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

Banking companies

Section 371BI requires that when a controlled foreign company (CFC) charge is imposed on a UK banking company, the charge must include the banking surcharge rate in addition to the normal corporation tax rate, and it contains anti-avoidance rules to prevent banking groups from avoiding this additional charge.

• When a chargeable company is a banking company, the CFC charge at step 5 of the charging calculation is increased by applying the banking surcharge rate to the CFC's chargeable profits apportioned to that company, reduced by any available surcharge allowance the company specifies in its tax return.
• If arrangements transfer profits out of a CFC to a non-banking company, or transfer losses or deductible amounts into a CFC from a non-banking company, with the main purpose of avoiding the surcharge element, the CFC's chargeable profits are recalculated as if the transfer had not occurred.
• If arrangements shift the relevant interest in a CFC from a banking company to a non-banking company to avoid the surcharge, the banking company is treated as still holding the relevant interest, and profits are reapportioned to counteract the effect of the arrangements.
• A non-banking company is one that is neither a banking company itself nor a CFC in relation to which a banking company is a chargeable company, and the definition of arrangements is drawn very broadly to include any agreement, understanding, scheme, transaction or series of transactions whether or not legally enforceable.