INTM202010 – Controlled Foreign Companies: definitions
Definitions: Controlled Foreign Company
Where in any accounting period a company is a 'controlled foreign company' the provisions of Chapter IV apply in relation to that accounting period. A company is a 'controlled foreign company' if it is -
- resident outside the United Kingdom,
- controlled by persons resident in the United Kingdom, and
- subject to a lower level of taxation in its territory of
residence.
There is no definition of 'company' in Chapter IV, so the
definition at ICTA88/S832(1) and 832(2) applies. A company is any
body corporate or unincorporated association, but not a
partnership. Where there is any doubt whether a particular entity
is a company it will be necessary to obtain its constituting
document and consider the relevant foreign legal provisions. Advice
on this matter is available from the Business International:
Outward Investment Team.
The 'accounting periods' of a controlled foreign company are
determined broadly on normal Corporation Tax lines but with some
modifications. Full details are given at
INTM202040.
There are a number of references to 'resident' and
‘residence’ in (a), (b) and (c) above: 'resident
outside the United Kingdom', 'resident in the United Kingdom' and
'territory of residence'. Guidance on the differing meanings of
these terms (and of other references to resident and residence in
Chapter IV) is given at
INTM202050.
The definition of 'control' for Chapter IV purposes is at
ICTA88/S755D and is set out at
INTM202020.
The test of whether a company is 'subject to a lower level
of taxation' requires a comparison to be made between the taxes
which it has paid on its profits in its 'territory of residence'
and the Corporation Tax which it would have paid on its income if
it had been resident in the United Kingdom. Guidance and examples
of computations for the lower level of taxation test are given at
INTM202030.
