371SB What are “assumed taxable total profits” and “assumed total profits”?
(1) For the purposes of this Part a CFC's “assumed taxable total profits” for an accounting period are what, applying the corporation tax assumptions, would be the CFC's taxable total profits of the accounting period for corporation tax purposes.
(2) “Taxable total profits” has the meaning given by section 4(2) of CTA 2010 (calculation of taxable total profits).
(3) But, for this purpose, in section 4(3) of CTA 2010—
(a) step 1 is to be applied subject to subsections (4) to (6) below, and
(b) step 2 is to be ignored.
(4) Any income which accrues during the accounting period to the trustees of a settlement in relation to which the CFC is a settlor or a beneficiary is to be added to the income determined at step 1.
(5) If there is more than one settlor or beneficiary in relation to the settlement, the income is to be apportioned between the CFC and the other settlors or beneficiaries on a just and reasonable basis.
(6) If by virtue of subsection (4) any income (“the settlement income”) is added to the income determined at step 1, any dividend or other distribution which derives from the settlement income is to be excluded from the income determined at step 1.
(7) Subsection (8) applies if there is any income which, by virtue of subsection (4), would (apart from subsection (8)) be included in—
(a) the chargeable profits for an accounting period of a CFC which is a beneficiary in relation to a settlement, and
(b) the chargeable profits for an accounting period of a CFC which is a settlor in relation to the settlement.
(8) If the CFC charge is charged in relation to the beneficiary's accounting period, the income is not to be included in the settlor's chargeable profits.
(9) For the purposes of this Part a CFC's “assumed total profits” for an accounting period are its assumed taxable total profits for the period before taking step 2 in section 4(2) of CTA 2010.
(1) In this Part “the corporation tax assumptions” means the assumptions set out in sections 371SD to 371SR.
(2) The corporation tax assumptions are to be applied in determining the following for an accounting period (“the relevant accounting period”) of a CFC—
(a) the CFC's assumed taxable total profits in accordance with section 371SB(1),
(b) the corresponding UK tax in accordance with section 371NE, and
(c) the CFC's creditable tax in accordance with Chapter 16.
(1) Assume—
(a) that the CFC is UK resident at all times during the relevant accounting period,
(b) if the relevant accounting period is not the CFC's first accounting period, that the CFC has been UK resident from the beginning of the CFC's first accounting period, and
(c) except where the CFC ceases to be a CFC at the end of the relevant accounting period, that the CFC will continue to be UK resident until it ceases to be a CFC,
and that the CFC is, has been and will continue to be within the charge to corporation tax, and that its accounting periods (as determined in accordance with section 371VB) are accounting periods for corporation tax purposes, accordingly.
(2) Subsection (1)—
(a) does not require it to be assumed that there is any change in the place or places at which the CFC carries on its activities, and
(b) requires (in particular) that it be assumed that the CFC does not get the benefit of section 1279 of CTA 2009 (exemption for profits from securities free of tax to residents abroad).
(3) If the CFC is (actually) UK resident immediately before the beginning of its first accounting period, assume that its UK residence from the beginning of that accounting period (as assumed in accordance with subsection (1)) is not continuous with its (actual) UK residence before the beginning of that accounting period.
(4) Except where the relevant accounting period is the CFC's first accounting period, assume that a determination of the CFC's assumed taxable total profits has been made for all previous accounting periods back to (and including) the CFC's first accounting period.
(5) Subsection (4) applies (in particular) for the purpose of applying any relief which is relevant to two or more accounting periods.
(5A) The assumption in subsection (1) is to be ignored for the purposes of applying section 164A (and accordingly the CFC will not get the benefit of the transfer pricing exemption for qualifying provision between UK resident companies).
(6) In this section references to the CFC's first accounting period are to the CFC's accounting period which begins when it becomes a CFC.
(1) In relation to any relief under the Corporation Tax Acts which is dependent upon the making of a claim or election, assume the CFC—
(a) to have made that claim or election which would give the maximum amount of relief, and
(b) to have made that claim or election within any applicable time limit.
(2) Subsection (1) does not cover (so far as it would otherwise do so) a claim or election under—
(a) section 18A of CTA 2009 (exemption for profits or losses of foreign permanent establishments),
(b) section 1275 of CTA 2009 (relief for unremittable income),
(c) section 9A of CTA 2010 (designated currency of a UK resident investment company), or
(d) regulations made under paragraph 16 of Schedule 8 to FA 2006 (election for lease to be treated as long funding lease).
(3) Subsection (1) is also subject to section 371SK(5).
371SG Disapplication of assumption in section 371SF(1)
(1) This section applies if a notice is given to an officer of Revenue and Customs requesting that the CFC be assumed—
(a) not to have made for the relevant accounting period a specified claim or election otherwise covered by section 371SF(1),
(b) to have made for the relevant accounting period a specified claim or election, being different from one assumed by section 371SF(1) but being one which (subject to compliance with any applicable time limit) could have been made by a company within the charge to corporation tax, or
(c) to have disclaimed or required the postponement, in whole or in part, of a specified allowance for the relevant accounting period if (subject to compliance with any applicable time limit) a company within the charge to corporation tax could have disclaimed the allowance or required such a postponement (as the case may be).
(2) In determining for the purposes of section 371BA(3) the CFC's assumed total profits and the amounts to be relieved against those profits at step 2 in section 4(2) of CTA 2010—
(a) the assumption set out in the notice under subsection (1) is to be applied so far as relevant, and
(b) the assumption set out in section 371SF(1) is to be disapplied to the extent necessary as a consequence.
(3) In determining the CFC's creditable tax—
(a) the assumption set out in the notice under subsection (1) is to be applied so far as relevant, and
(b) the assumption set out in section 371SF(1) is to be disapplied to the extent necessary as a consequence.
