Schedule 20 - Controlled foreign companies and foreign permanent establishments

Part of Finance Bill – in a Public Bill Committee am 4:45 pm ar 19 Mehefin 2012.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Step 5

Allocate to the qualifying loan relationship a just and reasonable proportion of—

(a) the debits from the CFC’s loan relationships which are brought into account in determining the CFC’s non-trading finance profits (so far as not reflected in the step 4 credits), and

(b) any amounts set off under Chapter 16 of Part 5 of CTA 2009 (non-trading deficits) against amounts which, apart from the set off, would be included in the CFC’s non-trading finance profits.

Reduce the step 4’.

Amendment 67, in schedule 20, page 459, line 35, leave out ‘business,’ and insert

‘business (as the case may be),’.

Amendment 68, in schedule 20, page 459, line 36, leave out from ‘company’ to end of line 37.

Amendment 69, in schedule 20, page 460, line 39, leave out ‘a loan to another person’ and insert

‘—

(a) a loan to another person, or

(b) so far as not covered by paragraph (a), an arrangement intended to produce for any person a return in relation to any amount which it is reasonable to suppose would be a return by reference to the time value of that amount of money.

“(5A) Subsection (5) does not apply if—

(a) the main business of the ultimate debtor is banking business or insurance business, and

(b) the funding for the loan or arrangement would be provided in the ordinary course of the ultimate debtor’s banking business or insurance business (as the case may be).

(5B) A creditor relationship of the CFC cannot be a qualifying loan relationship if—

(a) the main business of the ultimate debtor in relation to the creditor relationship is banking business or insurance business, and

(b) the creditor relationship is, or is connected (directly or indirectly) to, an arrangement the main purpose, or one of the main purposes, of which is for the ultimate debtor to provide (directly or indirectly) funding for a loan or arrangement as mentioned in subsection (5)(a) or (b) in order to obtain a tax advantage for the ultimate debtor.’.

Amendment 70, in schedule 20, page 460, line 42, leave out from ‘relationship’ to ‘an’ in line 48 and insert

‘if the loan which is the subject of the creditor relationship is made to any extent (other than a negligible one) out of funds received by the CFC (directly or indirectly)—

(a) from a relevant UK connected company other than by way of a loan, or

(b) as a result of’.

Amendment 71, in schedule 20, page 461, leave out lines 3 to 5 and insert—

“(7) For the purposes of subsection (6) a company is “relevant UK connected” if—

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

(b) the company’s main business is banking business or insurance business, and

(c) the company’s banking business or insurance business (as the case may be) is a trade.’.

Amendment 72, in schedule 20, page 461, line 13, leave out ‘company,’ and insert

‘company by—

(i) a non-UK resident person, or

(ii) a UK resident person who is not connected with the CFC,’.

Amendment 73, in schedule 20, page 461, line 41, leave out from ‘relationship”’ to end of line 42 and insert

‘or “ultimate debtor” for the purposes of this Chapter.’.

Amendment 74, in schedule 20, page 462, line 2, at end insert—

“(2A) The claim may be amended or withdrawn by company C only by amending the return.’.

Amendment 75, in schedule 20, page 462, line 14, leave out ‘assessment’ and insert ‘amendment’.

Amendment 76, in schedule 20, page 473, line 42, leave out ‘by the CFC’.

Amendment 77, in schedule 20, page 473, line 46, leave out

‘a person other than the CFC,’

and insert ‘any person,’.

Amendment 78, in schedule 20, page 479, line 43, at end insert—

‘371QG Anti-avoidance

(1) This section applies in relation to an accounting period (“the relevant accounting period”) of a CFC if—

(a) at any time an arrangement is entered into, and

(b) the main purpose, or one of the main purposes, of the arrangement is to obtain for any person a tax advantage within section 1139(2)(da) of CTA 2010 in relation to—

(i) the relevant accounting period, or

(ii) that period and one or more other accounting periods of the CFC.

