time (“the relevant time”) during the accounting period, assume— (a) that the CFC would continue to carry on the same business as it is actually carrying on at the relevant time, and (b) that no relevant UK activities (see subsection (10)) by which any asset or risk was UK managed would be replaced— (i) by activities carried on by any person connected with the CFC at any time, or (ii) in any other way which relies to any extent upon the CFC receiving (directly or indirectly) resources or other assistance from a person connected with it at any time. (9) An asset or risk is “UK managed” if— (a) the acquisition, creation, development or exploitation of the asset, or (b) the taking on, or bearing, of the risk, is managed or controlled to any significant extent by way of relevant UK activities. (10) “Relevant UK activities” means activities carried on in the United Kingdom— (a) by the CFC, otherwise than through a UK permanent establishment, or (b) by companies connected with the CFC under arrangements which would not, it is reasonable to suppose, be entered into by companies not connected with each other. (11) Condition D is that the CFC's assumed total profits consist only of one or both of the following— (a) non-trading finance profits; (b) property business profits.

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371CB Does Chapter 5 apply?

(1) Subject to sections 371CC and 371CD, Chapter 5 (non-trading finance profits) applies for a CFC's accounting period if (and only if) the CFC has non-trading finance profits. (2) In this section and Chapter 5 references to the CFC's non-trading finance profits are to those profits excluding any profits falling within subsection (3) or (4) or Chapter 8 (solo consolidation). (3) Profits fall within this subsection so far as they arise from the investment of funds held by the CFC for the purposes of a trade— (a) which is carried on by the CFC, and (b) no trading profits of which pass through the CFC charge gateway for the accounting period. (4) Profits fall within this subsection so far as they arise from the investment of funds held by the CFC for the purposes of a UK property business or overseas property business carried on by the CFC. (5) Neither subsection (3) nor subsection (4) applies in relation to funds— (a) held only or mainly because of a prohibition or restriction on the CFC paying dividends or making other distributions imposed under— (i) the law of the territory in which the CFC is incorporated or formed, (ii) the articles of association or other document regulating the CFC, or (iii) any arrangement entered into by or in relation to the CFC, (b) held with a view to paying dividends or making other distributions at a time after the end of the relevant 12 month period, (c) held with a view to acquiring shares in any company or making any capital contribution to a person, (d) held with a view to acquiring, developing or otherwise investing in land at a time after the end of the relevant 12 month period, (e) held only or mainly for contingencies, or (f) held only or mainly for the purpose of reducing or eliminating a liability of any person to tax or duty imposed under the law of any territory. (6) Subsection (5)(a) does not cover a prohibition or restriction which ceases to have effect before the end of the relevant 12 month period. (7) “The relevant 12 month period” means the period of 12 months after the end of the accounting period. (8) In the case of a chargeable company which makes a claim under Chapter 9, in this section and Chapter 5 references to the CFC's non-trading finance profits are to those profits excluding also the CFC's qualifying loan relationship profits (as defined in Chapter 9).

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371CC Incidental non-trading finance profits: the 5% rule

(1) This section applies in relation to a CFC's accounting period if one or both of the following requirements is met— (a) the CFC has trading profits or property business profits (or both); (b) the CFC has exempt distribution income and, at all times during the accounting period, a substantial part of its business is the holding of shares or securities in companies which are its 51% subsidiaries. (2) Chapter 5 does not apply for the accounting period if the CFC's non-trading finance profits are no more than 5% of the relevant amount. (3) “The relevant amount” is— (a) if the requirement of subsection (1)(a) is met, the total of the CFC's trading profits and property business profits determined before deduction of interest or any tax or duty imposed under the law of any territory, (b) if the requirement of subsection (1)(b) is met, the total of the CFC's exempt distribution income, or (c) if both those requirements are met, the sum of the totals given by paragraphs (a) and (b). (4) Subsection (5) applies for the purposes of subsection (2) if— (a) the requirement of subsection (1)(b) is met (whether or not the requirement of subsection (1)(a) is also met), (b) at any time during the accounting period, a 51% subsidiary of the CFC (“the CFC subsidiary”) is also a CFC, and (c) the CFC subsidiary has relevant non-trading finance profits as determined in accordance with subsection (6) or (7). (5) The CFC subsidiary's relevant non-trading finance profits are to be added to the CFC's non-trading finance profits. (6) If— (a) the CFC subsidiary has an accounting period (“the relevant period”) which is the same as the CFC's accounting period or otherwise falls wholly within the CFC's accounting period, and (b) by virtue of this section or section 371CD, Chapter 5 does not apply (in the case of the CFC subsidiary) for the relevant period, the CFC subsidiary's “relevant non-trading finance profits” are its non-trading finance profits for the relevant period. (7) If— (a) the CFC subsidiary has an accounting period (“the relevant period”) which otherwise overlaps with the CFC's accounting period, and (b) by virtue of this section or section 371CD, Chapter 5 does not apply (in the case of the CFC subsidiary) for the relevant period, the CFC subsidiary's “relevant non-trading finance profits” are a just and reasonable proportion of its non-trading finance profits for the relevant period. (8) In this section references to the CFC's trading profits are to those profits excluding any of them which pass through the CFC charge gateway for the accounting period. (9) “Exempt distribution income” means any dividends or other distributions which are not brought into account in determining the CFC's assumed total profits on the basis that they would be exempt for the purposes of Part 9A of CTA 2009 (company distributions). (10) This section needs to be read with section 371CD.

