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HMRC internal manual

General Insurance Manual

Captive insurers: controlled foreign companies (CFC): funded accounting: tax rules: time limits for enquiries, returns and payment of dividends where the CFC fails to pay a dividend under the acceptable distribution policy (ADP) within the time limit

: accounting periods beginning before 1 July 2009

The UK company may submit its return on the basis that it intends to pursue an acceptable distribution policy (ADP), but it may fail to do so because it does not pay a dividend within 18 months following the replacement of the technical provision, or any later period approved by the Board. The chargeable profits of the CFC will fall to be apportioned to the UK company.

The UK company has 30 days from the 18-month time limit in which to amend its return. In this example in which the CFC’s fund closes on 31 December 2001 and the accounts are signed off on 14 April 2002, the UK company has until 13 October 2003 in which to amend its return. The enquiry window is unaffected and runs from 14 April 2002 to 13 April 2004. The enquiry is into the whole return not just the amendment.

If the company had a four-year funded account (or longer), the fund would close on 31 December 2003. In this case, the UK company has until 30 July 2005 to amend its return. The enquiry window still runs from 31 December 2003 to 31 December 2005. In this case there would be a period from 1 January 2003 until 31 December 2003 where there is no enquiry window open.

The ADP exemption was repealed by FA09/SCH16 Part 1 for accounting periods beginning on or after 1 July 2009.