(2) The CFC’s chargeable profits and creditable tax for the relevant accounting period are to be apportioned in accordance with section 371QC(2) (and not section 371QD if that section would otherwise apply).

(3) The apportionments must (in particular) be made in a way which, so far as practicable, counteracts the effects of the arrangement mentioned in subsection (1)(a) so far as those effects are referable to the purpose mentioned in subsection (1)(b).’.

Amendment 79, in schedule 20, page 480, line 7, leave out

‘Sections 371RC and 371RG set out circumstances’

and insert

‘Section 371RC sets out certain cases’.

Amendment 80, in schedule 20, page 483, line 30, at end insert—

“(3A) The Treasury may by regulations provide that, if specified conditions are met, a company is not to be taken to be a CFC by virtue of—

(a) section 371RE, or

(b) provision corresponding to section 371RE contained in regulations under subsection (3).’.

Amendment 81, in schedule 20, page 483, line 31, leave out ‘subsection (3)’ and insert ‘subsections (3) and (3A)’.

Amendment 82, in schedule 20, page 483, line 33, leave out from beginning to end of line 45 on page 484.

Amendment 83, in schedule 20, page 489, line 5, at end insert—

“(2A) Subsection (2)(b) does not apply if—

(a) a notice is given to an officer of Revenue and Customs revoking the notice under subsection (1), and

(b) the time at which the notice revoking the notice under subsection (1) is given is a time at which, applying the corporation tax assumptions apart from this section and the assumption in subsection (2)(a), the CFC would have been able to revoke its assumed election under section 9A of CTA 2010.’.

Amendment 84, in schedule 20, page 489, line 6, after ‘(1)’ insert ‘or (2A)’.

Amendment 85, in schedule 20, page 489, line 29, after ‘(1)’ insert

‘or (2A) (as the case may be)’.

Amendment 86, in schedule 20, page 496, line 5, at end insert—

“(4A) In subsections (2) to (4) references to apportioned percentages of the CFC’s chargeable profits for the relevant accounting period are to the percentages apportioned at step 3 in section 371BC(1).’.

Amendment 87, in schedule 20, page 496, line 40, after ‘including’ insert ‘an assessment’.

Amendment 88, in schedule 20, page 497, line 13, after ‘conferring’ insert ‘or regulating’.

Amendment 89, in schedule 20, page 498, line 40, at end insert—

“(8) But, in relation to a sum charged on a company by virtue of section 371BH(2), in this section—

(a) “the appropriate rate” means the rate given by section 371BH(2A)(a), and

(b) “relevant allowance” means any adjusted BLAGAB management expenses for the purposes of section 73 of FA 2012.’.

Amendment 90, in schedule 20, page 500, line 20, leave out ‘371RC, 371RE(2) and 371RG,’ and insert

‘371RC and 371RE(2) and regulations under section 371RF(3A),’.

Amendment 91, in schedule 20, page 500, line 24, leave out

‘has the meaning given at’

and insert

‘means a company which is a chargeable company for the purposes of’.

Amendment 92, in schedule 20, page 500, line 34, leave out ‘371RG(6),’ and insert ‘371RF,’.

Amendment 93, in schedule 20, page 502, line 1, leave out

‘(see Chapter 15) ceasing to have that interest’

and insert

‘ceasing to have any relevant interest in the CFC at all’.

Amendment 94, in schedule 20, page 503, line 28, leave out ‘profits,’ and insert

‘profits or property business losses,’.

Amendment 95, in schedule 20, page 503, line 29, at end insert—

“(2A) In subsection (2)(b) “property business losses” means any losses of a UK property business or overseas property business of the CFC; such losses are to be determined in a way corresponding to the way in which property business profits are determined.’.

Amendment 96, in schedule 20, page 503, line 45, leave out from ‘(6)’ to ‘Part’ in line 46.

Amendment 97, in schedule 20, page 505, leave out lines 16 to 20.

