Finance Act 2003

Companies engaged in business of banking etc

3 (1) Paragraph 11 (provisions relating to wholesale, distributive, financial or service business) is amended as follows.

(2) In sub-paragraph (3) (controlled foreign company engaged in business of banking etc) for paragraph (a) (interest from UK company not to be regarded as receipt derived from connected or associated persons) substitute—

“(a) no payment of interest received from a company resident in the United Kingdom which is connected or associated with the controlled foreign company shall be regarded for the purposes of paragraph 6(2)(b) above as a receipt derived directly or indirectly from a person falling within paragraph 6(2A) above, but”.

(3) At the end of paragraph (b) of that sub-paragraph (the capitalisation test) add “, and

(c) it shall also be conclusively presumed that the condition in paragraph 6(2)(b) is not fulfilled if 10% or more of the company’s gross trading receipts from all businesses carried on by it in the accounting period in question, taken together, are receipts other than interest and are directly or indirectly derived from persons—

(i) which are companies resident in the United Kingdom,

(ii) which are companies not resident in the United Kingdom but which carry on business through a branch or agency in the United Kingdom, or

(iii) who are individuals habitually resident in the United Kingdom,

but for this purpose a company’s gross trading receipts shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (ii) 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.”.