Income and Corporation Taxes Act 1988

748 [F1 Cases where section 747(3) does not apply.] U.K.

[F2 M1 (1) No apportionment under section 747(3) falls to be made as regards an accounting period of a controlled foreign company if—]

(a) F3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) throughout that period the company is, within the meaning of Part II of [F4 Schedule 25], engaged in exempt activities; or

[F5 (ba) the company is exempt for that period by virtue of Part 2A of that Schedule (exemption for trading companies with limited UK connection); or

(bb) the company is exempt for that period by virtue of Part 2B of that Schedule (exemption for companies exploiting intellectual property with limited UK connection); or]

(c) F6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) the chargeable profits of the accounting period do not exceed [F7 £50,000] or, if the accounting period is less than 12 months, a proportionately reduced amount;[F8 or

[F9 (da) the relevant profits for the accounting period, after any adjustment required by subsection (3C), do not exceed—

(i) £200,000, or

(ii) if the accounting period is less than 12 months, a proportionately reduced amount; or]

(e) as respects the accounting period, the company is, within the meaning of regulations made by the Board for the purposes of this paragraph, resident in a territory specified in the regulations and satisfies—

(i) such conditions with respect to its income or gains as may be so specified; and

(ii) such other conditions (if any) as may be so specified][F10 ;

or

(f) the accounting period ends during an exempt period in relation to the company (see Part 3A of Schedule 25).]

[F11 (1A) Regulations under paragraph (e) of subsection (1) above may—

(a) make different provision for different cases or with respect to different territories;

(b) make provision having effect in relation to accounting periods of controlled foreign companies ending not more than one year before the date on which the regulations are made; and

(c) contain such supplementary, incidental, consequential and transitional provision as the Board may think fit.]

(2) F12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Notwithstanding that none of paragraphs (a) to [F13 (f)] of subsection (1) above applies to an accounting period of a controlled foreign company, [F14 no apportionment under section 747(3) falls to be made as regards that accounting period if it is the case that]—

(a) in so far as any of the transactions the results of which are reflected in the profits arising in that accounting period, [F15 or any two or more transactions taken together, the results of at least one of which are so reflected,] achieved a reduction in United Kingdom tax, either the reduction so achieved was minimal or it was not the main purpose or one of the main purposes of that transaction or, as the case may be, of those transactions taken together to achieve that reduction, and

(b) it was not the main reason or, as the case may be, one of the main reasons for the company’s existence in that accounting period to achieve a reduction in United Kingdom tax by a diversion of profits from the United Kingdom,

and Part IV of Schedule 25 shall have effect with respect to the preceding provisions of this subsection.

[F16 (3A) The reference in subsection (1)(da) to the relevant profits for an accounting period are to the sum of—

(a) the profits of the company for that period calculated in accordance with generally accepted accounting practice (disregarding any exempt distributions and any capital gains or losses), before any adjustment required or authorised by law in calculating chargeable profits,

(b) any amount which accrues during that period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and

(c) the company's share of any income which accrues during that period to a partnership of which the company is a partner.

(3B) For the purposes of subsection (3A)—

(a) “exempt distribution” means a distribution (within the meaning of Part 23 of CTA 2010) which would be excluded from the company's chargeable profits by reason of it being exempt for the purposes of Part 9A of CTA 2009 (company distributions),

(b) where there is more than one settlor or beneficiary in relation to the settlement mentioned in subsection (3A)(b), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis, and

(c) the company's share of any income which accrues to a partnership as mentioned in subsection (3A)(c) is to be determined by apportioning that income between the company and the other partners on a just and reasonable basis;

and in subsection (3A) and this subsection “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.

(3C) For the purposes of subsection (1)(da), Part 4 of TIOPA 2010 (transfer pricing) applies in relation to the calculation of the relevant profits for the accounting period as it applies in relation to the calculation of the chargeable profits for that period.

(3D) But where the difference made in the amount of the relevant profits for the period as a result of the application of subsection (3C) would (disregarding this subsection) not exceed £50,000, no adjustment under that subsection is to be made.]

[F17 (4) F18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) F18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F19 (6) This section is subject to [F20 sections 748ZA and] 748A.]

Textual Amendments

F1 S. 748 sidenote substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 3(9); S.I. 1998/3173, art. 2

F2 Words in s. 748(1) substituted (with effect in accordance with Sch. 17 para 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 3(2); S.I. 1998/3173, art. 2

F3 S. 748(1)(a) and word omitted (with effect in accordance with Sch. 16 para. 6 of the repealing Act) by virtue of Finance Act 2009 (c. 10), Sch. 16 para. 1(2)

F4 Words in s. 748(1)(b) substituted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by Finance Act 2011 (c. 11), Sch. 12 para. 1(2)

F5 S. 748(1)(ba)(bb) inserted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by Finance Act 2011 (c. 11), Sch. 12 para. 1(3)

F6 S. 748(1)(c) and word repealed (with effect in accordance with Sch. 15 para. 10 of the repealing Act) by Finance Act 2007 (c. 11), Sch. 15 para. 8(1), Sch. 27 Pt. 2(15), Note

F7 Words in s. 748(1)(d) substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 3(3); S.I. 1998/3173, art. 2

F8 S. 748(1)(e) and preceding word inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 3(4); S.I. 1998/3173, art. 2

F9 S. 748(1)(da) inserted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by Finance Act 2011 (c. 11), Sch. 12 para. 4(2)

F10 S. 748(1)(f) and preceding word inserted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by Finance Act 2011 (c. 11), Sch. 12 para. 6(2)

F11 S. 748(1A) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 3(5); S.I. 1998/3173, art. 2

F12 S. 748(2) repealed (with effect in accordance with Sch. 17 para. 37 of the repealing Act) by Finance Act 1998 (c. 36), Sch. 17 para. 3(27); S.I. 1998/3173, art. 2

F13 Word in s. 748(3) substituted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by Finance Act 2011 (c. 11), Sch. 12 para. 6(3)

F14 Words in s. 748(3) substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 3(8); S.I. 1998/3173, art. 2

F15 Words in s. 748(3)(a) substituted (with effect in accordance with s. 182 of the amending Act) by Finance Act 1996 (c. 8), Sch. 36 para. 2

F16 S. 748(3A)-(3D) inserted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by Finance Act 2011 (c. 11), Sch. 12 para. 4(3)

F17 S. 748(4)(5) inserted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 25 para. 4

F18 S. 748(4)(5) repealed (with effect in accordance with Sch. 4 para. 24(2) of the repealing Act) by Finance Act 2005 (c. 7), Sch. 11 Pt. 2(6), Note

F19 S. 748(6) inserted (with effect in accordance with s. 89(3) of the amending Act) by Finance Act 2002 (c. 23), s. 89(1)

F20 Words in s. 748(6) substituted (with effect in accordance with Sch. 12 para. 14(2) of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 12 para. 4(4)

Marginal Citations

M1 Source—1984 s.83