Statutory Instruments
2006 No. 3262
Corporation Tax
The Lloyd’s Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006
Made
6th December 2006
Laid before the House of Commons
7th December 2006
Coming into force
31st December 2006
Preliminary
Citation, commencement and effect
1.—(1) These Regulations may be cited as the Lloyd’s Underwriters (Double Taxation Relief) (Corporate Members) Regulations 2006 and shall come into force on 31st December 2006.
(2) These Regulations shall have effect in relation to accounting periods ending on or after the date on which these Regulations come into force.
Interpretation
2.—(1) This paragraph gives the meaning of abbreviated references to legislation used in these Regulations—
“ICTA” means the Income and Corporation Taxes Act 1988(3);
“Chapter 2 of Part 18” means Chapter 2 of Part 18 of ICTA (rules governing relief by way of credit).
(2) In these Regulations—
“foreign amount of tax” has the meaning given by regulation 5(4);
“foreign tax” means tax chargeable under the law of a territory outside the United Kingdom.
General scope of these Regulations
General provisions
3.—(1) These Regulations make provision for giving credit for foreign tax payable in respect of profits or losses arising from a corporate member’s underwriting business in an accounting period.
(2) Relief from corporation tax shall be given under Chapters 1 and 2 of Part 18 of ICTA in respect of the foreign tax payable by allowing the amount of the pool of adjusted sums of foreign tax for an accounting period as a credit against the corporation tax payable on the profits arising from the corporate member’s underwriting business.
(3) In these Regulations—
(a)regulations 5 to 10 apply to determine how the amount of the pool of adjusted sums of foreign tax for an accounting period is ascertained, and
(b)regulation 11 explains how the amount of the pool of adjusted sums of foreign tax for an accounting period is allowed as a credit against the corporation tax payable on the profits arising from the corporate member’s underwriting business.
Application of sections in Chapter 2 of Part 18
4. The following sections of Chapter 2 of Part 18 apply for the purposes of these Regulations—
section 792 (interpretation of credit code);
sections 793 to 795A(4) (general rules);
sections 797 to 798C(5) (the measure of the foreign income);
sections 805 and 806 (elections and claims).
The pool of adjusted sums of foreign tax
Allocation of foreign tax to accounting periods
5.—(1) The amount of the pool of adjusted sums of foreign tax for an accounting period is calculated by reference to the foreign tax payable for the corresponding foreign period of accounting.
(2) Adjusted sums of foreign tax must be calculated separately for each relevant territory outside the United Kingdom.
(3) For the purposes of these Regulations an accounting period corresponds to a foreign period of accounting if the foreign period of accounting ends in the period of twelve months immediately preceding the beginning of the accounting period.
Regulation 6 contains further provisions that apply if an accounting period or a foreign period of accounting is not a period of twelve months.
(4) In these Regulations an amount of foreign tax payable for a corresponding foreign period of accounting is called a foreign amount of tax.
Further provisions relating to accounting periods and to foreign periods of accounting
6.—(1) If a foreign period of accounting is more than twelve months—
(a)the period must be split into successive periods of twelve months and a final period not exceeding twelve months, and
(b)the profit of the corporate member’s underwriting business and the amount of foreign tax must be apportioned rateably.
(2) If a foreign period of accounting is less than twelve months and more than one such period ends in the period of twelve months immediately preceding the beginning of the accounting period, the accounting period corresponds to all those foreign periods of accounting.
(3) If a foreign period of accounting ends at a time which is within the immediately preceding twelve months period of more than one accounting period, the accounting period to which the foreign period of accounting corresponds is the first accounting period to begin after the foreign period of accounting ends.
(4) In paragraph (3) “the immediately preceding twelve months period” means the period of twelve months immediately preceding an accounting period.
Adjustments of foreign amounts of tax
7.—(1) If necessary, foreign amounts of tax must be adjusted in accordance with the provisions of this regulation to determine the adjusted sums of foreign tax.
(2) The effective rate of foreign tax must be determined in accordance with the equation—
(3) In this regulation—
=
the effective rate of foreign tax;
=
the foreign tax payable for the corresponding foreign period of accounting;
=
the profit of the corporate member’s underwriting business arising in the relevant territory outside the United Kingdom for the foreign period of accounting in respect of which the foreign tax is payable.
