Areas of the legislation:
  • Controlled Foreign Companies and permanent establishments - draft guidance

Controlled Foreign Companies and permanent establishments - draft guidance

Finance Bill 2012 contains the draft legislation for the new Controlled Foreign Companies (CFCs) rules, and some amendments to the rules for the exemption of foreign permanent establishments that will apply to CFCs and permanent establishments with accounting periods that begin on or after 1 January 2013.

HM Revenue & Customs (HMRC) will publish draft guidance for the new rules on this page. Initially the guidance will be published as separate documents for each chapter of Schedule 20 of Finance Bill 2012. The draft guidance will be published in stages over the summer. Updated drafts of the chapter guidance documents will be published when there are enough comments and examples to incorporate into an updated guidance chapter. The guidance will then be incorporated into the International Manual in 2013.

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Supplementary guidance of 17 November 2014

Supplementary guidance on an additional exclusion from the definition of 'qualifying loan relationship' in section 371IH (9A) - (9E) TIOPA 2010.

Supplementary guidance (PDF 276K)

Guidance of 17 April 2014

Guidance on the proposed additions to the CFC Rules in Part 9A TIOPA 2010 contained in clause 286 of Finance Bill 2014.

Guidance on Finance Bill 2014 amendment to CFC Rules (PDF 77K)

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Supplementary draft guidance of 2 January 2014

Supplementary guidance on the interaction of section 441 CTA 2009 and the CFC Rules in Part 9A TIOPA 2010.

Draft guidance on s441 and CFC financing arrangements (PDF 23K)

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Updated draft guidance of 31 May 2013

The following documents are either new or have been updated as a result of the recent draft guidance consultation process.

Overview of CFC rules (PDF 51K)

The CFC charge gateway: Chapter 3 (PDF 117K)

The CFC charge gateway: Chapter 4: Profits Attributable to UK Activities (PDF 73K)

The CFC charge gateway: Chapter 5: non-trading finance profits (PDF 100K)

The CFC charge gateway: Chapter 6: trading finance profits (PDF 122K)

Chapter 7 - the CFC charge gateway: captive insurance business (PDF 71K)

The CFC charge gateway: Chapter 8: solo consolidation (PDF 20K)

Exemptions for profits from qualifying loan relationships: Chapter 9 (PDF 304K)

Chapter 11: the excluded territories exemption (PDF 55K)

Chapter 12: the low profits exemption (PDF 32K)

Chapter 13: the low profit margin exemption (PDF 26K)

Chapter 14: the tax exemption (PDF 53K)

Chapter 16: creditable tax of a CFC (PDF 28K)

Chapter 17: apportionment of a CFC's chargeable profits and creditable tax (PDF 45K)

Chapter 18: control (PDF 52K)

Chapter 19: assumed taxable total profits, assumed total profits and the Corporation Tax assumptions (PDF 68K)

Chapter 20: Residence of CFCs (PDF 39K)

Chapter 22: Supplementary Provision (PDF 211K)

CFC Clearances: General (PDF 48K)

Foreign Permanent Establishment Exemption Anti-diversion Rules (PDF 53K)

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Draft guidance published prior to 31 May 2013

Find the draft guidance from the links below:

Overview of CFC rules (PDF 42K)

The CFC charge gateway: Chapter 3 (PDF 86K)

The CFC charge gateway: Chapter 4: Profits Attributable to UK Activities (PDF 79K)

The CFC charge gateway: Chapter 5: non-trading finance profits (PDF 60K)

The CFC charge gateway: Chapter 6: trading finance profits (PDF 101K)

The CFC charge gateway: Chapter 8: solo consolidation (PDF 25K)

Exemptions for profits from qualifying loan relationships: Chapter 9 (PDF 166K)

Chapter 11: the excluded territories exemption (PDF 49K)

Chapter 12: the low profits exemption (PDF 32K)

Chapter 13: the low profit margin exemption (PDF 28K)

Chapter 14: the tax exemption (PDF 62K)

Chapter 15: relevant interests in a CFC (PDF 29K)

Chapter 16: creditable tax of a CFC (PDF 47K)

Chapter 17: apportionment of a CFC's chargeable profits and creditable tax (PDF 52K)

Chapter 18: control (PDF 61K)

Chapter 19: assumed taxable total profits, assumed total profits and the Corporation Tax assumptions (PDF 59K)

Chapter 22: Supplementary Provision (PDF 211K)

Introduction to CFC Guidance (PDF 26K)

Chapter 10 - the exempt period exemption (PDF 49K)

Chapter 7 - the CFC charge gateway: captive insurance business (PDF 66K)

Chapter 2: The CFC charge (PDF 63K)

Chapter 20: Residence of CFCs (PDF 48K)

Chapter 21: Management (PDF 36K)

Draft Regulations
CFC Banking Capitalisation Regulations

Draft regulations that provide a capitalisation safe harbour in respect of banking CFCs within banking groups have been published on the HM Treasury website. The link below will take you to the relevant webpage which has details of how to make comments on the draft regulations.

Draft Regulations - CFC Banking Capitalisation Regulations (Opens new window)

Draft Regulations
Amendment of worldwide debt cap rules in Part 7 TIOPA

Draft regulations amending certain of the worldwide debt cap rules in Part 7 TIOPA have been published on the HMT website. The changes that will be made by those regulations will ensure the new CFC rules interact as intended with the worldwide debt cap rules. The link below will take you to the relevant HMT webpage which also has details of how to make comments on the draft regulations.

Draft Regulations - worldwide debt cap - CFC interaction (Opens new window)

HMRC intends to consult on draft guidance for CFCs and permanent establishments throughout the rest of 2012. However we would prefer substantive comments to be made by the end of October 2012 to provide time for comments to be properly considered before the draft guidance is incorporated into the International Manual in January 2013. Some draft guidance has been published in October 2012 and HMRC will be happy to take comments on these later published chapters up to the end of November 2012. Comments on the draft guidance should be sent to:

Ali Hancock
CTIAA
Third Floor, 3E/07
100 Parliament Street
London
SW1A 2BQ

Email your comments to Ali Hancock.

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