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17th of May 2012

New UK CFC proposals encourage captives

Vicky Beckett 08/12/2011

Proposed UK controlled foreign company  rules will encourage British-parented captives and benefit US multinationals.
 
The chancellor of the exchequer announced the proposals on December 6.
 
The current controlled foreign company (CFC) rules take an ‘all or nothing’ approach to a CFC’s profits.
 
The new regime will bring into charge only profits that the government considers represent profits ‘artificially diverted’ from the UK.
 
Howard Jones, Mazars head of insurance tax services, said: “Tax will now be based on a territorial approach. I think it will encourage multinationals to come to the UK and the formation of more British captives.”
 
Colin Graham, UK insurance tax leader at Pricewaterhouse Cooper, said: “Profits of foreign insurance subsidiaries will now only be subject to UK tax where they are derived from activities carried out in, or directed from, the UK or from excess capital provided from the UK.
 
“The news that the government intends to continue to work with the insurance industry to develop a capitalisation condition for insurance groups should considerably reduce the compliance burden.”
 
“However, the actual draft legislation is complex and it remains to be seen if it can really achieve the stated aim of reducing the compliance burden for insurance groups and other UK businesses."
 
The proposal has broad exemptions and a ‘gateway’ test that reduces compliance for companies that hold foreign subsidies beneath the UK.
 
The new finance company partial exception is particularly favourable for US multinationals with UK subsidies that have interest bearing receivables from other group companies.
 
The proposed CFC rules apply to non-UK subsidiaries and exempt non-UK braches of UK companies.

Tags: Captive, Cfc, Controlled foriegn company, Insurance, Multinationals, UK

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Ethica 14/01/2012 11:56pm

Whoa, whoa, get out the way with that good ifonrmiaton.

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