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HMRC internal manual

International Manual

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Controlled Foreign companies: Entity Exemptions: Chapter 10 - The Exempt Period Exemption: Transitional provision - Interaction with Temporary Period Exemption

FA12/Sch20/Part 5/Para 58 applies to CFCs which are subject to the Temporary Period Exemption (TPE) contained inICTA88/Part 3A/Sch 25 (i.e. the old CFC rules), where that period continues after the end of the last accounting period for which the old CFC rules apply. This transitional provision ensures that an exemption for a company will continue and end at the same time as it would have under the TPE rules.

FA12/Sch20/Part 5/Para 58(1) sets out the basic requirements for the transitional provision to apply, which are:

  1. that an exempt period under the old CFC rules began before 1 January 2013;
  2. that the exempt period does not end before the end of the last accounting period under the old CFC rules; and 
  3. that TIOPA10/Part 9A applies to the CFC at the start of the first accounting period under the new CFC rules.

FA12/Sch20/Part 5/Para 58(2) determines that the remainder of the exempt period is treated as an exempt period under the exemption.

FA12/Sch20/Part 5/Para 58(3) provides for the remainder of the exempt period to be determined in accordance with the old CFC rules as set out in ICTA88/Sch25/Para 15F. For this purpose, the pre TIOPA10/Part 9A rules are assumed to continue to apply, and TIOPA10/S371JD regarding the length of the exempt period is disregarded.

FA12/Sch20/Part 5/Para 58(4) adapts the application of TIOPA10/S371JB so that an accounting period is exempt if it ends during an exempt period. The other conditions in section 371JB are omitted for the purposes of this transitional provision.

FA12/Sch20/Part 5/Para 58(5) adapts the application of TIOP10/S371JE, so that if an exempt period comes to an end during an accounting period, any profits that arise during that exempt period can be exempted from a CFC charge. The other conditions of section 371JE are omitted for the purposes of this transitional provision.

FA12/Sch20/Part 5/Para 58(6) disapplies the anti-avoidance provisions at TIOPA10/S371JF for the purposes of this transitional exemption. The anti-avoidance rules in ICTA88/Sch25/Part 3A instead continue to apply for the purposes of the transitional provision.