SCHEDULES
SCHEDULE 20Controlled foreign companies and foreign permanent establishments
PART 2Foreign permanent establishments
6Main provision
For sections 18G to 18I substitute—
18GAnti-diversion rule
1
This section applies for the purposes of this Chapter for any relevant accounting period (“period X”) of a company (“company X”) in relation to a territory outside the United Kingdom (“territory X”) if—
a
there is an adjusted relevant profits amount in relation to territory X for period X,
b
the adjusted relevant profits amount includes diverted profits (see section 18H), and
c
none of the exemptions mentioned in section 18I applies for period X.
2
The diverted profits are to be left out of the adjusted relevant profits amount.
3
For the purposes of this Chapter “adjusted”, in relation to a relevant profits amount, is what the relevant profits amount would be if it were determined without reference to gains or losses which are chargeable gains or allowable losses for corporation tax purposes.
18HWhat are “diverted profits”?
1
2
To determine the extent to which company X’s total profits of period X pass through the diverted profits gateway, apply—
a
section 371BB of TIOPA 2010 (controlled foreign companies: the CFC charge gateway), and
b
except Chapter 8 of Part 9A of that Act, the other provisions referred to in that section,
as if references to the CFC charge gateway were references to the diverted profits gateway.
3
In applying section 371BB of TIOPA 2010 and the other provisions referred to in it assume—
a
that company X is a CFC resident in territory X,
b
that period X is the CFC’s accounting period, and
c
that company X’s total profits of period X are the CFC’s assumed total profits for the accounting period.
4
Subsection (3)(a) does not require it to be assumed that there is any change in the place or places at which company X carries on its activities.
5
6
In this section—
a
references to company X’s total profits of period X are to those profits ignoring this Chapter and step 2 in section 4(3) of CTA 2010, and
18HAModification of Chapter 3 of Part 9A of TIOPA 2010
Chapter 3 of Part 9A of TIOPA 2010 (the CFC charge gateway: determining which of Chapters 4 to 8 applies) applies for the purposes of section 18H(2) with the omission of—
d
section 371CD,
f
section 371CG.
18HBModification of Chapter 4 of Part 9A of TIOPA 2010
1
2
The modifications are—
3
18HCModification of Chapter 5 of Part 9A of TIOPA 2010
18HDModification of Chapter 7 of Part 9A of TIOPA 2010
18HEModification of Chapter 9 of Part 9A of TIOPA 2010
1
2
3
4
5
6
7
In section 371IJ references to the relevant corporation tax accounting period are to be read as references to period X and subsection (6) is to be omitted.
18IExemptions from anti-diversion rule
1
2
b
the assumptions set out in subsection (3) are to be made, and
3
For the purposes of subsection (2)(b), assume—
a
that the permanent establishment which company X has in territory X is a separate company from company X,
b
that the separate company is a CFC resident in territory X,
c
that period X and company X’s other accounting periods for corporation tax purposes are accounting periods of the CFC for the purposes of Part 9A of TIOPA 2010,
d
that the CFC’s assumed total profits for period X are the adjusted relevant profits amount,
e
that the CFC’s assumed taxable total profits for period X are the same as the CFC’s assumed total profits for period X,
f
that the CFC is connected with company X and is also connected or associated with any person with whom company X is connected or associated, and
g
that any person who has an interest in company X also has an interest in the CFC.
4
18IAThe excluded territories exemption
1
2
Sections 371KB(1)(b)(iii) and 371KH are to be omitted.
3
4
5
6
Section 371KF is to be omitted.
7
8
9
In section 371KJ—
a
18IBThe low profits exemption
18ICThe low profit margin exemption
1
2
In section 371MB—
a
subsection (2) is to be omitted, and
b
references to the CFC’s accounting profits for an accounting period are to be read as references to the adjusted relevant profits amount determined before any deduction for interest.
18IDThe tax exemption
1
2
a
b
the second paragraph is to be omitted.
3
4
5
“The corresponding UK tax” is the amount of corporation tax which would be payable in respect of the adjusted relevant profits amount if it were subject in full to corporation tax, ignoring any credit which would be allowed against it under section 18(3) of TIOPA 2010 and assuming, where there is more than one rate of corporation tax applicable to period X, that it were chargeable at the average rate over period X.