Office of Public Sector Information
SCHEDULE 17 continued
(1) In this section “the relevant provisions” means sections 752 to 752B and this section.
(2) For the purposes of the relevant provisions—
(a) a person has a direct interest in a company if (and only if) he has an interest in the company otherwise than by virtue of having an interest in another company;
(b) a person has an indirect interest in a company if (and only if) he has an interest in the company by virtue of having an interest in another company;
(c) a person indirectly holds shares of a controlled foreign company if (and only if) he directly holds ordinary shares of a company which is share-linked to the controlled foreign company.
(3) For the purposes of the relevant provisions, a company is “share-linked” to a controlled foreign company if it has an interest in the controlled foreign company only by virtue of directly holding ordinary shares—
(a) of the controlled foreign company, or
(b) of the controlled foreign company or of one or more companies which are share-linked to the controlled foreign company by virtue of paragraph (a) above, or
(c) of the controlled foreign company or of one or more companies which are share-linked to the controlled foreign company by virtue of paragraph (a) or (b) above,
and so on.
(4) For the purposes of the relevant provisions, a company (“company A”) has an intermediate interest in a controlled foreign company if (and only if)—
(a) it has a direct or indirect interest in the controlled foreign company; and
(b) one or more other persons have relevant interests in the controlled foreign company by virtue of having a direct or indirect interest in company A.
(5) Any interest or shares held by a nominee or bare trustee shall be treated for the purposes of the relevant provisions as held by the person or persons for whom the nominee or bare trustee holds the interest or shares.
(6) Where—
(a) an interest in a controlled foreign company is held in a fiduciary or representative capacity, and
(b) subsection (5) above does not apply, but
(c) there are one or more identifiable beneficiaries,
the interest shall be treated for the purposes of the relevant provisions as held by that beneficiary or, as the case may be, as apportioned on a just and reasonable basis among those beneficiaries.
(7) In the relevant provisions—
“bare trustee” means a person acting as trustee—
for a person absolutely entitled as against the trustee; or
for any person who would be so entitled but for being a minor or otherwise under a disability; or
for two or more persons who are or would, but for all or any of them being a minor or otherwise under a disability, be jointly so entitled;
“ordinary shares”, in the case of any company, means shares of a single class, however described, which is the only class of shares issued by the company;
“the relevant accounting period” means the accounting period mentioned in section 752(1);
“share” includes a reference to a fraction of a share.”
8 Section 753 of the Taxes Act 1988 (notices and appeals) shall cease to have effect.
9 (1) Section 754 of the Taxes Act 1988 (assessment, recovery and postponement of tax) shall be amended as follows.
(2) In subsection (1) (provisions of section 747(4)(a) relating to assessment and recovery of a sum as if it were an amount of corporation tax to be taken as applying all enactments applying generally to corporation tax, including certain described enactments)—
(a) for “assessment and recovery” there shall be substituted “the charging”; and
(b) after “including” there shall be inserted “those relating to company tax returns,”.
(3) After subsection (1) there shall be inserted—
“(1A) Accordingly (but without prejudice to subsection (1) above) the Management Act shall have effect as if—
(a) any reference to corporation tax included a reference to a sum chargeable under section 747(4)(a) as if it were an amount of corporation tax; and
(b) any reference to profits of a company included a reference to an amount of chargeable profits of a controlled foreign company which falls to be apportioned to a company under section 747(3).”
(4) For subsection (2) (which provides for any sum assessable and recoverable under section 747(4)(a) to be regarded as corporation tax which falls to be assessed for the accounting period in which ends the accounting period of the controlled foreign company and which makes provision as to the contents of a notice of assessment) there shall be substituted—
“(2) For the purposes of the Taxes Acts, any sum chargeable on a company under section 747(4)(a) is chargeable for the accounting period of the company in which ends that one of the controlled foreign company’s accounting periods the chargeable profits of which give rise to that sum.”
(5) After subsection (2) there shall be inserted—
“(2A) Where—
(a) an apportionment under section 747(3) falls to be made as regards an accounting period of a controlled foreign company, and
(b) the apportionment falls to be made in accordance with section 752(4) on a just and reasonable basis, and
(c) a company tax return is made or amended using for the apportionment a particular basis adopted by the company making the return,
the Board may determine that another basis is to be used for the apportionment.
