Amendments made: 46, in schedule 20, page 428, line 15, leave out ‘section’ and insert ‘sections 371BG and’.

Amendment 47, in schedule 20, page 428, line 46, leave out ‘to 371BG’ and insert ‘and 371BF’.

Amendment 48, in schedule 20, page 430, line 2, leave out from beginning to end of line 3 on page 431 and insert—

“(1) Subsection (2) applies if conditions A to C are met in relation to a relevant interest, or a part of a relevant interest, which a chargeable company (“CC”) has in the CFC at all times during the CFC’s accounting period.

(2) Step 5 in section 371BC(1) is to be taken in relation to CC on the following basis.

(3) That basis is—

(a) 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 is to be left out of P%, and

(b) so much of Q% as is so attributable is to be left out of Q%.

(4) Condition A 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 B is that any increase in the value of the relevant shares at any time during the relevant corporation tax accounting period is (or would be) income, or brought into account in determining any income, of CC chargeable to corporation tax for that period.

(6) Condition C is that any dividend or other distribution received at any time during the relevant corporation tax accounting period by CC from the CFC (directly or indirectly) by virtue of its holding the relevant shares is (or would be) income, or brought into account in determining any income, of CC chargeable to corporation tax for that period.

(7) Subsection (8) applies if—

(a) CC has the relevant interest, or the part of a relevant interest, by virtue of section 371OB(3) or (4),

(b) the CFC is an offshore fund (as defined in section 355) which does not meet the qualifying investments test in section 493 of CTA 2009, and

(c) conditions B and C would be met but for the offshore fund not meeting that test.

(8) Conditions B and C are to be taken to be met.

(9) This section is subject to section 371BH.

371BH Companies carrying on BLAGAB

(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.

(2A) 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 (2H) to (4)), and

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

(2B) 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).

(2C) Condition E is met if the following requirement is met in relation to a time during the relevant corporation tax accounting period.

(2D) 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.

(2E) Condition F is met if the following requirement is met in relation to a time during the relevant corporation tax accounting period.

(2F) 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.

(2G) 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.

(2H) “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.’.

Amendment 49, in schedule 20, page 433, line 14, leave out from ‘under’ to end of line 15 and insert ‘—

(i) the law of the territory in which the CFC is incorporated or formed,

(ii) the articles of association or other document regulating the CFC, or

(iii) any arrangement entered into by or in relation to the CFC,’.

Amendment 50, in schedule 20, page 435, line 33, at end insert—

“(2A) Profits treated as non-trading finance profits under subsection (2) are not to be taken to fall within section 371CB(3) or (4).’.

Amendment 51, in schedule 20, page 435, line 36, at end insert—

“(3A) For this purpose, section 337(1) (definition of “the worldwide group”) applies with the omission of paragraph (a).’.

Amendment 146, in schedule 20, page 436, leave out lines 36 and 37 and insert

‘by a UK connected company.

(3) In subsection (2)(b)(ii)—

“services” does not include services provided as part of insurance business, and

“UK connected company” means—

(a) a UK resident company connected with the CFC, or

(b) a non-UK resident company connected with the CFC acting through a UK permanent establishment.’.

Amendment 52, in schedule 20, page 447, line 1, leave out

‘derive (directly or indirectly) from’

and insert

‘represent, or derive (directly or indirectly) from,’.

Amendment 53, in schedule 20, page 449, line 14, leave out ‘section 371FB’ and insert ‘sections 371FB and 371FBA’.

Amendment 54, in schedule 20, page 449, line 39, leave out from ‘CFC”)’ to end of line 40.

Amendment 55, in schedule 20, page 450, line 41, leave out ‘371BC(3))’ and insert

‘371BC(3), ignoring sections 371BG(3)(a) and 371BH(2A)(b))’.

Amendment 56, in schedule 20, page 450, line 41, at end insert—

‘371FBA Loans from foreign permanent establishments of UK resident companies

(1) Subsection (2) applies if—

(a) there is a company (“C”) which has made an election under section 18A of CTA 2009 (exemption for profits or losses of foreign permanent establishments),

(b) during a relevant accounting period of C which begins on or after 1 January 2013, C has a creditor relationship which, applying the assumptions set out in section 18H(3) of CTA 2009 in relation to C for the relevant accounting period, would be a qualifying loan relationship (within the meaning of Chapter 9 of this Part) of C in relation to which the CFC would be the ultimate debtor,

(c) in the application of section 18H(2) of CTA 2009 for the relevant accounting period, C makes a claim under Chapter 9 of this Part (as applied by section 18H(2)), and

(d) the relevant accounting period falls wholly or partly in the CFC’s accounting period.