(4) The claims which may be specified in a notice under subsection (1) by virtue of paragraph (b) include claims under the provision mentioned in section 371SF(2)(b) or 371SK(5).
(5) A notice under subsection (1)—
(a) may be given only by a company or companies determined under subsection (6) or (7), and
(b) must be given—
(i) within 20 months after the end of the relevant accounting period, or
(ii) within such longer period as an officer of Revenue and Customs may allow.
(6) 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 relevant 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%.
(7) 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 relevant 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%.
(8) In subsections (6) and (7) “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 relevant accounting period.
(1) This section applies if—
(a) during the relevant accounting period or any earlier accounting period of the CFC, a notice is given to an officer of Revenue and Customs requesting that the CFC be assumed to have made an election under section 9A of CTA 2010 (designated currency of a UK resident investment company) in the form specified in the notice, and
(b) the time at which the notice is given is a time at which, applying the corporation tax assumptions apart from this section, the CFC would have been able to make an election under that section in the form specified in the notice (see, in particular, section 9A(2)).
(2) Assume—
(a) that an election under section 9A of CTA 2010 has been made by the CFC in the form specified in the notice under subsection (1) at the time in question, and
(b) that, accordingly, sections 9A and 9B of that Act apply to determine the effect (if any) of that election.
(3) Subsection (2)(b) does not apply if—
(a) a notice is given to an officer of Revenue and Customs revoking the notice under subsection (1), and
(b) the time at which the notice revoking the notice under subsection (1) is given is a time at which, applying the corporation tax assumptions apart from this section and the assumption in subsection (2)(a), the CFC would have been able to revoke its assumed election under section 9A of CTA 2010.
(4) A notice under subsection (1) or (3) may be given only by a company or companies determined under subsection (5) or (6).
(5) A company may give a notice if—
(a) the company would be likely to be a chargeable company in relation to the applicable accounting period were section 371BC (charging the CFC charge) to apply in relation to that period, and
(b) the percentage of the CFC's chargeable profits for the applicable accounting period which would be likely to be apportioned to the company at step 3 in section 371BC(1) would represent more than half of X%.
(6) Two or more companies may together give a notice if—
(a) the companies would all be likely to be chargeable companies in relation to the applicable accounting period were section 371BC (charging the CFC charge) to apply in relation to that period, and
(b) the percentage of the CFC's chargeable profits for the applicable accounting period which would be likely to be apportioned to the companies, taken together, at step 3 in section 371BC(1) would represent more than half of X%.
(7) In subsections (5) and (6) (and this subsection)—
“the applicable accounting period” means the accounting period of the CFC during which the notice under subsection (1) or (3) (as the case may be) is given, and
“X%” means the total percentage of the CFC's chargeable profits for the applicable accounting period which would be likely to 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 applicable accounting period.
371SI Modification of sections 6 and 7 of CTA 2010
(1) This section applies if—
(a) in accordance with section 371SH, the CFC is assumed to have made an election under section 9A of CTA 2010, but
(b) applying the corporation tax assumptions apart from this section, section 6 or 7 of CTA 2010 could not apply in relation to the CFC for a period of account because the CFC does not prepare its accounts in accordance with generally accepted accounting practice.
(2) If sterling is the CFC's designated currency for the period of account, assume that section 6 of CTA 2010 applies in relation to the CFC as if the words “in accordance with generally accepted accounting practice” were—
(a) omitted from subsection (1A)(a), and
(b) in subsection (2), inserted after “its accounts in sterling”.
(3) If the CFC's designated currency for the period of account is a currency other than sterling, assume that section 7 of CTA 2010 applies in relation to the CFC as if the words “in accordance with generally accepted accounting practice” were—
(a) omitted from subsection (1A)(a), and
(b) at step 1 in subsection (2), inserted after “that currency”.
371SJ Elections for leases to be treated as long funding leases
(1) This section applies if—
(a) a notice is given to an officer of Revenue and Customs requesting that the CFC be assumed to have made a long funding lease election in the form specified in the notice, and
(b) the time at which the notice is given is a time at which, applying the corporation tax assumptions apart from this section, the CFC would have been able to make a long funding lease election in the form specified in the notice.
(2) Assume—
(a) that a long funding lease election has been made by the CFC in the form specified in the notice under subsection (1) at the time in question, and
(b) that, accordingly, regulation 2(5) of the 2007 Regulations applies to determine the effect (if any) of that election.
(3) Subsection (2)(b) does not apply if—
(a) a notice is given to an officer of Revenue and Customs withdrawing the notice under subsection (1), and
(b) the time at which the notice withdrawing the notice under subsection (1) is given is a time at which, applying the corporation tax assumptions apart from this section and the assumption in subsection (2)(a), the CFC would have been able to withdraw its assumed long funding lease election.
(4) A notice under subsection (1) or (3) may be given only by a company or companies determined under subsection (5) or (6).
(5) A company may give a notice if—
(a) the company would be likely to be a chargeable company in relation to the applicable accounting period were section 371BC (charging the CFC charge) to apply in relation to that period, and
(b) the percentage of the CFC's chargeable profits for the applicable accounting period which would be likely to be apportioned to the company at step 3 in section 371BC(1) would represent more than half of X%.
(6) Two or more companies may together give a notice if—
(a) the companies would all be likely to be chargeable companies in relation to the applicable accounting period were section 371BC (charging the CFC charge) to apply in relation to that period, and
(b) the percentage of the CFC's chargeable profits for the applicable accounting period which would be likely to be apportioned to the companies, taken together, at step 3 in section 371BC(1) would represent more than half of X%.
(7) In this section—
(a) “the 2007 Regulations” means the Long Funding Leases (Elections) Regulations 2007 (S.I. 2007/304),
(b) terms defined in the 2007 Regulations have the same meaning as they have in the 2007 Regulations,
(c) “the applicable accounting period” means the CFC's accounting period in which falls the effective date specified in the notice under subsection (1), and
(d) “X%” means the total percentage of the CFC's chargeable profits for the applicable accounting period which would be likely to 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 applicable accounting period.
