Taxation (International and Other Provisions) Act 2010 section 371SR

Double taxation relief: countering effect of avoidance arrangements

Section 371SR ensures that anti-avoidance rules for double taxation relief apply when calculating the creditable tax of a controlled foreign company (CFC), so that avoidance arrangements cannot be used to inflate the CFC's foreign tax credits.

• When computing a CFC's chargeable profits, the legislation assumes the CFC is a UK corporation tax payer; this section extends that fiction to include the anti-avoidance rules in section 82 of TIOPA 2010 that counter abusive double taxation relief arrangements.
• The section applies where it is reasonable to suppose that each of the four conditions (A to D) in section 82 would or might be met in relation to the CFC for the relevant accounting period, if the normal corporation tax assumptions were applied.
• Where the section applies, the CFC's creditable tax must be adjusted as necessary to counteract the effects of the avoidance scheme or arrangement that are attributable to the tax-avoidance purpose identified under condition B of section 82.
• Normally, the section 82 anti-avoidance rules require a formal notice from an HMRC officer before adjustments can be made; section 371SR bypasses this requirement by assuming, in effect, that such a notice has already been issued.