(2B) For the purposes of subsection (2A) above, the Board may by notice require the company making the return—
(a) to produce to them such documents in the company’s power or possession, and
(b) to provide them with such information, in such form,
as they may reasonably require for the purpose of determining the basis which is to be used for making the apportionment.
(2C) The provisions of paragraphs 27 to 29 of Schedule 18 to the Finance Act 1998 (notice to produce documents etc for the purposes of enquiry: supplementary provisions and penalty) shall apply in relation to a notice under subsection (2B) above.
(2D) Once the Board have determined under subsection (2A) above the basis to be used for the apportionment, matters shall proceed as if that were the only basis allowed by the Tax Acts.
(2E) A determination under subsection (2A) above may be questioned on an appeal against an amendment, made under paragraph 30 or 34(2) of Schedule 18 to the Finance Act 1998, of the company’s company tax return, but only on the ground that the basis of apportionment determined by the Board is not just and reasonable.”
(6) For subsection (3) (appeals) there shall be substituted the following subsections—
“(3) Where any appeal—
(a) under paragraph 34(3) of Schedule 18 to the Finance Act 1998 against an amendment of a company tax return, or
(b) under paragraph 48 of that Schedule against a discovery assessment or discovery determination under paragraph 41 of that Schedule (including an assessment by virtue of paragraph 52 of that Schedule),
involves any question concerning the application of this Chapter in relation to any particular person, that appeal shall be to the Special Commissioners.
(3A) Where—
(a) any such question as is mentioned in subsection (3) above falls to be determined by the Special Commissioners for the purposes of any proceedings before them, and
(b) the question is one whose resolution is likely to affect the liability of more than one person under this Chapter in respect of the controlled foreign company concerned,
subsection (3B) below shall apply.
(3B) Where this subsection applies—
(a) each of the persons whose liability under this Chapter in respect of the controlled foreign company concerned is likely to be affected by the resolution of the question shall be entitled to appear and be heard by the Special Commissioners, or to make representations to them in writing;
(b) the Special Commissioners shall determine that question separately from any other questions in those proceedings; and
(c) their determination on that question shall have effect as if made in an appeal to which each of those persons was a party.”
(7) Subsection (4) shall cease to have effect.
(8) In subsection (6) (power of Board to serve notice of liability to tax on another company with the same interest where tax assessed by virtue of section 752(6) remains unpaid by the assessable company)—
(a) for “assessed” and “assessable”, wherever occurring, there shall be substituted “chargeable”;
(b) in paragraph (a), for “752(6)” there shall be substituted “747(4)(a)”;
(c) in paragraph (b), before “the same interest” there shall be inserted “the whole or any part of”; and
(d) at the beginning of the words following paragraph (b) there shall be inserted “the whole or, as the case may be, the corresponding part of”.
(9) In subsection (7) (liability for interest where notice of liability to tax is served)—
(a) at the beginning of paragraph (a) there shall be inserted “the whole, or (as the case may be) the corresponding part, of”;
(b) in paragraph (a), for “assessed” and “assessable” there shall be substituted “chargeable”; and
(c) at the end of paragraph (b), there shall be added “(so far as referable to tax payable by the responsible company by virtue of the notice)”.
(10) In subsection (8) (recovery of tax and interest from the assessable company where the responsible company fails to pay within the time allowed) for “assessable” there shall be substituted “chargeable”.
10 After section 754 of the Taxes Act 1988 there shall be inserted—
(1) This section applies where—
(a) a company resident in the United Kingdom (“the UK company”) has an interest in a controlled foreign company at any time during an accounting period of the controlled foreign company;
(b) the UK company delivers a company tax return; and
(c) at the time when the UK company delivers the company tax return, it is not established whether or not the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period.
(2) If the UK company is of the opinion that the controlled foreign company is likely to pursue an acceptable distribution policy in relation to the accounting period, the UK company shall make the company tax return on the basis that the accounting period of the controlled foreign company is one in relation to which the controlled foreign company pursues such a policy.
