During the period of consolidation, only the head company is required to operate attribution accounts and attributed tax accounts for the purposes of the CFC measures. Subsidiary companies transfer the pre-consolidation balances of their attribution accounts and attributed tax accounts to the head company to facilitate its use of any pre-consolidation surpluses during consolidation.
Once the account balances have been transferred to the head company of a consolidated group, the attribution and attributed tax accounts of subsidiary members become inoperative. However, the attribution and attributed tax account surpluses are transferred to the head company so that, to the extent that income had previously been attributed to the entity company, subsequent distributions of income from an attribution entity - for example, a CFC, that had previously been attributed to the entity company - are not assessed to the head company.
When a company with an interest in a CFC leaves a group, a proportion of the attribution and attributed tax account surpluses that the head company has in relation to the interests in the CFC that leave the group with the leaving company will be transferred to the leaving company.
The provisions relating to attribution accounts and attributed tax accounts became effective on 1 July 2002. These provisions were contained in the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 which received royal assent on 24 October 2002.