(8) The Treasury may by regulations amend this section as they consider appropriate to take account of any regulations made by them from time to time under paragraph 16 of Schedule 8 to FA 2006 (elections for leases to be treated as long funding leases).
(1) This section applies for the purpose of applying Part 8 of CTA 2009 (intangible fixed assets).
(2) Assume that any intangible fixed asset acquired or created by the CFC before its first accounting period was acquired or created by the CFC at the beginning of that accounting period at a cost equal to its value recognised for accounting purposes at that time.
(3) In subsection (2) references to the CFC's first accounting period are to the CFC's accounting period which begins when it becomes a CFC.
(4) The assumption in subsection (2) does not affect the determination of the question whether Part 8 of CTA 2009 applies to an asset in accordance with section 882 of that Act (application of Part 8 to assets created or acquired on or after 1 April 2002).
(5) Assume also that the CFC—
(a) has not claimed any relief under Chapter 7 of Part 8 of CTA 2009 (roll-over relief in case of reinvestment), or
(b) made any provisional declaration of entitlement to such relief.
(6) Subsection (5) is subject to section 371SG(4).
371SKA Restrictions on certain deductions: deductions allowances
(1) This section applies for the purposes of—
(a) applying Part 7ZA of CTA 2010 (restrictions on obtaining certain deductions), and
(b) applying any provision of Part 7ZA of CTA 2010 for the purposes of Part 7A of that Act (restrictions on obtaining certain deductions: banking companies).
(2) Assume that each of the following is nil—
(a) the CFC's deductions allowance for the relevant accounting period,
(b) the CFC's trading profits deductions allowance for the relevant accounting period, and
(c) the CFC's non-trading profits deductions allowance for the relevant accounting period.
(3) But if section 269ZX of CTA 2010 (increase of deductions allowance in connection with onerous or impaired leases) applies in relation to the relevant accounting period, the reference in subsection (2) to “nil” is to be read as a reference to an amount equal to the increase provided for by subsection (3) of that section.
(1) Assume that the CFC is neither a member of a group of companies nor a member of a consortium for the purposes of any provision of the Tax Acts.
(2) Subsection (3) applies if—
(a) under Part 5 of CTA 2010 (group relief) or Part 5A of that Act (group relief for carried-forward losses) the CFC actually surrenders any relief which is allowed to another company by way of group relief or group relief for carried-forward losses, but
(b) applying the corporation tax assumptions apart from subsection (3), the relief would reduce the CFC's assumed taxable total profits for the relevant accounting period.
(3) Assume that the relief is to be ignored in determining the CFC's assumed taxable total profits for the relevant accounting period.
(4) This section is subject to section 371SLA (corporate interest restriction).
(1) This section applies for the purpose of applying Part 10 (corporate interest restriction).
(2) Assume—
(a) that the CFC is a member of a worldwide group for a period of account of which it would be a member if section 371SL were ignored, and
(b) that the CFC is the only UK group company in the period (within the meaning of that Part).
(3) Assume also that Part 10 applies as if subsections (2) and (3) of section 392 (interest capacity of the group: the de minimis amount) were omitted.
(1) This section applies if, before the CFC's first accounting period, the CFC incurred any capital expenditure on the provision of plant or machinery for the purposes of its trade.
(2) For the purposes of Part 2 of CAA 2001 (plant and machinery allowances) assume that the plant or machinery—
(a) was provided for purposes wholly other than those of the trade, and
(b) was not brought into use for the purposes of the trade until the beginning of the CFC's first accounting period,
and that section 13 of CAA 2001 (use for qualifying activity of plant or machinery provided for other purposes) applies accordingly.
(3) In this section references to the CFC's first accounting period are to the CFC's accounting period which begins when it becomes a CFC.
(4) This section is to be read as if it were contained in Part 2 of CAA 2001.
(1) For the purposes of Part 18 of CTA 2009 (unremittable overseas income) assume that in section 1274(1)(a), (3) and (4) of that Act references to the United Kingdom are references to the relevant territories.
(2) “The relevant territories” means—
(a) the United Kingdom,
(b) the territory in which the CFC is taken to be resident for the relevant accounting period as determined under Chapter 20, and
(c) any other territory in which the CFC is in fact resident at any time during the relevant accounting period.
(1) This section applies if there is an arrangement or other conduct a purpose of which is to obtain a tax advantage within section 1139(2)(da) of CTA 2010 by obtaining by any means what would, applying the corporation tax assumptions apart from this section, be a tax advantage within section 1139(2)(a) to (d) of that Act.
(2) So far as they would not otherwise do so, the Corporation Tax Acts are to be assumed to apply in relation to the arrangement or other conduct in the same way as they would apply were the purpose of obtaining a tax advantage within section 1139(2)(da) of CTA 2010 the purpose of obtaining an actual tax advantage within section 1139(2)(a) to (d) of that Act by the means in question.
371SP Disguised interest: application of Chapter 2A of Part 6 of CTA 2009
(1) This section applies if—
(a) applying the corporation tax assumptions apart from this section, Chapter 2A of Part 6 of CTA 2009 (disguised interest) would, but for section 486D(1) of that Act, apply in relation to a return produced for the CFC by an arrangement to which the CFC is a party, and
(b) it is reasonable to assume that the main purpose, or one of the main purposes, of the CFC being a party to the arrangement is to obtain a tax advantage within section 1139(2)(da) of CTA 2010 for any person by obtaining what would, applying the corporation tax assumptions apart from this section, be a relevant tax advantage in relation to the CFC.
(2) Chapter 2A of Part 6 of CTA 2009 is to be assumed to apply in relation to the return.
