GIM11070 - Captive insurers: controlled foreign companies: general rules

A UK company which has a relevant interest in a captive insurer is subject to the same basic CFC rules as any other UK company. These rules are described in more detail in ITH1700 onwards, and in INTM201000 onwards. Under CTSA, a UK company which holds a relevant interest of 25% or more in a CFC must make a return which includes the Controlled Foreign Companies (CFC) supplementary pages, and calculate any tax due in accordance with ICTA88/S747 and ICTA88/SCH25.

The key points are that unless the CFC meets the requirements of the excluded countries’ list, the exempt activities test and passes the motive test, it must pursue an Acceptable Distribution Policy (ADP) by paying a dividend falling within Case V of Schedule D within 18 months from the end of the CFC’s accounting period.

If it does not do so, the CFC’s profits will have to be apportioned to the UK company.