[F1PART 9AU.K.Controlled foreign companies

Textual Amendments

F1Pt. 9A inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 1 (with ss. 56-58)

Chapter 2U.K.The CFC charge

371BHCompanies carrying on BLAGABU.K.

(1)Subsection (2) applies in relation to a chargeable company (“CC”) if—

(a)CC carries on basic life assurance and general annuity business during the relevant corporation tax accounting period,

(b)the I-E rules apply to CC for the relevant corporation tax accounting period, and

(c)the following are met in relation to a relevant interest, or a part of a relevant interest, which CC has in the CFC at all times during the CFC's accounting period—

(i)condition D,

(ii)condition E or F (or both), and

(iii)condition G.

(2)An additional sum is charged on CC at step 5 in section 371BC(1) and, for this purpose, step 5 is to be taken on the following basis.

(3)That basis is—

(a)in paragraph (a) at step 5, the reference to the appropriate rate is to be read as a reference to—

(i)the policyholders' rate of tax under section 102 of FA 2012 applicable to the I-E profit for the relevant corporation tax accounting period, or

(ii)if there is more than one such rate, the average rate over the whole of the relevant corporation tax accounting period, and

(b)any reduction of P% or Q% under section 371BG(3) by reference to any relevant interest of CC is to be ignored, but—

(i)P% is to be reduced so that it represents only the policyholders' share of the BLAGAB component of the apportioned profit (see subsections (10) to (12)), and

(ii)Q% is to be reduced by the same proportion as P% is reduced under sub-paragraph (i).

(4)Condition D is that, at all times during the CFC's accounting period, CC has the relevant interest, or the part of a relevant interest, by virtue of its holding shares (“the relevant shares”) in the CFC (directly or indirectly).

(5)Condition E is met if the following requirement is met in relation to a time during the relevant corporation tax accounting period.

(6)The requirement is that any increase (or any part of any increase) in the value of the relevant shares which occurs at that time is not (or would not be) brought into account at step 1 in section 73 of FA 2012 in determining whether CC has an I-E profit for the relevant corporation tax accounting period.

(7)Condition F is met if the following requirement is met in relation to a time during the relevant corporation tax accounting period.

(8)The requirement is that any dividend or other distribution (or any part of any dividend or other distribution) received at that time by CC from the CFC (directly or indirectly) by virtue of its holding the relevant shares is not (or would not be) brought into account at step 1 in section 73 of FA 2012 in determining whether CC has an I-E profit for the relevant corporation tax accounting period.

(9)Condition G is that the assets which represent the relevant interest, or the part of a relevant interest, during the CFC's accounting period are (to any extent) assets held by CC for the purposes of CC's long-term business.

(10)“The apportioned profit” means so much of P% as is attributable to CC having the relevant interest, or the part of a relevant interest, during the CFC's accounting period.

(11)Take the following steps to determine the “BLAGAB component” of the apportioned profit.

  • Step 1 Assume that the apportioned profit is income falling within section 74(1)(j) of FA 2012 paid to CC at the end of the CFC's accounting period.

  • Step 2 Calculate how much of that income would be referable, in accordance with Chapter 4 of Part 2 of FA 2012, to CC's basic life assurance and general annuity business. That amount is the “BLAGAB component” of the apportioned profit.

(12)The “policyholders' share” of the BLAGAB component of the apportioned profit is equal to the policyholders' share of the I - E profit for the relevant corporation tax accounting period as determined in accordance with the rules contained in Chapter 5 of Part 2 of FA 2012.]

Modifications etc. (not altering text)