(3) In subsection (1)(b) the reference to obtaining what would be a relevant tax advantage is to be read in accordance with section 486D(4) of CTA 2009.
(4) This section is without prejudice to the generality of section 371SO.
371SQ Shares accounted for as liabilities: application of section 521C of CTA 2009
(1) This section applies if—
(a) applying the corporation tax assumptions apart from this section, section 521C of CTA 2009 (shares accounted for as liabilities) would, but for section 521C(1)(f) of that Act, apply to a share held by the CFC, and
(b) the main purpose, or one of the main purposes, for which the CFC holds the share is to obtain a tax advantage within section 1139(2)(da) of CTA 2010 for any person by obtaining what would, applying the corporation tax assumptions apart from this section, be a relevant tax advantage in relation to the CFC.
(2) Section 521C of CTA 2009 is to be assumed to apply to the share.
(3) In subsection (1)(b) the reference to obtaining what would be a relevant tax advantage is to be read in accordance with section 521E(4) of CTA 2009.
(4) This section is without prejudice to the generality of section 371SO.
371SR Double taxation relief: countering effect of avoidance arrangements
(1) This section applies if it is reasonable to suppose that, applying the corporation tax assumptions apart from this section, each of conditions A to D of section 82 (double taxation relief: conditions to be met for countering effect of avoidance arrangements) would or might be met in relation to the CFC in relation to the relevant accounting period.
(2) Assume that such adjustments are to be made as are necessary for counteracting what, applying the corporation tax assumptions apart from this section, would be the effects of the scheme or arrangement in question in the relevant accounting period that would be referable to the purpose referred to in condition B of section 82.
(1) For the purposes of this Part a CFC is taken to be resident for an accounting period (“the relevant accounting period”) in—
(a) the territory determined by applying section 371TB, or
(b) if no territory can be determined by applying that section—
(i) if subsection (2) applies, the territory in which the CFC is taken to be resident under the double taxation arrangements in question, or
(ii) otherwise, the territory in which the CFC is incorporated or formed.
(2) This subsection applies if the CFC is incorporated or formed in the United Kingdom but is taken to be non-UK resident by virtue of section 18 of CTA 2009 (companies treated as non-UK resident under double taxation arrangements).
(3) This section is subject to section 371KC and step 1 in section 371NB(1).
371TB How to determine the territory in which the CFC is resident
(1) The CFC is taken to be resident in the territory under the law of which, at all times during the relevant accounting period, the CFC is liable to tax by reason of domicile, residence or place of management.
(2) If there are two or more territories (each of which is called an “eligible territory”) falling within subsection (1), the CFC is taken to be resident in only one of the eligible territories.
(3) To determine that territory, go through the following subsections.
If two or more subsections apply, the earlier or earliest subsection takes precedence.
(4) If an election or designation under subsection (8) or (9) has effect for the relevant accounting period by virtue of section 371TC(9)(b), the CFC is taken to be resident in the eligible territory which is the subject of the election or designation.
(5) If, at all times during the relevant accounting period, the CFC's place of effective management is situated in one of the eligible territories only, the CFC is taken to be resident in that territory.
(6) If—
(a) at all times during the relevant accounting period, the CFC's place of effective management is situated in two or more of the eligible territories, and
(b) immediately before the end of the relevant accounting period, over 50% of the amount of the CFC's assets is situated in one of those eligible territories,
the CFC is taken to be resident in the territory in which over 50% of the amount of the CFC's assets is situated.
For this purpose, the amount of the CFC's assets is determined by reference to their market value immediately before the end of the relevant accounting period.
(7) If, immediately before the end of the relevant accounting period, over 50% of the amount of the CFC's assets is situated in one of the eligible territories, the CFC is taken to be resident in that territory.
For this purpose, the amount of the CFC's assets is determined by reference to their market value immediately before the end of the relevant accounting period.
(8) If, in accordance with section 371TC(1), an election specifying an eligible territory is made, the CFC is taken to be resident in that territory.
(9) If an officer of Revenue and Customs designates an eligible territory on a just and reasonable basis (see section 371TC(6) to (8)), the CFC is taken to be resident in that territory.
(1) An election under section 371TB(8)—
(a) may be made only by a company or companies determined under subsection (2) or (3),
(b) must be made by notice to an officer of Revenue and Customs,
(c) must be made no later than 12 months after the end of the relevant accounting period,
(d) must state, in relation to each company making the election, the percentage of the CFC's chargeable profits for the relevant accounting period which would be likely to be apportioned to the company at step 3 in section 371BC(1) were section 371BC (charging the CFC charge) to apply in relation to the relevant accounting period,
(e) must be signed on behalf of each company making the election, and
(f) is irrevocable.
(2) A company may make an election if it is likely that, were section 371BC (charging the CFC charge) to apply in relation to the relevant accounting period, the company would be a chargeable company whose apportioned percentage of the CFC's chargeable profits for the relevant accounting period would represent more than half of X%.
(3) Two or more companies may together make an election if it is likely that, were section 371BC (charging the CFC charge) to apply in relation to the relevant accounting period, the companies would all be chargeable companies whose apportioned percentage of the CFC's chargeable profits for the relevant accounting period would, taken together, represent more than half of X%.
(4) In subsections (2) and (3) “X%” means the total percentage of the CFC's chargeable profits for the relevant accounting period which would be likely to be apportioned to chargeable companies were section 371BC (charging the CFC charge) to apply in relation to the relevant accounting period.
(5) In subsections (2) to (4) references to apportioned percentages of the CFC's chargeable profits for the relevant accounting period are to the percentages apportioned at step 3 in section 371BC(1).
(6) A designation under section 371TB(9) is irrevocable.
(7) An officer of Revenue and Customs must give notice of a designation to each company which the officer considers would be likely to be a chargeable company were the CFC charge to be charged in relation to the relevant accounting period.
