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Finance Bill
Part 9 — Miscellaneous and supplementary provisions

    133

 

 200   Controlled foreign companies: exempt activities

     (1)    Schedule 42 to this Act (which amends Part 2 of Schedule 25 to the Taxes Act

1988 (exempt activities)) shall have effect.

     (2)    The amendments made by that Schedule have effect in relation to accounting

periods of a controlled foreign company beginning on or after 27th November

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2002.

     (3)    In this section “accounting period” and “controlled foreign company” have the

same meaning as in Chapter 4 of Part 17 of the Taxes Act 1988.

     (4)    This section shall be taken to have come into force on 27th November 2002.

 201   Application of CFC provisions to Hong Kong and Macao companies

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     (1)    In Part 2 (exempt activities) of Schedule 25 to the Taxes Act 1988 (cases where

section 747(3) does not apply), in paragraph 5 insert after sub-paragraph (2)—

                       “(3)                                In the case of a controlled foreign company—

                    (a)                   which is, by virtue of section 749(5), presumed to be resident

in a territory in which it is subject to a lower level of taxation,

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                    (b)                   the business affairs of which are, throughout the accounting

period in question, effectively managed in a special

administrative region, and

                    (c)                   which is liable to tax for that period in that region,

                                       references in the following provisions of this Part of this Schedule to

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the territory in which that company is resident shall be construed as

references to that region.

                       (4)                                In sub-paragraph (3) above “special administrative region” means

the Hong Kong or the Macao Special Administrative Region of the

People’s Republic of China.

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                       (5)                                Where sub-paragraph (3) above applies, it applies in place of sub-

paragraph (2).”.

     (2)    This section shall be deemed to have had effect—

           (a)           as from 1st July 1997, so far as relating to the Hong Kong Special

Administrative Region;

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           (b)           as from 20th December 1999, so far as relating to the Macao Special

Administrative Region.

Administrative matters

 202   Deduction of tax from interest: recognised clearing houses etc

     (1)    Section 349 of the Taxes Act 1988 (payment of annual interest etc) is amended

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as follows.

     (2)    In subsection (3) (cases where obligation to make interest payments net of tax

does not apply), at the end insert “or—

                  (j)                    to interest paid by a recognised clearing house or recognised

investment exchange carrying on business as provider of a

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central counterparty clearing service, in the ordinary course of

that business, on margin or other collateral deposited with it by

users of the service; or

 

 

Finance Bill
Part 9 — Miscellaneous and supplementary provisions

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                  (k)                    to interest treated by virtue of section 730A(2)(a) or (b) (repos)

as paid by a recognised clearing house or recognised

investment exchange in respect of contracts made by it as

provider of a central counterparty clearing service.”.

     (3)    In subsection (6) (definitions), at the appropriate places insert—

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                                  ““central counterparty clearing service” means the service

provided by a clearing house or investment exchange to the

parties to a transaction where there are contracts between each

of the parties and the clearing house or investment exchange (in

place of, or as an alternative to, a contract directly between the

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parties);”;

                                  ““recognised clearing house” and “recognised investment

exchange” have the same meaning as in the Financial Services

and Markets Act 2000 (see section 285 of that Act);”.

     (4)    This section applies in relation to payments of interest on or after 14th April

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2003.

 203   Authorised unit trusts: interest distributions paid gross

     (1)    Chapter 3 of Part 12 of the Taxes Act 1988 (unit trust schemes) is amended as

follows.

     (2)    In section 468L(4) (obligation to deduct tax from interest distributions to be

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subject to provision made by sections 468M and 468N), for “sections 468M and

468N” substitute “section 468M”.

     (3)    For sections 468M and 468N substitute—

       “468M             Cases where no obligation to deduct tax

           (1)           Where an interest distribution is made for a distribution period to a unit

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holder, any obligation to deduct under section 349(2) does not apply to

the interest distribution if—

                  (a)                 the unit holder is a company or the trustees of a unit trust

scheme, or

                  (b)                 either the residence condition or the reputable intermediary

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condition is on the distribution date fulfilled with respect to the

unit holder.

           (2)           Section 468O makes provision about the circumstances in which the

residence condition or the reputable intermediary condition is fulfilled

with respect to a unit holder.”.

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     (4)    Section 468O (residence condition) is amended as follows.

     (5)    In subsection (1), for “sections 468M and 468N” substitute “section 468M”.