(3) If the UK company is not of the opinion that the controlled foreign company is likely to pursue an acceptable distribution policy in relation to the accounting period, the UK company shall make the company tax return on the basis that the accounting period of the controlled foreign company is one in relation to which the controlled foreign company does not pursue such a policy.
(4) In any case where—
(a) the UK company acts in pursuance of subsection (2) above, but
(b) it becomes established that the controlled foreign company has not pursued an acceptable distribution policy in relation to the accounting period,
the UK company shall amend the company tax return on the basis that the accounting period is not one in relation to which the controlled foreign company pursues an acceptable distribution policy.
(5) In any case where—
(a) the UK company acts in pursuance of subsection (3) above, but
(b) it becomes established that the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period,
the UK company shall amend the company tax return on the basis that the accounting period is one in relation to which the controlled foreign company pursues an acceptable distribution policy.
(6) Any amendment required to be made to the company tax return by virtue of subsection (4) or (5) above (“an ADP amendment”) shall be made by the UK company before the expiration of the period of 30 days next following the end of the period allowed for establishing an ADP in relation to the accounting period of the controlled foreign company.
(7) Subject to subsection (8) below, the making of any ADP amendment is subject to, and must be in accordance with, the other provisions of the Corporation Tax Acts as they apply for the purposes of this Chapter.
(8) The time limits otherwise applicable to amendment of a company tax return do not apply to an ADP amendment.
(9) A company which fails to make an ADP amendment required by subsection (4) above within the time allowed for doing so shall be liable to a tax-related penalty under paragraph 20 of Schedule 18 to the Finance Act 1998 (penalty, not exceeding amount of tax understated, for incorrect or uncorrected return).
(10) For the purposes of this section, if it has not previously been established whether or not the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period, it shall be taken to be established immediately after the end of the period allowed for establishing an ADP in relation to that accounting period.
(11) In this section, “the period allowed for establishing an ADP” means, in relation to an accounting period of a controlled foreign company, the period ending with the expiration of—
(a) subject to paragraph (b) below, the period of eighteen months next following the end of the accounting period; or
(b) if the Board have, in the case of the accounting period, allowed further time under paragraph 2(1)(b) of Schedule 25, the further time so allowed.
(12) In this section any reference to a controlled foreign company pursuing an acceptable distribution policy in relation to an accounting period shall be construed in accordance with Part I of Schedule 25.”
11 After section 754A of the Taxes Act 1988 there shall be inserted—
(1) This section has effect where a determination requiring the Board’s sanction is made for any of the following purposes, that is to say—
(a) the giving of a closure notice; or
(b) the making of a discovery assessment.
(2) If the closure notice or, as the case may be, notice of the discovery assessment is given to any person without—
(a) the determination, so far as it is taken into account in the closure notice or the discovery assessment, having been approved by the Board, or
(b) notification of the Board’s approval having been served on that person at or before the time of the giving of the notice,
the closure notice or, as the case may be, the discovery assessment shall be deemed to have been given or made (and in the case of an assessment notified) in the terms (if any) in which it would have been given or made had that determination not been taken into account.
(3) A notification under subsection (2)(b) above—
(a) must be in writing;
(b) must state that the Board have given their approval on the basis that—
(i) an amount of chargeable profits, and
(ii) an amount of creditable tax (which may be nil),
for the accounting period of the controlled foreign company in question fall to be apportioned under section 747(3) to the person in question;
(c) must state the amounts mentioned in sub-paragraphs (i) and (ii) of paragraph (b) above; and
(d) subject to paragraphs (a) to (c) above, may be in such form as the Board may determine.
(4) For the purposes of this section, the Board’s approval of a determination requiring their sanction—
(a) must be given specifically in relation to the case in question and must apply to the amount determined; but
(b) subject to that, may be given by the Board (either before or after the making of the determination) in any such form or manner as they may determine.
(5) In this section references to a determination requiring the Board’s sanction are references (subject to subsection (6) below) to any determination of the amount of chargeable profits or creditable tax for an accounting period of a controlled foreign company which falls to be apportioned to a particular person under section 747(3).