Amendment 98, in schedule 20, page 505, line 37, leave out ‘and 371CE(2).’ and insert ‘, 371CE(2) and 371IA(9).’.

Amendment 99, in schedule 20, page 506, line 13, leave out from ‘entitled’ to end of line 15 and insert

‘—

(i) to direct how income or assets of the company are to be applied,

(ii) to have such income or assets applied on the person’s behalf, or

(iii) otherwise to secure that such income or assets will be applied (directly or indirectly) for the person’s benefit, and’.

Amendment 100, in schedule 20, page 506, leave out lines 22 to 26 and insert—

“(4) In subsection (2)(c) references to a person being entitled to do anything also cover cases in which it is reasonable to suppose that a person is presently able, or will at a future date become able, to do the thing (even though the person presently has, or will have, no entitlement to do the thing).

(4A) Subsection (4B) applies if a person’s entitlement (or supposed ability) to do anything mentioned in subsection (2)(c) is (or would be) contingent upon a default of the company or any other person under any agreement.

(4B) The person is not to have an interest in the company under subsection (2)(c) by virtue of that entitlement (or supposed ability) unless the default has occurred.’.

Amendment 101, in schedule 20, page 506, line 45, leave out from beginning to end of line 5 on page 507.

Amendment 102, in schedule 20, page 507, line 45, leave out

‘a loan to any other person.’

and insert

‘—

(i) a loan to any other person, or

(ii) so far as not covered by sub-paragraph (i), an arrangement intended to produce for any person a return in relation to any amount which it is reasonable to suppose would be a return by reference to the time value of that amount of money.’.

Amendment 103, in schedule 20, page 508, line 37, leave out ‘they’ and insert ‘the assets’.

Amendment 104, in schedule 20, page 511, leave out line 19 and insert—

“(3) For section 371IA(5) there is to be substituted—

(5) 75% of the profits of each qualifying loan relationship are “exempt” under this Chapter.”

(3A) In section 371IA(9)(a) the words “or Chapter 8 (solo consolidation)” are to be omitted.

(3B) Sections 371IB to 371IE are to be omitted.

(3C) Section 371IH(9)(a) is to be read ignoring the modification in section 18HC(b) above.’.

Amendment 105, in schedule 20, page 511, line 21, after ‘X’ insert

‘and subsection (5) is to be omitted’.

Amendment 106, in schedule 20, page 513, leave out lines 17 to 19 and insert—

“(4) For the purposes of step 3 in section 371NB(1) the amount of the corresponding UK tax for the accounting period is to be determined in accordance with subsection (5) below; and section 371NE is to be omitted accordingly.

(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.”’.

Amendment 107, in schedule 20, page 517, line 13, leave out from ‘paragraph’ to end of line 16 and insert

‘(b), and

(b) before paragraph (k) (as inserted by paragraph 136 of Schedule 16 to this Act) insert—

“(ja) Part 9A of that Act (controlled foreign companies),”.’.

Amendment 108, in schedule 20, page 518, line 44, leave out from beginning to ‘references’ in line 7 on page 519 and insert—

“(4) Section 371RB of TIOPA 2010 (read with section 371RD of that Act) applies for the purposes of this section.

(5) Section 371RD of TIOPA 2010 applies for the purpose of determining if the requirements of subsection (3)(b) and (c) are met in any case.

(6) In subsections (4) and (5)’.

Amendment 109, in schedule 20, page 519, line 32, at end insert—

38A (1) Section 938M (group mismatch schemes: controlled foreign companies) is amended as follows.

(2) In subsection (1) for the words from the beginning to “company” substitute “Section 371SL(1) of TIOPA 2010 (assumption that a CFC”.

(3) In subsection (2)—

(a) for “chargeable profits” substitute “assumed taxable total profits”, and

(b) for “Chapter 4 of Part 17 of ICTA” substitute “Part 9A of TIOPA 2010”.’.

