Finance Bill 2002: EXPLANATORY NOTE
CLAUSE 89: CONTROLLED FOREIGN COMPANIES AND TREATY NON-RESIDENT COMPANIES
DETAILS
1. This clause inserts a new subsection, subsection (1B), into section 747 of the Income and Corporation Taxes Act 1988. The effect of the provision is that a UK resident company can be subject to the controlled foreign company rules notwithstanding that it is treated as being non-resident under the terms of one of the UK's double taxation treaties.
2. The provision comes into force on 1st April 2002, but does not apply to a company that was treated as being resident outside the UK, and not resident in the UK, immediately before that date and has not subsequently ceased to be treated in that way.
BACKGROUND NOTE
3. This measure is introduced as part of the package of corporation tax reforms containing the exemption regime for substantial shareholdings introduced by clause 43 and Schedule 8 to this Bill. The exemption regime has implications for the UK tax base. For example, without the protection provided by clause 89, the introduction of the exemption regime could facilitate changes in companies? residence which were driven more by fiscal than commercial considerations. The clause provides protection by ensuring that companies migrating in such circumstances remain subject to the UK's controlled foreign company rules.