(6) For the purposes of this section, a determination shall be taken, in relation to a closure notice or a discovery assessment, not to be a determination requiring the Board’s sanction if—
(a) an agreement about the relevant amounts has been made between an officer of the Board and the person in whose case it is made;
(b) that agreement is in force at the time of the giving of the closure notice or, as the case may be, notice of the assessment; and
(c) the matters to which the agreement relates include the amount determined.
(7) In paragraph (a) of subsection (6) above, “the relevant amounts” means—
(a) the amount of chargeable profits, and
(b) the amount of creditable tax (which may be nil),
for the accounting period of the controlled foreign company in question which fall to be apportioned under section 747(3) to the person mentioned in that paragraph.
(8) For the purposes of subsection (6) above an agreement made between an officer of the Board and any person (“the taxpayer”) in relation to any matter shall be taken to be in force at any time if, and only if—
(a) the agreement is one which has been made or confirmed in writing;
(b) that time is after the end of the period of thirty days beginning—
(i) in the case of an agreement made in writing, with the day of the making of the agreement, and
(ii) in any other case, with the day of the agreement’s confirmation in writing; and
(c) the taxpayer has not, before the end of that period of thirty days, served a notice on an officer of the Board stating that he is repudiating or resiling from the agreement.
(9) The references in subsection (8) above to the confirmation in writing of an agreement are references to the service on the taxpayer by an officer of the Board of a notice—
(a) stating that the agreement has been made; and
(b) setting out the terms of the agreement.
(10) The matters that may be questioned on so much of any appeal by virtue of any provision of the Management Act or Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters) as relates to a determination the making of which has been approved by the Board for the purposes of this section shall not include the Board’s approval, except to the extent that the grounds for questioning the approval are the same as the grounds for questioning the determination itself.
(11) In this section—
“closure notice” means a notice under paragraph 32 of Schedule 18 to the Finance Act 1998 (completion of enquiry and statement of conclusions);
“discovery assessment” means a discovery assessment or discovery determination under paragraph 41 of that Schedule (including an assessment by virtue of paragraph 52 of that Schedule).”
12 Section 755 of the Taxes Act 1988 (information relating to controlled foreign companies) shall cease to have effect.
13 After section 755 of the Taxes Act 1988 there shall be inserted—
(1) This section applies in any case where—
(a) an amount (“the apportioned profit”) of a controlled foreign company’s chargeable profits for an accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom (“the UK company”);
(b) the UK company carries on life assurance business in that one of its accounting periods (“the relevant accounting period”) in which ends the accounting period of the controlled foreign company; and
(c) the property or rights which represent the UK company’s relevant interest in the controlled foreign company constitute to any extent assets of the UK company’s long term business fund.
(2) Subsections (3) and (4) below apply if, in the case of the relevant accounting period, the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business.
(3) Where this subsection applies, the “appropriate rate” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 in relation to the policy holders' part of any BLAGAB apportioned profit shall be—
(a) if a single rate of tax under section 88A(1) of the [1989 c. 26.] Finance Act 1989 (lower corporation tax rate on certain insurance company profits) is applicable in relation to the relevant accounting period, that rate; or
(b) if more than one such rate of tax is applicable in relation to the relevant accounting period, the average of those rates over the whole of that period.
(4) Where this subsection applies, the “appropriate rate” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 shall be nil in relation to so much of the apportioned profit as is referable to—
(a) pension business,
(b) life reinsurance business, or
(c) overseas life assurance business,
carried on by the UK company.
(5) If, in the case of the relevant accounting period, the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, the “appropriate rate” for the purposes of—
(a) section 747(4)(a), and
(b) paragraph 1 of Schedule 26,
shall be nil in relation to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of its long term business fund.
(6) If, in the case of the relevant accounting period,—
(a) the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business,
(b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company, and
(c) the apportioned profit is to any extent referable to a category of business specified in paragraphs (a) to (c) of subsection (4) above,
so much of the creditable tax so apportioned as is attributable to the apportioned profit so far as so referable shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
(7) If, in the case of the relevant accounting period,—
(a) the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, and
(b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company,
so much of the creditable tax so apportioned as is attributable to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of the UK company’s long term business fund shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
(8) Any set off under paragraph 1 or 2 of Schedule 26 against the UK company’s liability to tax under section 747(4)(a) in respect of the apportioned profit shall be made against only so much of that liability as is attributable to the eligible part of the apportioned profit.
