Introduction Details of the Section
2.Sections 2 & 3 replaces the term “gross profits” with “the profit-related threshold”.
3.New subsection 3A, inserted by section 4, defines “the profit-related threshold”. This is the sum of the surrendering company’s gross profits and the amount of the chargeable profits of a CFC apportioned to the surrendering company (on condition that it is a chargeable company for the purpose of the controlled foreign company rules). This new subsection applies in respect of chargeable profits of CFCs apportioned under section 371BC of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010).
4.New subsection 3B, inserted by section 4, includes in the “profit-related threshold” any chargeable profits of a CFC apportioned to the surrendering company under sections 747(3) and 752 of the Income and Corporation Taxes Act 1988 (ICTA 1988).
5.Section 5 inserts new subsection (5A) to section 105 which defines the terms “CFC” and “chargeable profits” by reference to the appropriate rules in either ICTA 1988 or TIOPA 2010. The definitions for these in the two Acts are slightly different and this section provides clarity on which rules need to be followed.
6.Sections 6-7 state that the amendments have effect where the surrender period of the surrendering company ends on or after 20 March 2013. However, the chargeable profits of a CFC for accounting periods ending before 20 March 2013 are not included.
7.Section 8 -9 says that where the accounting period of the CFC falls partly before and after 20 March 2013, the chargeable profits that relate to the period are apportioned, with the section not applying to the chargeable profits apportioned to part ending before 20 March 2013.