United Kingdom Statutory Instruments

" subject to the qualifications in paragraphs (2A) and (2C)".

(a) has invested, whether directly or indirectly, in an entity which is not a company, but is engaged in economic activity;

(b) is capable of exercising control over the entity; and

(c) the entity receives, whether directly or indirectly, at least 50 per cent. of its commercially quantified income, computed in accordance with paragraphs (2) and (2A) above from bodies which are associated or connected with the company, the reference to paragraph (2C) in paragraph (2) being disregarded for this purpose.

    (2C) Where this paragraph applies, that part of the income and gains of the entity mentioned in paragraph (2B)(a), which bears to the whole the same proportion as the extent of control, determined in accordance with regulation 7(1A) below, bears to the whole ("the controller's share"), shall be treated, for the purposes of these Regulations, as the income and gains of the controlled foreign company by which the entity is controlled (if not already included in that income or those gains).".

(a) has entered into one or more transactions with one or more connected or associated persons;

(b) the value to the company of that transaction, or the aggregate value to the company of all of those transactions, exceeds fifty per cent. of the commercially quantified income of the company; and

(c) the income and gains arising to, or the expenditure incurred by, the connected or associated person as a result of that transaction is taken into account - 


(i) in computing the company's profits for tax purposes in the territory in which resides but not in computing its chargeable profits, or

(ii) in computing the company's chargeable profits, but not in computing its profits for tax purposes in the territory in which it resides;



paragraph (3B) applies.

    (3B) If this paragraph applies - 

(a) the income and gains to which paragraph (3A)(c) applies shall be treated as non-local source income of the controlled foreign company; and

(b) an amount equal to which paragraph (3A)(c) applies shall be treated as non-local source income (and accordingly added to the amounts produced by sub-paragraphs (a) to (f) of paragraph (3) for the purpose of computing the amount of non-local source income).".

(a) where C is entitled to a share of more than one half of the assets, or more than one half of the income of the entity; or

(b) where, if the entity were a company and C were resident in the United Kingdom, C would be treated as having control of it for the purposes of Chapter 4 of Part 17 of the Taxes Act (tax avoidance: controlled foreign companies).".