(9) Accordingly, in the application of paragraph 2 of Schedule 26 in relation to the apportioned profit, in the definition of “the relevant maximum” in sub-paragraph (3)—
(a) the reference to the liability to tax referred to in sub-paragraph (1) of that paragraph shall be taken as a reference to only so much of that liability as is attributable to the eligible part of the apportioned profit; and
(b) in paragraph (a), for the amount there described there shall be substituted a reference to the eligible part of the apportioned profit.
(10) For the purposes of this section, the “eligible part” of the apportioned profit is any BLAGAB apportioned profit, other than the policy holders' part.
(11) For the purposes of this section, the “policy holders' part” of any BLAGAB apportioned profit is—
(a) in a case where subsection (4) of section 88A of the [1989 c. 26.] Finance Act 1989 applies, the whole; and
(b) in any other case, the fraction described in subsection (5)(b) of that section.
(12) In this section—
“BLAGAB apportioned profit” means so much of the apportioned profit as is referable to basic life assurance and general annuity business carried on by the UK company;
“long term business fund” has the meaning given by section 431(2).
(13) For the purposes of this section, the part of the apportioned profit which is referable to—
(a) pension business,
(b) life reinsurance business,
(c) overseas life assurance business, or
(d) basic life assurance and general annuity business,
carried on by the UK company is the part which would have been so referable under section 432A had the apportioned profit been a dividend paid to the UK company at the end of the accounting period mentioned in subsection (1)(a) above in respect of the property or rights which represent the UK company’s relevant interest in the controlled foreign company.
(14) For the purposes of this section, any attribution of creditable tax to a particular part of the apportioned profit shall be made in the proportion which that part of the apportioned profit bears to the whole of the apportioned profit.”
14 After section 755A of the Taxes Act 1988 there shall be inserted—
(1) This section applies where—
(a) a controlled foreign company carries on general insurance business in an accounting period;
(b) an amount of the company’s chargeable profits, and an amount of its creditable tax (if any), for that accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom (“the UK company”);
(c) the UK company delivers a company tax return for that one of its accounting periods in which the controlled foreign company’s accounting period ends; and
(d) in making or amending the return, the UK company has regard to accounts of the controlled foreign company drawn up using a method falling within subsection (2) below.
(2) The methods which fall within this subsection are—
(a) the method described in paragraph 52 of Schedule 9A to the [1985 c. 6.] Companies Act 1985 (which provides for a technical provision to be made in the accounts which is later replaced by a provision for estimated claims outstanding); and
(b) any method which would have fallen within paragraph (a) above, had final replacement of the technical provision, as described in sub-paragraph (4) of paragraph 52 of that Schedule, taken place, and been required to take place, no later than the end of the year referred to in that sub-paragraph as the third year following the underwriting year.
(3) Where this section applies—
(a) the UK company may make any amendments of its company tax return arising from the replacement of the technical provision in the controlled foreign company’s accounts at any time within twelve months from the date on which the provision was replaced; and
(b) notice of intention to enquire into the return under paragraph 24 of Schedule 18 to the Finance Act 1998 may be given at any time up to two years from that date (or at any later time in accordance with the general rule in sub-paragraph (3) of that paragraph).
(4) If, in a case where this section applies, the accounts of the controlled foreign company are drawn up using a method falling within paragraph (b) of subsection (2) above—
(a) the controlled foreign company, and
(b) any person with an interest in the controlled foreign company,
shall be treated for the purposes of this section as if final replacement of the technical provision, as described in sub-paragraph (4) of paragraph 52 of Schedule 9A to the [1985 c. 6.] Companies Act 1985, had taken place at, and been required to take place no later than, the end of the year referred to in that sub-paragraph as the third year following the underwriting year.
(5) Regulations under section 755C may make provision with respect to the determination of the amount of the provision by which the technical provision is to be treated as replaced in cases falling within subsection (4) above.
(6) In this section “general insurance business” means insurance business which is general business, as defined in section 1 of the [1982 c. 50.] Insurance Companies Act 1982.”
Finance Act 1998 (C. 36)