The Insurance Companies and CFCs (Avoidance of Double Charge) Regulations 2012

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make provision in relation to insurance companies to remove unnecessary administrative compliance burdens and avoid a double charge to tax in respect of investments held by insurance companies in controlled foreign companies (“CFCs”).

Regulation 1 provides for citation, commencement and effect. These Regulations have effect for accounting periods beginning on or after 1 January 2013 as the new regime for the taxation of insurance companies and the new regime for CFCs (“CFC rules”) introduced in the Finance Act 2012 both have effect from this date.

Regulation 2 sets out the case where these Regulations apply, gives an overview of the provisions made and defines terms used in the Regulations.

Regulation 3 excludes the operation of the CFC rules where an insurance company does not control a CFC, control here being determined by reference to accounting standards.

Regulation 4 excludes the operation of the CFC rules (subject to an anti-avoidance provision) where the CFC’s assets consist mainly of shares.

Regulation 5 modifies section 371BH (companies carrying on BLAGAB) of the Taxation (International and Other Provisions) Act 2010 to extend the exemption from the CFC rules where chargeable gains are brought into account in determining an insurance company’s I-E profit under section 73 of the Finance Act 2012.

Regulation 6 makes provision to avoid a double charge where an insurance company is deemed to dispose of an interest in a CFC under section 212 of the Taxation of Chargeable Gains Act 1992.

A Tax Information and Impact Note covering this instrument was published on 21 March 2012 alongside draft clauses for the 2012 Finance Bill and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. It remains an accurate summary of the impacts that apply to this instrument.