BN 13: Controlled Foreign Companies and Residence
Who is likely to be affected?
1. Companies which became non-resident in the UK for tax purposes before 1 April 2002.
General description of the measure
2. This measure is designed to ensure that some companies which became non-resident in the UK as a result of the operation of a double taxation treaty before 1 April 2002 are brought within the controlled foreign companies (CFC) legislation.
Operative date
3. This change will have effect from 22 March 2006.
Current law and proposed revisions
4. Section 747 of the Income and Corporation Taxes Act 1988 brings some subsidiaries of UK companies within the controlled foreign companies legislation.
5. Subsection 1B of section 747 provides that Section 249 of the Finance Act 1994 is disregarded for the purposes of the CFC legislation.
6. This means that companies which became non-resident for other tax purposes as the result of the operation of a double taxation treaty are still regarded as resident for the purposes of the CFC legislation.
7. When subsection 1B of Section 747 was introduced by Finance Act 2002, companies which became non-resident before 1 April 2002 were excluded.
8. This measure will remove that difference with effect from 22 March
2006, so that companies which became non-resident as a result of a double
taxation treaty before 1 April 2002 will become subject to the CFC legislation
on the occurrence of certain specified events. This will ensure
that companies which became non-resident as a result of a double taxation
treaty before 1 April 2002 cannot be used for tax avoidance.
Further advice
9. If you have any questions about this change, please contact Chris Murricane on 020 7147 2684 or Andrew Hoar on 020 7147 2719. Information about Budget measures is now available.