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371CD Incidental non-trading finance profits: the further 5% rule

(1) This section applies in relation to a CFC's accounting period if— (a) the requirements of section 371CC(1)(a) and (b) are both met, but (b) the CFC's non-trading finance profits (as added to under section 371CC(5) if applicable) are more than 5% of the relevant amount for the purposes of section 371CC(2). (2) Chapter 5 does not apply for the accounting period if the CFC's adjusted non-trading finance profits are no more than 5% of the total of the CFC's exempt distribution income (as defined in section 371CC(9)). (3) The CFC's “adjusted non-trading finance profits” are its non-trading finance profits excluding any profits falling within section 371CB(3) or (4). (4) Subsection (5) applies if any CFC subsidiary's relevant non-trading finance profits are added under section 371CC(5) to the CFC's non-trading finance profits for the purposes of section 371CC(2). (5) The CFC subsidiary's relevant non-trading finance profits are also to be added to the CFC's adjusted non-trading finance profits for the purposes of subsection (2) above.

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371CE Does Chapter 6 apply?

(1) Subject to what follows, Chapter 6 (trading finance profits) applies for a CFC's accounting period if (and only if)— (a) the CFC has trading finance profits, and (b) at any time during the accounting period, the CFC has funds or other assets which derive (directly or indirectly) from UK connected capital contributions. (2) The CFC's trading finance profits are to be treated for the purposes of this Part as if they were non-trading finance profits (and, accordingly, Chapter 6 cannot apply for the accounting period) if— (a) the CFC is a group treasury company in the accounting period (see section 371CEA), and (b) a notice is given to an officer of Revenue and Customs requesting that the CFC's trading finance profits be treated as if they were non-trading finance profits. (3) Profits treated as non-trading finance profits under subsection (2) are not to be taken to fall within section 371CB(3) or (4). (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) A notice under subsection (2)(b)— (a) may be given only by a company or companies determined under subsection (7) or (8), and (b) must be given— (i) within 20 months after the end of the accounting period, or (ii) within such longer period as an officer of Revenue and Customs may allow. (7) A company may give a notice if— (a) the company would be a chargeable company were section 371BC (charging the CFC charge) to apply in relation to the accounting period, and (b) the percentage of the CFC's chargeable profits which would be apportioned to the company at step 3 in section 371BC(1) would represent more than half of X%. (8) Two or more companies may together give a notice if— (a) the companies would all be chargeable companies were section 371BC (charging the CFC charge) to apply in relation to the accounting period, and (b) the percentage of the CFC's chargeable profits which would be apportioned to the companies, taken together, at step 3 in section 371BC(1) would represent more than half of X%. (9) In subsections (7) and (8) “X%” means the total percentage of the CFC's chargeable profits which would be apportioned to chargeable companies at step 3 in section 371BC(1) were section 371BC (charging the CFC charge) to apply in relation to the accounting period.

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371CEA Section 371CE: meaning of “group treasury company”

