SCHEDULES

SCHEDULE 25Cases where section 747(3) does not apply

PART II EXEMPT ACTIVITIES

8

(1)

Subject to sub-paragraph (4) below, the condition in paragraph 6(1)(b) above shall not be regarded as fulfilled F1in relation to a company which is not resident in an EEA territory unless—

(a)

the number of persons employed by the company in the territory in which it is resident is adequate to deal with the volume of the company’s business; and

(b)

any services provided by the company for persons resident outside that territory are not in fact performed in the United Kingdom.

(2)

For the purposes of sub-paragraph (1)(a) above, persons who are engaged wholly or mainly in the business of the company and whose remuneration is paid by a person connected with, and resident in the same territory as, the company shall be treated as employed by the company.

(3)

In the case of a holding company F2F3. . . , sub-paragraph (2) above shall apply with the omission of the words “wholly or mainly”.

(4)

For the purposes of sub-paragraph (1)(b) above, no account shall be taken of services—

(a)

provided through a F4permanent establishment of the controlled foreign company if the profits or gains of the business carried on through the F4permanent establishment are within the charge to tax in the United Kingdom; or

(b)

provided through any other person whose profits or gains from the provision of the services are within the charge to tax in the United Kingdom and who provides the services for a consideration which is, or which is not dissimilar from what might reasonably be expected to be, determined under a contract entered into at arm’s length; or

(c)

which are no more than incidental to services provided outside the United Kingdom.

F5(5)

The condition in paragraph 6(1)(b) above shall not be regarded as fulfilled in relation to a company which is resident in an EEA territory unless there are sufficient individuals working for the company in the territory who have the competence and authority to undertake all, or substantially all, of the company's business.

(6)

For the purposes of sub-paragraph (5) above, individuals are not to be regarded as working for a company in any territory unless—

(a)

they are employed by the company in the territory, or

(b)

they are otherwise directed by the company to perform duties on its behalf in the territory.