(8) The notice must specify—
(a) the date on which the designation was made,
(b) the CFC's name,
(c) the relevant accounting period, and
(d) the territory designated.
(9) An election or designation has effect in relation to—
(a) the relevant accounting period, and
(b) each successive accounting period of the CFC until subsection (10) applies to an accounting period,
regardless of any change in the persons who have interests in the CFC or any change in those interests.
(10) This subsection applies to an accounting period (“the later period”) if—
(a) one or more of the territories which were eligible territories in relation to the relevant accounting period does not fall within section 371TB(1) in relation to the later period, or
(b) some other territory also falls within section 371TB(1) in relation to the later period.
(1) The HMRC Commissioners are responsible for the management of the CFC charge, including the collection of sums charged.
(2) In this Chapter—
“closure notice” means a notice under paragraph 32 of Schedule 18 to FA 1998 (completion of enquiry and statement of conclusions),
“discovery assessment” means a discovery assessment or discovery determination under paragraph 41 of that Schedule (including an assessment by virtue of paragraph 52 of that Schedule), and
“the Taxes Acts” has the same meaning as in TMA 1970.
371UB Application of the Taxes Acts to the CFC charge
(1) The provision of step 5 in section 371BC(1) relating to the charging of a sum as if it were an amount of corporation tax is to be taken as applying all enactments applying generally to corporation tax.
(2) This is subject to—
(a) the provisions of the Taxes Acts, and
(b) any necessary modifications.
(3) The enactments referred to in subsection (1) include—
(a) those relating to returns of information and the supply of accounts, statements and reports,
(b) those relating to the assessing, collecting and receiving of corporation tax,
(c) those conferring or regulating a right of appeal, and
(d) those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.
(4) In particular, TMA 1970 is to have effect as if—
(a) any reference to corporation tax included a reference to a sum charged at step 5 in section 371BC(1) as if it were an amount of corporation tax, and
(b) any reference to profits of a company included, in the case of a chargeable company in relation to a CFC's accounting period, references to the percentage of the CFC's chargeable profits in respect of which the company is charged at step 5 in section 371BC(1).
(5) Nothing in—
(a) paragraph 10 of Schedule 18 to FA 1998 (claims or elections in company tax returns), or
(b) Schedule 1A to TMA 1970 (claims or elections not included in returns),
applies to an election under section 371TB(8).
371UBA Payments in respect of a charge on a banking company: information to be provided
(1) This section applies if—
(a) a sum is charged on a chargeable company at step 5 in section 371BC(1),
(b) the chargeable company is a banking company (within the meaning of Chapter 4 of Part 7A of CTA 2010) for the relevant corporation tax accounting period, and
(c) a payment is made (whether or not by the chargeable company) that is wholly or partly in respect of the sum charged on the chargeable company as mentioned in paragraph (a).
(2) The responsible company must notify an officer of Revenue and Customs in writing, on or before the date the payment is made, of the amount of the payment that is in respect of the sum charged on the chargeable company as mentioned in subsection (1)(a).
(3) “The responsible company” is—
(a) if the chargeable company is party to relevant group payment arrangements, the company that is, under those arrangements, to discharge the liability of the chargeable company to pay corporation tax for the relevant corporation tax accounting period, and
(b) otherwise, the chargeable company.
(4) “Relevant group payment arrangements” means arrangements under section 59F(1) of TMA 1970 (arrangements for paying of tax on behalf of group members) that relate to the relevant corporation tax accounting period.
(5) The requirement in subsection (2) is to be treated, for the purposes of Part 7 of Schedule 36 to FA 2008 (information and inspection powers: penalties), as a requirement in an information notice.
(6) This section is subject to any provision to the contrary in regulations under section 59E of TMA 1970 (further provision as to when corporation tax is due and payable).
(7) In this section “relevant corporation tax accounting period” has the meaning given by section 371BC(3).
(1) This section applies if—
(a) an apportionment of a CFC's chargeable profits and creditable tax is to be made in accordance with section 371QC(2), and
(b) a company tax return is made or amended using for the apportionment a particular basis adopted by the company making the return.
(2) An officer of Revenue and Customs may determine that another basis is to be used for the apportionment; and matters are then to proceed as if that were the only basis allowed by the Taxes Acts.
(3) The officer's determination may be questioned on an appeal against an amendment of the company's tax return made under paragraph 30 or 34 of Schedule 18 to FA 1998.
(4) But it may be questioned only on the ground that the basis of apportionment determined by the officer is not just and reasonable.
(1) This section applies if—
(a) a relevant appeal involves any question concerning the application of this Part in relation to a particular person, and
(b) the resolution of that question is likely to affect the liability under this Part of any other person in relation to the CFC concerned.
(2) Each of the following is a “relevant appeal”—
(a) an appeal under paragraph 34(3) of Schedule 18 to FA 1998 against an amendment of a company tax return, and
(b) an appeal under paragraph 48 of that Schedule against a discovery assessment.
(3) The appeal is to be conducted as follows.
(4) Each of the persons whose liability under this Part is likely to be affected by the resolution of the question is entitled to be a party to the proceedings.
(5) The tribunal must determine the question separately from any other questions in the proceedings.
(6) The tribunal's determination on the question is to have effect as if made in an appeal to which each of those persons was a party.
371UF Recovery of sum charged from other UK resident companies
(1) This section applies if a sum charged on a company (“the defaulting company”) at step 5 in section 371BC(1) as if it were an amount of corporation tax is not fully paid before the date on which it is due and payable in accordance with the Taxes Acts.
(2) An officer of Revenue and Customs may give a notice of liability to another UK resident company which holds or has held (directly or indirectly) the whole or any part of the same interest in the CFC concerned as is or was held by the defaulting company.