(1) This section makes provision for determining whether the CFC is a group treasury company in the accounting period for the purposes of section 371CE. (2) The CFC is a group treasury company in the accounting period if— (a) it is a member of a worldwide group in relation to a period of account in which the accounting period wholly or partly falls, (b) throughout the accounting period— (i) all, or substantially all, of the activities undertaken by it consist of treasury activities undertaken for the group, and (ii) all, or substantially all, of its assets and liabilities relate to such activities, and (c) at least 90% of its relevant income for the accounting period is group treasury revenue. (3) For the purposes of this section a company undertakes treasury activities for the group if it does one or more of the following in relation to, or on behalf of, the group or any of its members— (a) managing surplus deposits of money or overdrafts, (b) making or receiving deposits of money, (c) lending money, (d) subscribing for or holding shares in a company which is a UK group company undertaking treasury activities for the group at least 90% of whose relevant income is group treasury revenue for its relevant accounting period, (e) investing in debt securities, and (f) hedging assets, liabilities, income or expenses. (4) For the purposes of this section “group treasury revenue”, in relation to a company, means revenue— (a) arising from the treasury activities that the company undertakes for the group, and (b) accounted for as such under generally accepted accounting practice, before any deduction (whether for expenses or otherwise). (5) But revenue consisting of a dividend or other distribution is not group treasury revenue of the company unless it is from a company that meets the conditions in subsection (3)(d). (6) In this section— “debt security” has the same meaning as in the Handbook made by the Financial Conduct Authority or Prudential Regulation Authority under the Financial Services and Markets Act 2000 (as the Handbook in question has effect from time to time), “period of account” has the same meaning as in Part 10, “relevant accounting period” has the same meaning as in Part 10, “relevant income”, in relation to a company, means income— arising from the activities of the company, and accounted for as such under generally accepted accounting practice, before any deduction (whether for expenses or otherwise), “UK group company” has the same meaning as in Part 10, and “worldwide group” has the same meaning as in Part 10.

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371CF Does Chapter 7 apply?

(1) Chapter 7 (captive insurance business) applies for a CFC's accounting period if (and only if)— (a) at any time during the accounting period, the main part of the CFC's business is insurance business, and (b) the CFC's assumed total profits include amounts falling within subsection (2). (2) An amount falls within this subsection if it derives (directly or indirectly) from— (a) a contract of insurance which is entered into with— (i) a UK resident company connected with the CFC, or (ii) a non-UK resident company connected with the CFC acting through a UK permanent establishment, or (b) a contract of insurance which— (i) is entered into with a UK resident person, and (ii) is linked (directly or indirectly) to the provision of goods or services to the UK resident person by a UK connected company. (3) In subsection (2)(b)(ii)— “services” does not include services provided as part of insurance business, and “UK connected company” means— a UK resident company connected with the CFC, or a non-UK resident company connected with the CFC acting through a UK permanent establishment.

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371CG Does Chapter 8 apply?

(1) Chapter 8 (solo consolidation) applies for a CFC's accounting period if (and only if) condition A or B is met. (2) Condition A is that, at any time during the accounting period— (a) the CFC is a subsidiary undertaking which is the subject of a solo consolidation waiver under section BIPRU 2.1 of the PRA Handbook , and (b) the CFC's parent undertaking in relation to that waiver is a UK resident company. (3) Condition B is that, at any time during the accounting period— (a) the CFC is controlled (either alone or with other persons) by a UK resident bank which holds shares in the CFC, (b) the UK resident bank must meet requirements of the PRA Handbook in relation to its capital, (c) any fall in the value of the shares held in the CFC would be (wholly or mainly) ignored for the purpose of determining if the UK resident bank meets those requirements of the PRA Handbook , and (d) the main purpose, or one of the main purposes, of the UK resident bank in holding the shares in the CFC is to obtain a tax advantage for itself or any company connected with it. (4) In this section— “the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000 (as that Handbook has effect from time to time), and “UK resident bank” means a UK resident person carrying on banking business. (5) The Treasury may by regulations amend this Chapter or Chapter 8 as they consider appropriate to take account of— (a) any changes to the PRA Handbook , or (b) any relevant document published by the Financial Conduct Authority or the Prudential Regulation Authority from time to time. (6) “Relevant document” means— (a) a document which replaces the PRA Handbook , or (b) a document which changes or replaces a document falling within paragraph (a) or a document which is a relevant document by virtue of this paragraph.

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371DA Introduction to Chapter

(1) Take the steps set out in section 371DB(1) to determine the CFC's profits falling within this Chapter for the purposes of step 2 in section 371BB(1) (the CFC charge gateway). (2) In this Chapter references to the CFC's assumed total profits are to those profits excluding its non-trading finance profits and property business profits (if any). (3) For the purposes of this Chapter— (a) “the OECD Report” means the Report on the Attribution of Profits to Permanent Establishments of the Organisation for Economic Co-operation and Development (“OECD”) dated 22 July 2010, (b) terms used which are also used in the OECD Report have the same meaning as they have in the OECD Report, (c) “the CFC group” means the CFC taken together with the companies with which it is connected as those companies may change from time to time, (d) “the provisional Chapter 4 profits” has the meaning given at step 7 in section 371DB(1), (e) “the relevant assets and risks” has the meaning given at step 1 in section 371DB(1), subject to any exclusions at step 2 or 6, (f) “SPF” means a significant people function or a key entrepreneurial risk-taking function, (g) an SPF is a “UK SPF” so far as the SPF is carried out in the United Kingdom— (i) by the CFC, otherwise than through a UK permanent establishment, or (ii) by a company connected with the CFC, and (h) an SPF is a “non-UK SPF” so far as it is not a UK SPF. (4) The Treasury may by regulations amend this Chapter as they consider appropriate to take account of any relevant document published by OECD from time to time. (5) “Relevant document” means— (a) a document which replaces, updates or supplements the report mentioned in subsection (3)(a), or (b) a document which replaces, updates or supplements a document falling within paragraph (a) or a document which is a relevant document by virtue of this paragraph.

