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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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Controlled Foreign Companies: Reviews: Reports to Business International, Outward Investment Team

The Officer should keep close links with Business International, Outward Investment Team when dealing with Chapter IV. A formal report must be made where:

  1. a) an apportionment falls to be made under ICTA/S747(4) (interests held other than by virtue of ordinary shares alone) and the Officer is dissatisfied with the basis adopted by the company.
  2. b) before a closure notice is issued, following enquiries, which concludes that the figure for controlled foreign companies tax should be amended. This report is to seek the Commissioners’ sanction.

The Officer should also feel free to ask for help from Business International, Outward Investment Team where there is doubt or difficulty. Help should be sought where

  • there is doubt about the meaning of a Chapter IV rule
  • someone objects to the application of Chapter IV on the grounds of policy
  • someone argues that they satisfy the motive test in a case where Chapter IV should apply
  • the Commissioners’ sanction is relevant
  • an advance clearance is requested

In a few cases Business International, Outward Investment Team will look to see if there is Chapter IV tax. They will keep Officers informed of what is happening in these cases.

Where, under the clearance procedures, Business International, Outward Investment Team has agreed or disagreed a particular treatment for an overseas company, be it the motive test, exempt activities test, etc. the Officer will be notified. Clearances given will continue for later accounting periods as long as the facts and legislation do not change. If the information received from Business International, Outward Investment Team contradicts an entry (or absence of entry) on a return, then the Officer may well wish to make enquiries. The Officer may later be barred under FA98/SCH18/PARA44 from making a discovery assessment if enquiries are not made into a return at the time.

For self assessment periods Officers can agree claims to the motive test. (For earlier periods any such claim should continue to be submitted to Business International, Outward Investment Team before agreement is given). Where the Officer has doubts as to whether and how the test applies, he or she must seek advice from Business International, Outward Investment Team so that consistency in the application of the test is ensured.