(3) If such a notice is given to a company (“the responsible company”), the following are payable by the responsible company—
(a) the whole or, as the case may be, the corresponding part of the sum charged so far as it is unpaid as at the time the notice is given,
(b) the whole or, as the case may be, the corresponding part of any unpaid interest due on the sum charged as at the time the notice is given, and
(c) any interest accruing on the sum charged after the notice is given so far as referable to the sum payable by the responsible company under paragraph (a).
(4) Subsection (5) applies if any sum payable by the responsible company under subsection (3) is not fully paid by the end of the period of 3 months starting with the date on which the notice is given.
(5) Without affecting the right of recovery from the responsible company, the outstanding amount may be recovered from the defaulting company.
In this Part—
“accounting period”, in relation to a CFC, is to be read in accordance with section 371VB,
“accounting profits”, in relation to a CFC, is to be read in accordance with sections 371VC and 371VD,
“arrangement” includes—
any agreement, scheme, transaction or understanding (whether or not legally enforceable), and
a series of arrangements or a part of an arrangement,
“assumed taxable total profits”, in relation to a CFC, is to be read in accordance with section 371SB(1) to (6),
“assumed total profits”, in relation to a CFC, is to be read in accordance with section 371SB(9), subject to section 371DA(2),
“banking business” means the business of—
banking, deposit-taking, money-lending or debt-factoring, or
any activity similar to an activity falling within paragraph (a),
“CFC” is to be read in accordance with section 371AA(3), subject to sections 371RC and 371RE(2) and regulations under section 371RF(4),
“the CFC charge” is to be read in accordance with section 371AA(1),
“chargeable company”, in relation to a CFC's accounting period, means a company which is a chargeable company for the purposes of step 4 in section 371BC(1),
“chargeable profits”, in relation to a CFC, is to be read in accordance with section 371BA(3),
“company” is to be read subject to section 371VE,
“company tax return” means a return required to be made under Schedule 18 to FA 1998,
“contract of insurance” has the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001,
“control” is to be read in accordance with sections 371RB and 371RE, subject to section 371RF,
“the corporation tax assumptions” is to be read in accordance with section 371SC,
“creditable tax”, in relation to a CFC, is to be read in accordance with section 371PA,
“the HMRC Commissioners” means the Commissioners for Her Majesty's Revenue and Customs,
“insurance business” means the business of effecting or carrying out of contracts of insurance, including the investment of premiums received,
“intellectual property” means—
any patent, trade mark, registered design, copyright or design right, or
any licence or other right in relation to anything falling within paragraph (a),
“interest”, as in an interest in a company, is to be read in accordance with section 371VH,
“the local tax amount”, in relation to a CFC, means the amount of tax determined at step 2 in section 371NB(1),
“non-trading finance profits” is to be read in accordance with section 371VG,
“non-trading income” means income which is not trading income,
“property business profits” is to be read in accordance with section 371VI,
“relevant finance lease” is to be read in accordance with section 371VIA,
“relevant interest” is to be read in accordance with Chapter 15,
“tax advantage” has the meaning given by section 1139 of CTA 2010,
“trading finance profits” is to be read in accordance with section 371VG,
“trading income”, in relation to a CFC, means income brought into account in determining the CFC's trading profits for the accounting period in question,
“trading profits”, in relation to a CFC, means any profits included in the CFC's assumed total profits for the accounting period in question on the basis that they would be chargeable to corporation tax under Part 3 of CTA 2009 (trading income),
“UK connected capital contribution”, in relation to a CFC, means any capital contribution to the CFC made (directly or indirectly) by a UK resident company connected with the CFC (whether in relation to an issue of shares in the CFC or otherwise), and
“UK permanent establishment”, in relation to a non-UK resident company, means a permanent establishment which the company has in the United Kingdom and through which it carries on a trade in the United Kingdom.
(1) This section applies for the purposes of this Part.
(2) An accounting period of a CFC begins—
(a) when the CFC becomes a CFC, or
(b) immediately after the end of the previous accounting period of the CFC, if the CFC is still a CFC.
(3) An accounting period of a CFC comes to an end on the occurrence of any of the following—
(a) the CFC ceasing to be a CFC,
(b) the CFC becoming, or ceasing to be, liable to tax in a territory by reason of domicile, residence or place of management,
(c) the CFC ceasing to have any source of income at all, or
(d) a company which has a relevant interest in the CFC ceasing to have any relevant interest in the CFC at all or ceasing to be within the charge to corporation tax.
(4) Without affecting subsections (2) and (3), sections 10(1)(a) to (d), (i) and (j) and (5), 11(1) and (2) and 12 of CTA 2009 (corporation tax accounting periods) apply as they apply for corporation tax purposes.
(5) Subsection (6) applies if it appears to an officer of Revenue and Customs that the beginning or end of a CFC's accounting period is uncertain.
(6) An officer of Revenue and Customs may by notice specify as an accounting period of the CFC such period not exceeding 12 months as the officer considers appropriate.
(7) Subsection (8) applies if after the giving of a notice under subsection (6)—
(a) further facts come to the knowledge of an officer of Revenue and Customs, and
(b) as a result of that, it appears to an officer of Revenue and Customs that any accounting period specified in the notice is not the true accounting period.
(8) An officer of Revenue and Customs must by notice amend the notice under subsection (6) so as to specify what appears to the officer to be the true accounting period.
(9) A notice under subsection (6) or (8) must be given to each company which the officer of Revenue and Customs considers would be likely to be a chargeable company were the CFC charge to be charged in relation to the CFC's accounting period in question.
(1) This section and section 371VD (with which this section needs to be read) apply for the purposes of this Part.
(2) A CFC's accounting profits for an accounting period are its pre-tax profits for the period.
(3) If financial statements for the CFC are prepared for the accounting period in accordance with an acceptable accounting practice, the CFC's pre-tax profits are to be determined by reference to the amounts disclosed in those statements (subject to subsections (4) and (5)).