Amendment 110, in schedule 20, page 519, line 40, at end insert—

‘40A (1) Section 179 (compensating payment if advantaged person is controlled foreign company) is amended as follows.

(2) For subsection (1) substitute—

“(1) Subsection (2) applies if—

(a) the actual provision is provision made or imposed in relation to a CFC,

(b) for the purpose of determining the CFC’s assumed taxable total profits for an accounting period, the CFC’s profits and losses are to be calculated in accordance with section 147(3) or (5) in the case of that provision,

(c) in relation to the accounting period, sums are charged on chargeable companies at step 5 in section 371BC(1), and

(d) in consequence of the application of section 147(3) or (5) as mentioned in paragraph (b), the total of those sums is more than it would otherwise be.”

(3) In subsection (2) for “controlled foreign company” substitute “CFC”.

(4) In subsection (3)—

(a) in paragraph (a) for “companies mentioned in subsection (1)(c)” substitute “chargeable companies on which a sum is charged”, and

(b) in paragraph (b) for “tax chargeable under section 747(4) of ICTA” substitute “the CFC charge”.

‘(5) For subsection (4) substitute—

“(4) In this section terms which are defined in Part 9A have the same meaning as they have in that Part.

(5) For the purposes of subsections (1)(c) and (d) and (3)(a) assume that any claims made under Chapter 9 of Part 9A for the accounting period were not made.”’.

Amendment 188, in schedule 20, page 520, line 1, at beginning insert—

‘40B In Chapter 4 of Part 7 (exemption for financing income) after section 298 insert—

“298A Application of Chapter to financing income amounts determined under section 314A

(1) The Commissioners may by regulations amend this Chapter—

(a) to enable a financing income amount determined in accordance with section 314A for the relevant period of account (or a proportion of such an amount so determined) to be specified in a statement of allocated exemptions under section 292(4)(b), and

(b) to require, where a financing income amount so determined (or a proportion of such an amount so determined) is specified in such a statement, the sum charged on the company as mentioned in section 314A(1)(a) to be re-determined at step 5 in section 371BC(1) on the basis set out in subsection (2) below.

(2) The basis referred to in subsection (1)(b) is—

(a) the relevant finance profits (see section 314A(1)(c)) are to be left out of the CFC’s chargeable profits mentioned in paragraph (a) at step 5 in section 371BC(1), and

(b) the CFC’s creditable tax mentioned in paragraph (b) at that step is to be reduced so far as it is just and reasonable for it to be reduced having regard to the amounts left out of the CFC’s chargeable profits.

(3) For a case where only a proportion (“X%”) of a financing income amount is specified in a statement of allocated exemptions under section 292(4)(b), in subsection (2)(a) the reference to the relevant finance profits is to be read as a reference to X% of those profits.

(4) The Commissioners may by regulations amend this Chapter to require, where a financing income amount determined in accordance with section 314A for the relevant period of account is reduced under section 296, the sum charged on the company as mentioned in section 314A(1)(a) to be re-determined in accordance with provision made by regulations under subsection (1)(b) as if the proportion of the financing income amount represented by the amount of the reduction were specified in a statement of allocated exemptions under section 292(4)(b).

(5) The Commissioners may by regulations amend this Part or Part 9A in consequence of provision made by regulations under subsection (1) or (4).”’.

Amendment 189, in schedule 20, page 520, line 12, leave out ‘and’ and insert—

‘(ba) the CFC’s accounting period in relation to which the sum is charged ends in the period of account of the worldwide group, and’.

Amendment 111, in schedule 20, page 520, line 21, after ‘371BC(3)’ insert

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

Amendment 112, in schedule 20, page 520, line 23, leave out from ‘9A’ to ‘by’ in line 24 and insert

‘or which are qualifying loan relationship profits is limited to amounts—

(a) which so fall or which are such profits’.

Amendment 113, in schedule 20, page 520, line 28, at end insert—