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Version Superseded: 28/07/2000
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Income and Corporation Taxes Act 1988, Paragraph 6 is up to date with all changes known to be in force on or before 04 August 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.
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6(1)Throughout an accounting period a controlled foreign company is engaged in exempt activities if, and only if, each of the following conditions is fulfilled—
(a)that, throughout that accounting period, the company has a business establishment in the territory in which it is resident; and
(b)that, throughout that accounting period, its business affairs in that territory are effectively managed there; and
(c)that any of sub-paragraphs (2) to [F1(4A)] below applies to the company.
(2)This sub-paragraph applies to a company if—
(a)at no time during the accounting period in question does the main business of the company consist of either—
(i)investment business, or
(ii)dealing in goods for delivery to or from the United Kingdom or to or from connected or associated persons; and
(b)in the case of a company which is mainly engaged in wholesale, distributive or financial business in that accounting period, less than 50 per cent. of its gross trading receipts from that business is derived directly or indirectly from connected or associated persons [F2or persons who have [F3a 25 per cent. assessable interest in the company in the case of] that accounting period.]
(3)This sub-paragraph applies to a company which is a holding company if at least 90 per cent. of its gross income during the accounting period in question is derived directly from companies which it controls and which, throughout that period—
(a)are resident in the territory in which the holding company is resident; and
(b)are not themselves holding companies [F4or superior holding companies], but otherwise are, in terms of this Schedule, engaged in exempt activities [F5or are, in terms of sub-paragraph (5A) below, exempt trading companies];
and a holding company to which this sub-paragraph applies is in this Part of this Schedule referred to as a “local holding company”.
(4)This sub-paragraph applies to a company which is a holding company, but not a local holding company, if at least 90 per cent. of its gross income during the accounting period in question is derived directly from companies which it controls and which, throughout that period—
(a)are local holding companies; or
(b)are not themselves holding companies (whether local or not) [F6or superior holding companies], but otherwise are, in terms of this Schedule, engaged in exempt activities [F7or are, in terms of sub-paragraph (5A) below, exempt trading companies].
[F8(4A)This sub-paragraph applies to a company which is a superior holding company if at least 90 per cent. of its gross income during the accounting period in question—
(a)represents qualifying exempt activity income of its subsidiaries; and
(b)is derived directly from companies which it controls and which fall within sub-paragraph (4B) below.
(4B)For the purposes of paragraph (b) of sub-paragraph (4A) above, a company falls within this sub-paragraph if—
(a)throughout the accounting period mentioned in that sub-paragraph, it is not itself a superior holding company but otherwise is, in terms of this Schedule, engaged in exempt activities or is, in terms of sub-paragraph (5A) below, an exempt trading company; or
(b)it is itself a superior holding company throughout that period and at least 90 per cent of its gross income during that period—
(i)represents qualifying exempt activity income of its subsidiaries, and
(ii)is derived directly from companies which it controls and which themselves fall within this paragraph or paragraph (a) above.]
[F9(4C)For the purposes of sub-paragraph (2)(b) above, a person has a 25 per cent. assessable interest in a controlled foreign company in the case of an accounting period of the company if, on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3), at least 25 per cent. of the controlled foreign company’s chargeable profits for the accounting period would be apportioned to that person.]
(5)Any reference in [F10sub-paragraphs (3) to (4B)] above to a company which a holding company [F11or superior holding company] controls includes a reference to a trading company in which the holding company [F11or superior holding company] holds the maximum amount of ordinary share capital which is permitted under the law of the territory—
(a)in which the trading company is resident; and
(b)from whose laws the trading company derives its status as a company.
[F12(5A)For the purposes of sub-paragraphs (3) to (4B) above, a company is an exempt trading company throughout any period if—
(a)it is a trading company throughout each of its accounting periods which falls wholly or partly within that period; and
(b)each of those accounting periods is one as regards which—
(i)the condition in section 747(1)(c) is not satisfied; or
(ii)the conditions in section 748(1)(e) are satisfied; or
(iii)the conditions in section 748(3)(a) and (b) are satisfied.]
(6)The following provisions of this Part of this Schedule have effect in relation to sub-paragraphs (1) to (4) above.
Textual Amendments
F1Words in Sch. 25 para. 6(1)(c) substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(2); S.I. 1998/3173, art. 2
F2Words in Sch. 25 para. 6(2)(b) inserted (with effect in accordance with s. 182 of the amending Act) by Finance Act 1996 (c. 8), Sch. 36 para. 4(5)
F3Words in Sch. 25 para. 6(2)(b) substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c, 36), Sch. 17 para. 30(3); S.I. 1998/3173, art. 2
F4Words in Sch. 25 para. 6(3)(b) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(4)(a); S.I. 1998/3173, art. 2
F5Words in Sch. 25 para. 6(3)(b) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(4)(b); S.I. 1998/3173, art. 2
F6Words in Sch. 25 para. 6(4)(b) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(5)(a); S.I. 1998/3173, art. 2
F7Words in Sch. 25 para. 6(4)(b) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para 30(5)(b); S.I. 1998/3173, art. 2
F8Sch. 25 para. 6(4A)(4B) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(6); S.I. 1998/3173, art. 2
F9Sch. 25 para. 6(4C) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(7); S.I. 1998/3173, art. 2
F10Words in Sch. 25 para. 6(5) substituted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(8)(a); S.I. 1998/3173, art. 2
F11Words in Sch. 25 para. 6(5) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(8)(b); S.I. 1998/3173, art. 2
F12Sch. 25 para. 6(5A) inserted (with effect in accordance with Sch. 17 para. 37 of the amending Act) by Finance Act 1998 (c. 36), Sch. 17 para. 30(9); S.I. 1998/3173, art. 2
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