(4) Subsection (5) applies if—
(a) the CFC's financial statements for the accounting period (or any aspect of them) are not prepared in accordance with an acceptable accounting practice, or
(b) no financial statements are prepared at all for the CFC for the accounting period within 12 months after the end of that period.
(5) The CFC's pre-tax profits are to be determined by reference to the amounts which would have been disclosed had financial statements for the accounting period been prepared for the CFC in accordance with—
(a) the acceptable accounting practice in accordance with which financial statements for the CFC are normally prepared, or
(b) if paragraph (a) cannot be applied, international accounting standards.
(6) Each of the following is an “acceptable accounting practice”—
(a) international accounting standards,
(b) UK generally accepted accounting practice, and
(c) accounting practice which is generally accepted in the territory in which the CFC is resident for the accounting period.
(7) In this section references to amounts disclosed in financial statements include amounts comprised in amounts so disclosed.
(8) If the CFC's accounting profits (or any amounts included in them) are determined in a currency other than sterling, they are to be translated into their sterling equivalent using the average rate of exchange for the accounting period calculated from daily spot rates.
(1) This section applies for the purpose of determining a CFC's accounting profits for an accounting period.
(2) The following are to be ignored in determining the profits—
(a) any dividend or other distribution which is not brought into account in determining the CFC's assumed total profits for the accounting period on the basis that it would be exempt for the purposes of Part 9A of CTA 2009 (company distributions),
(b) any property business profits or property business losses, and
(c) any capital profits or losses.
(3) In subsection (2)(b) “property business losses” means any losses of a UK property business or overseas property business of the CFC; such losses are to be determined in a way corresponding to the way in which property business profits are determined.
(4) The profits are to include—
(a) any amount which accrues during the accounting period to the trustees of a settlement in relation to which the CFC is a settlor or beneficiary, and
(b) the CFC's share of any income which accrues during the accounting period to a partnership of which the CFC is a partner, as determined by apportioning that income between the partners on a just and reasonable basis.
(5) If there is more than one settlor or beneficiary in relation to a settlement covered by subsection (4)(a), the income is to be apportioned between the CFC and the other settlors or beneficiaries on a just and reasonable basis.
(6) In subsection (4)(b) “partnership” includes an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.
(7) Part 4 (transfer pricing) applies as it applies in relation to the determination of the CFC's assumed taxable total profits for the accounting period.
(8) But subsection (7) is to be ignored if the difference made in the amount of the profits as a result of its application would not be more than £50,000.
(1) This Part applies in relation to unincorporated cells and incorporated cells as if they were non-UK resident companies.
(2) An “unincorporated cell” is an identifiable part (by whatever name known) of a non-UK resident company which meets the following condition.
(3) The condition is that, under the law under which the non-UK resident company is incorporated or formed, under the articles of association or other document regulating the non-UK resident company or under any arrangement entered into by or in relation to the non-UK resident company—
(a) assets and liabilities of the non-UK resident company may be wholly or mainly allocated to the part of the company in question,
(b) liabilities so allocated are to be met wholly or mainly out of assets so allocated, and
(c) there are members of the non-UK resident company who have rights in relation to the company's assets which cover only or mainly assets so allocated.
(4) Subsection (1) does not affect the status of the non-UK resident company mentioned in subsection (2) as a company for the purposes of this Part; but its assets and liabilities are to be apportioned between it and the unincorporated cell (and any other unincorporated cells which are part of the company) on a just and reasonable basis.
(5) An “incorporated cell” is an entity (by whatever name known) established under the articles of association or other document regulating a non-UK resident company—
(a) which, under the law under which the non-UK resident company is incorporated or formed, has a legal personality distinct from that of the non-UK resident company, but
(b) which is not itself a company (ignoring this section).
(6) Subsection (1) does not affect the status of the non-UK resident company mentioned in subsection (5) as a company for the purposes of this Part.
(7) The Treasury may by regulations provide for this Part to apply in relation to—
(a) parts of companies falling within specified descriptions, or
(b) other entities falling within specified descriptions which are not themselves companies (ignoring this section),
as if they were non-UK resident companies.
(8) Regulations under subsection (7) may add to, repeal or otherwise amend subsections (1) to (6).
(1) This section applies for the purposes of this Part.
(2) The following provisions of CTA 2010 apply—
(a) section 882(2) to (7) (“associated” persons), and
(b) section 1122 (“connected” persons).
(3) A person is “related” to a CFC if—
(a) the person is connected or associated with the CFC,
(b) at least 25% of the CFC's chargeable profits would be apportioned to the person at step 3 in section 371BC(1) were that step required to be taken in relation to the accounting period in question, or
(c) if the CFC is a CFC by virtue of section 371RC, the person is connected or associated with either or both of the controllers.
(1) In this Part “non-trading finance profits”, in relation to a CFC, means any amounts—
(a) which are included in the CFC's assumed total profits for the accounting period in question on the basis that they would be chargeable to corporation tax under—
(i) section 299 of CTA 2009 (charge to tax on non-trading profits from loan relationships), or
(ii) Part 9A of that Act (company distributions), or
(b) which are included in the CFC's assumed total profits for the accounting period in question and which—
(i) arise from a relevant finance lease, but
(ii) are not trading profits.
(2) Subsection (1) is subject to subsection (3) and sections 371CB(2) and (8), 371CE(2) and 371IA(9).
(3) Any credits or debits which are to be brought into account in determining the CFC's property business profits for the accounting period in question in accordance with section 371VI(2) are not to be brought into account in determining the CFC's non-trading finance profits.
(4) In this Part “trading finance profits”, in relation to a CFC, means any amounts included in the CFC's assumed total profits for the accounting period in question—
(a) which are trading profits by virtue of section 297, 573 or 931W of CTA 2009, or
(b) which are trading profits arising from ... a relevant finance lease.