     (6)    After that subsection insert—

           “(1A)              For the purposes of section 468M, the reputable intermediary condition

is fulfilled with respect to a unit holder if—

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                  (a)                 the interest distribution is paid on behalf of the unit holder to a

company,

                  (b)                 the company either is subject to the EC Money Laundering

Directive, or to equivalent non-EC provisions, or is an

 

 

Finance Bill
Part 9 — Miscellaneous and supplementary provisions

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associated company resident in a regulating country or territory

of a company which is so subject, and

                  (c)                 the trustees of the authorised unit trust have reasonable

grounds for believing that the unit holder is not ordinarily

resident in the United Kingdom.

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           (1B)              For the purposes of subsection (1A)(b) above—

                  (a)                 a company is subject to the EC Money Laundering Directive if

it is a credit institution or financial institution as defined by

Article 1 of Directive 91/308/EEC, as amended by Directive

2001/97/EC,

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                  (b)                 a company is subject to equivalent non-EC provisions if it is

required by the law of any country or territory which is not a

member State to comply with requirements similar to those

which, under Article 3 of that Directive (as so amended),

member States must ensure are complied with by credit

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institutions and financial institutions,

                  (c)                 a company is to be treated as another’s associated company if it

would be so treated for the purposes of Part 11 (see section 416),

and

                  (d)                 a country or territory is a regulating country or territory if it

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either is a member State or imposes requirements similar to

those which, under Article 3 of that Directive (as so amended),

member States must ensure are complied with by credit

institutions and financial institutions.

           (1C)              If Directive 91/308/EEC ceases to have effect, or is further amended,

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the Treasury may by order make consequential amendments in

subsections (1A) and (1B) above.”.

     (7)    In the sidenote, insert at the end “and reputable intermediary condition”.

     (8)    In section 468P(1) (residence declarations)—

           (a)           for “468O” substitute “468O(1)”, and

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           (b)           for “subsections (2) to (4)” substitute “subsection (2) or (3)”.

     (9)    After section 468P insert—

       “468PA             Section 468O(1A): consequences of reasonable but incorrect belief

Where—

                  (a)                 an interest distribution is made to a unit holder by the trustees

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of an authorised unit trust,

                  (b)                 the trustees, in reliance on the reputable intermediary condition

being fulfilled with respect to the unit holder, do not comply

with the obligation under section 349(2) to make a deduction

from the interest distribution,

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                  (c)                 that obligation would apply but for that condition being so

fulfilled, and

                  (d)                 (contrary to the belief of the trustees) the unit holder is in fact

ordinarily resident in the United Kingdom,

section 350 and Schedule 16 have effect as if that obligation applied.

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Finance Bill
Part 9 — Miscellaneous and supplementary provisions

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       468PB                         Regulations supplementing sections 468M to 468PA

           (1)           The Board may by regulations make provision for giving effect to

sections 468M to 468PA.

           (2)           The regulations may, in particular, include provision modifying the

application of those sections in relation to interest distributions made to

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or received under a trust.

           (3)           The regulations may, in particular, include provision for the giving by

officers of the Board of notices requiring trustees of authorised unit

trusts to supply information and make available books, documents and

other records for inspection on behalf of the Board.

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           (4)           The regulations may—

                  (a)                 make provision in relation to times before they are made,

                  (b)                 make different provision for different cases, and

                  (c)                 make such supplementary, incidental, consequential or

transitional provision as appears to the Board to be

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appropriate.”.

     (10)   Section 98 of the Taxes Management Act 1970 (c. 9) (penalties: provisions

requiring information etc in response to notices) is amended as follows.

     (11)   In subsection (4A)(b), for “or (4D)” substitute “, (4D) or (4E)”.

     (12)   After subsection (4D) insert—

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           “(4E)              A payment is within this subsection if—

                  (a)                 it is an interest distribution made to a unit holder by the trustees

of an authorised unit trust,

                  (b)                 the trustees, in purported reliance on the reputable

intermediary condition being fulfilled with respect to the unit

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holder, do not comply with the obligation under section 349(2)

of the principal Act to make a deduction from the interest

distribution,

                  (c)                 that obligation would apply if that condition were not so

fulfilled, and

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                  (d)                 the trustees did not believe that the unit holder was not

ordinarily resident in the United Kingdom or could not

reasonably have so believed (so that that condition was not so

fulfilled).

                         Expressions used in this subsection have the same meaning as in

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Chapter 3 of Part 12 of the principal Act.”.

     (13)   In the first column of the Table, after the entry relating to regulations under

section 431E(1) or 441A(3) of the principal Act, insert—

                    “section 468P(6);

                    regulations under section 468PB(3);”.

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     (14)   This section has effect in relation to interest distributions made on or after 16th

October 2002.

 

 

 
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