SCHEDULES

SCHEDULE 25F34Cases where section 747(3) does not apply

Annotations:
Amendments (Textual)
F34

Sch. 25 heading substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 25; S.I. 1998/3173, art. 2

C1PART II EXEMPT ACTIVITIES

Annotations:
Modifications etc. (not altering text)

6

1

Throughout an accounting period a controlled foreign company is engaged in exempt activities if, and only if, each of the following conditions is fulfilled—

a

that, throughout that accounting period, the company has a business establishment in the territory in which it is resident; and

b

that, throughout that accounting period, its business affairs in that territory are effectively managed there; and

c

that any of sub-paragraphs F1(2) or (3) below applies to the company.

2

This sub-paragraph applies to a company if—

a

at no time during the accounting period in question does the main business of the company consist of either—

i

investment business, or

ii

dealing in goods for delivery to or from the United Kingdom or to or from connected or associated persons; and

b

in the case of a company which is mainly engaged in wholesale, distributive F2financial or service business in that accounting period, less than 50 per cent. of its gross trading receipts from that business is derived directly or indirectly from F3persons falling within sub-paragraph (2A) below.

F42A

Those persons are—

a

persons who are connected or associated with the company;

b

persons who have a 25 per cent assessable interest in the company in the case of the accounting period in question; F5. . .

c

if the company is a controlled foreign company in that accounting period by virtue of subsection (1A) of section 747, persons who are connected or associated with either or both of the two persons mentioned in that subsection F6;

d

persons not falling within paragraphs (a) to (c) above which are companies resident in the United Kingdom;

e

persons not falling within paragraphs (a) to (c) above which are companies not resident in the United Kingdom which carry on business through a F7permanent establishment in the United Kingdom;

f

persons not falling within paragraphs (a) to (c) above who are individuals habitually resident in the United Kingdom;

but where the company is a controlled foreign company falling within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be disregarded.

F82B

A controlled foreign company falls within this sub-paragraph if either—

a

its main business is the effecting or carrying out of contracts of long-term insurance, other than protection business; or

b

it is a member of an insurance group and its main business is insuring or reinsuring large risks.

Paragraph 11A below has effect for the interpretation of this sub-paragraph.

2C

For the purposes of sub-paragraph (2)(b) above, a company’s gross trading receipts from a business shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (2A)(e) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s F7permanent establishment in the United Kingdom.

3

This sub-paragraph applies to a company which is a holding company if at least 90 per cent. of its gross income during the accounting period in question F9is received by it in the territory in which it is resident and is derived directly from companies which it controls and which, throughout that period—

a

are resident in the territory in which the holding company is resident; and

b

are not themselves holding companies F10F11. . . , but otherwise are, in terms of this Schedule, engaged in exempt activities F12or are, in terms of sub-paragraph (5A) below, exempt trading companies ;

and a holding company to which this sub-paragraph applies is in this Part of this Schedule referred to as a “local holding company”.

4

F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F144ZA

F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F154A

F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F164AA

F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4B

F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F174BB

F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F184C

For the purposes of sub-paragraph F19(2A)(b) above, a person has a 25 per cent. assessable interest in a controlled foreign company in the case of an accounting period of the company if, on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3), at least 25 per cent. of the controlled foreign company’s chargeable profits for the accounting period would be apportioned to that person.

5

Any reference in F20sub-paragraph (3) above to a company which a holding company F21F22. . . controls includes a reference to a trading company F23to which sub-paragraph (5ZA) or (5ZB) below applies.

5ZA

This sub-paragraph applies to a trading company in which the holding company F21F24. . . holds the maximum amount of ordinary share capital which is permitted under the law of the territory—

a

in which the trading company is resident; and

b

from whose laws the trading company derives its status as a company.

F255ZB

This sub-paragraph applies to a trading company if—

a

it is a controlled foreign company by virtue of subsection (1A) of section 747; and

b

the person who satisfies the requirement in paragraph (b) of that subsection in relation to the company also controls the holding company F26. . . .

F275A

For the purposes of F28sub-paragraph (3) above, a company is an exempt trading company throughout any period if—

a

it is a trading company throughout each of its accounting periods which falls wholly or partly within that period; and

b

each of those accounting periods is one as regards which—

i

the condition in section 747(1)(c) is not satisfied; or

ii

the conditions in section 748(1)(e) are satisfied; or

iii

the conditions in section 748(3)(a) and (b) are satisfied.

F295B

F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F315C

For the purposes of this paragraph, the gross income of a holding company F32. . . during an accounting period includes—

a

any income which accrues during that period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and

b

any income which accrues during that period to a partnership of which the company is a partner, apportioned between the company and the other partners on a just and reasonable basis.

5D

Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (5C)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.

5E

In sub-paragraph (5C)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.

6

The following provisions of this Part of this Schedule have effect in relation to F33this paragraph.