# The Controlled Foreign Companies (Excluded Countries) (Amendment) Regulations 2005, Note: Explanatory note


(This note is not part of the Regulations)
These Regulations amend the Controlled Foreign Companies (Excluded Countries) Regulations 1988 (S.I. 1998/3081 “the principal Regulations”). Section 748(1A) of the Income and Corporation Taxes Act 1988 (c. 1), in exercise of which these Regulations are made, authorises the making of retrospective provision.
Regulation 1 provides for the citation, commencement and effect of these Regulations.
Regulation 2 introduces the amendments to the principal Regulations.
Regulation 3 amends the alternative test for a company’s residence in regulation 2(2)(b) of the principal Regulations so that it must be both incorporated and liable to tax in that territory on its profits.
Regulation 4 amends regulation 5 of the principal Regulations. Paragraph (1) introduces the amendments, and paragraphs (2) and (4) make amendments consequent upon the amendments in paragraphs (3) and (5) respectively.
Paragraph (3) inserts two new paragraphs (2B) and (2C) dealing with the control by a controlled foreign company of bodies which, although not companies, are engaged in economic activity. It also make an amendment consequent on these paragraphs, which re-enacts part of paragraph (2) of regulation 5 as it stood before the amendments.
The amendment made by regulation 4(5) provide that, if at least 50% of the commercially quantified income of a controlled foreign company’s derives from transactions with connected or associated person of the company, that income shall be treated as forming part of the company’s non-local source income.
Regulation 5 amends regulation 7 of the principal Regulations to provide an explanation of the circumstances in which a company is capable of exercising control over an entity referred to in the new paragraph (2B) of regulation 5 of the principal Regulations.
Regulation 6 makes transitional provision so that should a company’s accounting period would have ended before these Regulations come into force , but is amended after they come into force so as to end after the Regulations come into force, an accounting period shall be treated as having ended on the date on which they come into force.
These Regulations do not impose new costs on business.

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Source: https://www.legislation.gov.uk/uksi/2005/185/note (the official version)
Page: https://openlegislation.uk/controlled-foreign-companies-excluded-countries-amendment-regulations-2005/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.