INTM215300 - Controlled Foreign Companies:
before CTSA
Apportionment: general rules
Chapter IV does not give the Inspector a full set of rules to
say how the Inspector must apportion chargeable profits, etc. In
particular there is no rule to say what part of chargeable profits,
etc the Inspector should apportion to each separate class of
interest in a controlled foreign company. Instead, there are a
number of general principles. In addition there are detailed rules
for special cases.
This page and the following pages cover matters relating to
apportionment which are specific to periods before the introduction
of self assessment for companies. See
INTM209000 and following pages for
general guidance on the computation of chargeable profits and
creditable tax and
INTM210000 and following pages for
general guidance on the apportionment of chargeable profits and
creditable tax.
The general principles for apportionment are as follows. They
are set out in, or the Inspector can infer them from, Chapter
IV:
- The total amount apportioned cannot exceed
the amount of the chargeable profits or creditable tax for the
accounting period concerned.
- Apportionment is made among the persons who
at any time during the accounting period have interests in the
controlled foreign company. This is done according to their
interests - see
INTM210040.
- There may be persons who have the same
holding of shares of the same class throughout the accounting
period. If so, chargeable profits, etc is apportioned to them in
direct proportion to the numbers of shares held. This rule is
however subject to sub-head (e) below and to (c) of
INTM215310.
- The principles in sub-head (c) above also
apply to apportionment among other persons each of whom holds an
interest of the same description in the controlled foreign
company.
- The same interest in a controlled foreign
company may be held directly by one person and indirectly by
another person (or persons). The indirect holding may be because of
the latter's control over the first person. In that case
apportionment may be made to the person holding the interest
indirectly. This applies particularly where the first person is not
resident in the United Kingdom. This rule is subject to (f)
below.
- For some cases there is a special basis of
apportionment - see
INTM215320. This is where one person
directly holds an interest in a controlled foreign company and
another person holds indirectly the same interest.
Some rules direct that apportionment must be made in a special
way – see
INTM215310. In the normal case, the
Board must apportion chargeable profits, etc., in such a way as
seems to the Board to be just and reasonable. A company may pay
interest which would not qualify as a charge. This may be to a loan
creditor not resident in the United Kingdom. In that case the Board
may apportion the interest to the loan creditor and this reduces
the amounts apportioned to United Kingdom residents.
