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.
(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).
(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.
(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.
(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).
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.
(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.
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).
(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).
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.
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.
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.
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.
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.
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.
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.
(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.
(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).
(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).
(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.
(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.
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.
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.
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.
(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.
(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.
(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.
(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).
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.
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.
(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.
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.
(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.
(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.
(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.
(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.
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.