(4) If the effective rate of foreign tax for a corresponding foreign period of accounting is less than, or equal to, the average rate of corporation tax fixed for companies generally for the accounting period corresponding to the foreign period of accounting, the amount of the adjusted sum of foreign tax is the foreign amount of tax.
(5) If the effective rate of foreign tax for a corresponding foreign period of accounting is greater than the average rate of corporation tax fixed for companies generally for the accounting period corresponding to the foreign period of accounting, the amount of the adjusted sum of foreign tax is determined in accordance with the equation—
(6) In paragraph (5)—
=
the amount of the adjusted sum of foreign tax;
=
the average rate of corporation tax fixed for companies generally for the accounting period corresponding to the foreign period of accounting;
=
the foreign amount of tax.
Calculation of amount of pool of adjusted sums of foreign tax
8.—(1) The amount of the pool of adjusted sums of foreign tax for an accounting period is determined in accordance with the equation—
PASFT = AASFT + ATA + BFA
(2) In paragraph (1)—
=
the amount of the pool of adjusted sums of foreign tax;
=
the aggregate amount of adjusted sums of foreign tax;
=
an additional transitional amount (see regulation 9(2));
=
the amount brought forward from the previous accounting period (see regulation 11(2)).
(3) If regulation 10 applies, the amount of an adjusted sum of foreign tax must be determined in accordance with that regulation.
Transitional provision
9.—(1) This regulation applies if, for the first accounting period for which these Regulations apply—
(a)a corporate member has an amount of tax chargeable under the law of a territory outside the United Kingdom for which relief has not been given, and
(b)that amount of tax relates to foreign periods of accounting earlier than the period to which the first accounting period corresponds.
(2) If the corporate member so chooses, that amount of tax may be added to the pool of adjusted sums of foreign tax for that first accounting period.
(3) If paragraph (2) applies, the amount of tax must be adjusted in accordance with the provisions of regulation 7 if necessary.
(4) In any other case, relief must be given for that amount of tax before relief is given under these Regulations.
Refunds of foreign tax
10.—(1) This regulation applies if—
(a)relief for foreign tax paid is given by way of credit against United Kingdom tax on profits arising from a corporate member’s underwriting business, and
(b)an amount of that foreign tax (“the repaid amount”) is subsequently repaid to the member.
(2) For the purposes of regulations 5 to 8 the repaid amount must be dealt with in accordance with paragraphs (3) and (4).
(3) For the purposes of regulation 7—
(a)the repaid amount is to be treated as if it were a foreign amount of tax repayable for the corresponding foreign period of accounting, and
(b)the following are to be adjusted by deducting the repaid amount—
(i)the foreign tax payable for the corresponding foreign period of accounting (see paragraphs (2) and (3) of regulation 7), and
(ii)the foreign amount of tax (see paragraphs (5) and (6) of regulation 7).
(4) For the purposes of regulation 8 the repaid amount (adjusted, if necessary, under paragraph (3)) must be deducted from the amount AASFT.
(5) Paragraph (6) applies if—
(a)any credit for foreign tax has been allowed to a corporate member under any arrangements, and
(b)the amount of that credit is subsequently rendered excessive by reason of an adjustment of the amount of any tax payable under the laws of a territory outside the United Kingdom.
(6) The corporate member shall give notice in writing to an Officer of Revenue and Customs that an adjustment has been made that has rendered the amount of the credit excessive.
(7) A notice under paragraph (6) must be given within one year from the time of the making of the adjustment.
(8) A corporate member which fails to comply with the requirements imposed by paragraphs (6) and (7) in relation to any adjustment shall be liable to a penalty of an amount not exceeding the amount by which the credit allowed has been rendered excessive by reason of the adjustment.
(9) If the condition in paragraph (10) is met, any assessments may be made as are necessary to ensure that the total amount of the corporate member’s income or chargeable gains is assessed, and the proper credit, if any, is given in respect of that income or those gains.
(10) The condition is that it appears that the assessment to corporation tax made on the corporate member in respect of the income or chargeable gains—
(a)is not made in respect of the full amount of that income or those gains, or
(b)is incorrect having regard to the repaid amount.