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371DB The steps

(1) Here are the steps referred to in section 371DA(1). The steps are to be taken in accordance with the principles set out in the OECD Report (so far as relevant). Step 1 Identify the assets which the CFC has or has had, and the risks which the CFC bears or has borne, and from which amounts included in the CFC's assumed total profits have arisen. The identified assets and risks are called “the relevant assets and risks” Step 2 Exclude from the relevant assets and risks any asset or risk to which subsection (2) applies (subject to subsections (3) and (4)). Step 3 Identify the SPFs carried out by the CFC group which are relevant to— the economic ownership of the assets included in the relevant assets and risks, or the assumption and management of the risks included in the relevant assets and risks. For this purpose, assume that the CFC group is a single company. Step 4 Determine the extent to which the SPFs identified at step 3 are UK SPFs and the extent to which they are non-UK SPFs. If none of the SPFs is a UK SPF to any extent, then no profits fall within this Chapter and no further steps are to be taken. Step 5 Assume that the UK SPFs determined at step 4 are carried out by a permanent establishment which the CFC has in the United Kingdom and, accordingly, determine the extent to which the assets and risks included in the relevant assets and risks would be attributed to the permanent establishment. For this purpose, assume that the non-UK SPFs determined at step 4 are all carried out by the CFC itself (if that is not otherwise the case). Step 6 Exclude from the relevant assets and risks any asset or risk, or any assets or risks taken together, to which section 371DC applies. Step 7 Re-determine the CFC's assumed total profits on the basis that the CFC— does not hold, or has not held, the assets included in the relevant assets and risks, and does not bear, or has not borne, the risks included in the relevant assets and risks, so far as they would be attributed to the permanent establishment mentioned at step 5.“The provisional Chapter 4 profits” are the CFC's assumed total profits so far as they are left out of the re-determined profits. Step 8 Exclude from the provisional Chapter 4 profits any amounts which are required to be excluded by section 371DD, 371DE or 371DF. The remaining profits (if any) fall within this Chapter. (2) This subsection applies to an asset or risk if the CFC's assumed total profits are only negligibly higher than what they would be if the CFC— (a) did not hold, or had not held, the asset to any extent at all, or (b) did not bear, or had not borne, the risk to any extent at all. (3) The total number of assets and risks which may be excluded at step 2 in subsection (1) is limited as follows. (4) As well as applying to each asset and risk separately, subsection (2) must also apply to all the assets and risks included in the total number taken together.

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371DC Exclusion: UK activities a minority of total activities

(1) For the purposes of step 6 in section 371DB(1), this section applies to an asset or risk included in the relevant assets and risks if amount A is no more than 50% of amount B. (2) Amount A is the total of— (a) the gross amounts (that is, the amounts before deduction of expenses or transfers to or from reserves) of the CFC's income which would not have become receivable during the accounting period had the CFC— (i) not held the asset, or (ii) not borne the risk, so far as it would be attributed to the permanent establishment mentioned at step 5 in section 371DB(1), and (b) the additional expenses which the CFC would have incurred during the accounting period had the CFC— (i) not held the asset, or (ii) not borne the risk, so far as it would be so attributed. (3) Amount B is the total of— (a) the gross amounts (that is, the amounts before deduction of expenses or transfers to or from reserves) of the CFC's income which would not have become receivable during the accounting period had the CFC— (i) not held the asset to any extent at all, or (ii) not borne the risk to any extent at all, and (b) the additional expenses which the CFC would have incurred during the accounting period had the CFC— (i) not held the asset to any extent at all, or (ii) not borne the risk to any extent at all. (4) Subsection (5) applies if it is not reasonably practicable to separate a number of assets or risks included in the relevant assets and risks for the purpose of determining amounts A and B in relation to each of those assets or risks separately. (5) In subsections (1) to (3) references to an asset or risk are to be read as references to those assets or risks taken together.

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