(2) 75% of the principal outstanding during the CFC’s accounting period on the loan which is the subject of the qualifying loan relationship is to be added to the CFC’s free capital or free assets (as the case may be).

(3) Terms used in this section which are defined in section 18A of CTA 2009 have the meaning given by that section.’.

Amendment147, in schedule 20, page 451, leave out lines 43 and 44 and insert

‘by a UK connected company.

“(2A) In subsection (2)(b)(ii)—

“services” does not include services provided as part of insurance business, and

“UK connected company” means—

(a) a UK resident company connected with the CFC, or

(b) a non-UK resident company connected with the CFC acting through a UK permanent establishment.’.

Amendment 57, in schedule 20, page 452, leave out lines 9 to 11.

Amendment 58, in schedule 20, page 452, line 27, at end insert—

“(8) In this section “original contract of insurance”, in relation to a contract of reinsurance which is one in a chain of contracts of reinsurance, means the original contract of insurance reinsured by the first contract in the chain; and in subsection (6)(b) the reference to the original insured is to be read accordingly.’.

Amendment 59, in schedule 20, page 455, line 3, leave out from ‘which’ to end of line 4 and insert

‘a member of the CFC group incurs a debt in the United Kingdom to—

(a) a non-UK resident person, or

(b) a UK resident person who is not a member of the CFC group.’.

Amendment 187, in schedule 20, page 457, line 10, leave out ‘and’ and insert—

‘(ba) the CFC’s accounting period ends in that period of account, and’.

Amendment 60, in schedule 20, page 457, line 11, leave out from ‘this’ to end of line 15 and insert ‘section—

(i) the charging of a sum on company C at step 5 in section 371BC(1) would cause section 314A (finance income amounts of chargeable companies) to apply in the case of company C, and

(ii) the relevant finance profits (see section 314A(1)(c)) would include the leftover profits.’.

Amendment 61, in schedule 20, page 457, line 33, after ‘have’ insert

‘as a result of the application of section 314A’.

Amendment 62, in schedule 20, page 457, leave out lines 39 to 41 and insert—

“(6) For the purposes of subsection (5)(a) assume that company C’s finance income amount would include P% of the leftover profits.

(6A) “P%” has the meaning given by section 371BC(3), subject to sections 371BG(3)(a) and 371BH(2A)(b).

(6B) Subject to what follows, terms used in this section which are defined in Part 7 (tax treatment of financing costs and income) have the same meaning as they have in Part 7.

(6C) In subsections (2) to (4) references to the tested income amount or the tested expense amount are to that amount determined without regard to any debits, credits or other amounts arising from UK banking business or insurance business.

(6D) But subsection (6C) does not apply for the purpose of determining any finance income amount under section 314A or affect the way in which any such amount is to be taken into account in determining the tested income amount or the tested expense amount.

(6E) “UK banking business or insurance business” means banking business or insurance business carried on by—

(a) a UK resident company, or

(b) a non-UK resident company acting through a UK permanent establishment.’.

Amendment 63, in schedule 20, page 458, leave out lines 1 to 5.

Amendment 64, in schedule 20, page 458, line 17, leave out

‘(so far as not reflected in the step 1 credits)’.

Amendment 65, in schedule 20, page 458, line 20, leave out

‘(which is not itself a qualifying loan relationship of the CFC)’

and insert

‘(other than a qualifying loan relationship)’.

Amendment 66, in schedule 20, page 458, line 30, leave out from beginning to ‘credits’ in line 42 and insert—

‘Allocate to the qualifying loan relationship a just and reasonable proportion of the credits from the CFC’s relevant debtor relationships which are brought into account in determining the CFC’s non-trading finance profits (so far as not reflected in the step 2 credits).

Add the credits to the step 2 credits.

The result is “the step 3 credits”.

A debtor relationship of the CFC is “relevant” if the loan which is the subject of it is used by the CFC to fund the loan which is the subject of the qualifying loan relationship.