SCHEDULES

SCHEDULE 42Controlled foreign companies: exempt activities

Companies engaged in wholesale, distributive, financial or service business

2

1

Paragraph 6 (meaning of “engaged in exempt activities”) is amended as follows.

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3

In sub-paragraph (2A) (persons from whom less than 50% of the gross trading receipts of a wholesale etc business of the controlled foreign company must be derived) omit the word “and” immediately preceding paragraph (c) and at the end of that paragraph add

;

d

persons not falling within paragraphs (a) to (c) above which are companies resident in the United Kingdom;

e

persons not falling within paragraphs (a) to (c) above which are companies not resident in the United Kingdom which carry on business through a branch or agency in the United Kingdom;

f

persons not falling within paragraphs (a) to (c) above who are individuals habitually resident in the United Kingdom;

but where the company is a controlled foreign company falling within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be disregarded.

4

After sub-paragraph (2A) insert—

2B

A controlled foreign company falls within this sub-paragraph if either—

a

its main business is the effecting or carrying out of contracts of long-term insurance, other than protection business; or

b

it is a member of an insurance group and its main business is insuring or reinsuring large risks.

Paragraph 11A below has effect for the interpretation of this sub-paragraph.

2C

For the purposes of sub-paragraph (2)(b) above, a company’s gross trading receipts from a business shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (2A)(e) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s branch or agency in the United Kingdom.

5

In sub-paragraph (4C) (which defines for the purposes of sub-paragraph (2)(b) a “25 per cent assessable interest”, an expression not used in sub-paragraph (2)(b) but used in sub-paragraph (2A)(b)) for “(2)(b)” substitute “ (2A)(b) ”.