(11) Where the income is, or the chargeable gains are, entrusted to any person in the United Kingdom for payment, any such assessment may be made on the recipient of the income or gains; and, in the case of an assessment to corporation tax in respect of the income, may be assessed under Case VI of Schedule D.
Double taxation relief given
How relief is given
11.—(1) Relief from corporation tax for an accounting period in respect of foreign tax shall be given by allowing the amount of the pool of adjusted sums of foreign tax for that accounting period as a credit against corporation tax payable on the profits arising from a corporate member’s underwriting business—
(a)in that accounting period, or
(b)in such one or more preceding accounting periods, beginning not more than three years before the accounting period mentioned in sub-paragraph (a),
or partly in the one way and partly in the other as the corporate member may choose.
(2) Any amount in the pool of adjusted sums of foreign tax for an accounting period that is not allowed as a credit against corporation tax in accordance with paragraph (1) shall be carried forward and added to the pool of adjusted sums of foreign tax for the next accounting period (see regulation 8(1)).
Paul Gray
Mike Hanson
Two of the Commissioners for Her Majesty’s Revenue and Customs
6th December 2006
EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations make provision for double taxation relief in respect of the profits or losses arising from the underwriting business carried on by a corporate member of Lloyd’s.
Regulations 1 and 2 deal with preliminary matters. Regulation 1 provides for citation, commencement and effect, and regulation 2 for interpretation.
Regulations 3 and 4 deal with general matters. Regulation 3 contains general provisions, and states the principle that relief from United Kingdom corporation tax shall be given under Chapters 1 and 2 of Part 18 of the Income and Corporation Taxes Act 1988 (c. 1) in respect of the foreign tax payable by allowing the amount of the pool of adjusted sums of foreign tax for an accounting period as a credit against the United Kingdom corporation tax payable on the profits arising from the corporate member’s underwriting business. Regulation 4 provides for certain sections of Chapter 2 of Part 18 of the Income and Corporation Taxes Act 1988 to apply for the purposes of these Regulations.
Regulations 5 to 10 apply to determine how the amount of the pool of adjusted sums of foreign tax for an accounting period is ascertained. Regulation 5 provides that the amount of the pool of adjusted sums of foreign tax for an accounting period is calculated by reference to the foreign tax payable for the corresponding foreign period of accounting; and that an accounting period corresponds to a foreign period of accounting if the foreign period of accounting ends in the period of twelve months immediately preceding the beginning of the accounting period. An amount of foreign tax payable for a corresponding foreign period of accounting is called a foreign amount of tax. Regulation 6 contains further provisions that apply if an accounting period or a foreign period of accounting is not a period of twelve months. Regulation 7 provides for foreign amounts of tax to be adjusted in certain circumstances to determine the adjusted sums of foreign tax. Regulation 8 sets out how the calculation of the amount of the pool of adjusted sums of foreign tax is made. Regulation 9 contains transitional provisions; and regulation 10 contains provisions that apply if there is a refund of foreign tax.
Regulation 11 explains how the amount of the pool of adjusted sums of foreign tax for an accounting period is allowed as a credit against the United Kingdom corporation tax payable on the profits arising from the corporate member’s underwriting business.
A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.
1994 c. 9. Section 229 was amended by section 83(2) of the Finance Act 1995 (c. 4), paragraph 6(b) of Schedule 10 to the Finance Act 1997 (c. 16) and section 45(5) to (7) of the Finance (No. 2) Act 2005 (c. 22).
The functions of the Commissioners of Inland Revenue were transferred to the Commissioners for Her Majesty’s Revenue and Customs by section 5(2) of the Commissioners for Revenue and Customs Act 2005 (c. 11). Section 50 of that Act provides that in so far as it is appropriate in consequence of section 5 a reference in an enactment, however expressed, to the Commissioners of Inland Revenue is to be read as a reference to the Commissioners for Her Majesty’s Revenue and Customs.
Section 795A was inserted by paragraph 6 of Schedule 30 to the Finance Act 2000 (c. 17).
Section 798C was substituted by section 86(1) of the Finance Act 2005 (c. 7).