Taxation (International and Other Provisions) Act 2010

[F1 Chapter 22 U.K. Supplementary provision

Textual Amendments

F1 Pt. 9A inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 1 (with ss. 56-58)

371VA Definitions U.K.

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—

  (a)

  any agreement, scheme, transaction or understanding (whether or not legally enforceable), and

  (b)

  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—

  (a)

  banking, deposit-taking, money-lending or debt-factoring, or

  (b)

  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—

  (a)

  any patent, trade mark, registered design, copyright or design right, or

  (b)

  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,

• [F2 “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.

Textual Amendments

F2 Words in s. 371VA substituted (retrospective to 1.1.2013) by Finance Act 2013 (c. 29), Sch. 47 paras. 6, 21

371VB Accounting periods U.K.

(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.

371VC Accounting profits U.K.

(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.

371VD Adjustments to accounting profits U.K.

(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.

371VE Cell companies etc U.K.

(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).

371VF Connected persons etc U.K.

(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.

371VG Finance profits U.K.

(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

[F3 (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 F4 ... a relevant finance lease.

(5) Subsection (4) is subject to section 371CE(2).

Textual Amendments

F3 S. 371VG(1)(b) substituted (retrospective to 1.1.2013) by Finance Act 2013 (c. 29), Sch. 47 paras. 7(2), 21

F4 Words in s. 371VG(4)(b) omitted (retrospective to 1.1.2013) by virtue of Finance Act 2013 (c. 29), Sch. 47 paras. 7(3), 21

371VH Interests in companies U.K.

(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).

F5 ...

(10) Any rights falling within section 415(1)(b) of CTA 2009 are to be excluded from subsection (7).

[F6 (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.

Textual Amendments

F5 Words in s. 371VH(9) omitted (retrospective to 1.1.2013) by virtue of Finance Act 2013 (c. 29), Sch. 47 paras. 8(2), 21

F6 S. 371VH(10A) inserted (retrospective to 1.1.2013) by Finance Act 2013 (c. 29), Sch. 47 paras. 8(3), 21

371VI Property business profits U.K.

(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).

[F7 371VIA Relevant finance leases U.K.

(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.]

Textual Amendments

F7 S. 371VIA inserted (retrospective to 1.1.2013) by Finance Act 2013 (c. 29), Sch. 47 paras. 9, 21

371VJ Regulations U.K.

Regulations under this Part may contain incidental, supplemental, consequential and transitional provision and savings.]