(5) Subsection (4) is subject to section 371CE(2).
(1) This section applies for the purposes of this Part.
(2) The following persons have an “interest” in a company—
(a) any person who has, or is entitled to acquire, share capital or voting rights in the company,
(b) any person who has, or is entitled to acquire, a right to receive or participate in distributions of the company,
(c) any person who is entitled—
(i) to direct how income or assets of the company are to be applied,
(ii) to have such income or assets applied on the person's behalf, or
(iii) otherwise to secure that such income or assets will be applied (directly or indirectly) for the person's benefit, and
(d) any other person who, either alone or together with other persons, has control of the company.
(3) In subsection (2) references to a person being entitled to do anything cover cases in which—
(a) a person is presently entitled to do it at a future date, or
(b) a person will at a future date be entitled to do it.
(4) In subsection (2)(c) references to a person being entitled to do anything also cover cases in which it is reasonable to suppose that a person is presently able, or will at a future date become able, to do the thing (even though the person presently has, or will have, no entitlement to do the thing).
(5) Subsection (6) applies if a person's entitlement (or supposed ability) to do anything mentioned in subsection (2)(c) is (or would be) contingent upon a default of the company or any other person under any agreement.
(6) The person is not to have an interest in the company under subsection (2)(c) by virtue of that entitlement (or supposed ability) unless the default has occurred.
(7) Rights which a person has as a loan creditor of a company are to be ignored for the purposes of subsection (2).
(8) In subsection (7)—
“loan creditor” has the meaning given by section 453 of CTA 2010, but ignoring subsection (4) of that section, and
“rights” does not include any rights excluded from subsection (7) by subsection (10).
(9) Subsection (10) applies if, in accordance with generally accepted accounting practice, a loan creditor divides its rights and liabilities under a loan relationship to which it is a party as mentioned in section 415(1) of CTA 2009 (loan relationships with embedded derivatives).
...
(10) Any rights falling within section 415(1)(b) of CTA 2009 are to be excluded from subsection (7).
(10A) For the purposes of subsection (9), if for any relevant period accounts for a loan creditor are not prepared in accordance with international accounting standards or UK generally accepted accounting practice, any question relating to generally accepted accounting practice is to be determined in relation to the loan creditor for that period by reference to generally accepted accounting practice in relation to accounts prepared in accordance with international accounting standards.
(11) Subsections (12) and (13) apply if—
(a) apart from subsection (12), a person has, or two or more persons together have, an interest in a company (“company 1”), and
(b) company 1 has an interest in another company (“company 2”).
(In paragraph (b) “interest” includes an interest by virtue of subsection (12).)
(12) The person or persons mentioned in subsection (11)(a) are to be taken to have an interest in company 2 (and references to a person's interest in a company are to be read accordingly).
(13) For the purposes of references to one person's interest in a company being the same as another person's interest—
(a) the person mentioned in subsection (11)(a), or
(b) each of the persons so mentioned,
is to be taken as having, to the extent of that person's interest in company 1, the same interest as company 1 has in company 2.
(14) If two or more persons jointly have an interest in a company otherwise than in a fiduciary or representative capacity, they are taken to have the interest in equal shares.
(1) Subject to what follows, in this Part “property business profits”, in relation to a CFC, means any profits included in the CFC's assumed total profits for the accounting period in question on the basis that they would be chargeable to corporation tax under Part 4 of CTA 2009 (property income).
(2) Any credits or debits—
(a) which are brought into account under Part 5 of CTA 2009 in determining the CFC's assumed total profits for the accounting period, and
(b) which fall within subsection (3) or (5),
are to be brought into account in determining the CFC's property business profits.
(3) Credits and debits fall within this subsection so far as they are from a debtor relationship of the CFC where the loan which is the subject of the debtor relationship—
(a) is made and used solely for the purposes of a relevant property business, and
(b) is not used to any extent for the purpose of funding (directly or indirectly)—
(i) a loan to any other person, or
(ii) so far as not covered by sub-paragraph (i), an arrangement intended to produce for any person a return in relation to any amount which it is reasonable to suppose would be a return by reference to the time value of that amount of money.
(4) In subsection (3) “debtor relationship” has the meaning given by section 302(6) of CTA 2009 (and does not include anything which, although not falling within section 302(1) of that Act, is treated for any purpose as if it were a debtor relationship); and “loan” is to be read accordingly.
(5) Credits and debits fall within this subsection so far as they—
(a) are from any derivative contract or other arrangement entered into by the CFC as a hedge of risk in connection with a relevant property business, and
(b) are attributable to that hedge of risk.
(6) “Relevant property business” means a UK property business or overseas property business of the CFC, profits of which are included in the CFC's property business profits apart from subsection (2).
(1) In this Part “relevant finance lease” means an arrangement falling within subsection (2) or (3).
(An arrangement which is a loan relationship of any company does not fall within either of those subsections.)
(2) An arrangement falls within this subsection if—
(a) it provides for an asset to be leased or otherwise made available by a person (“the lessor”) to another person, and
(b) in accordance with generally accepted accounting practice, it falls (or would fall) to be treated in the accounts of the lessor, or of a person connected with the lessor, as a finance lease or a loan.
(3) A hire-purchase, conditional sale or other arrangement relating to an asset falls within this subsection if it does not fall within subsection (2) but is of a similar character to an arrangement which would fall within that subsection.
(4) If for any relevant period accounts for a person are not prepared in accordance with international accounting standards or UK generally accepted accounting practice, any question relating to generally accepted accounting practice is to be determined for the purposes of this section in relation to that person for that period by reference to generally accepted accounting practice in relation to accounts prepared in accordance with international accounting standards.
(5) In this section “accounts”, in relation to a company, includes accounts relating to two or more companies of which that company is one.