INTM214020 - How the CTSA regime works for Controlled Foreign Companies

When to make a return in respect of a Controlled Foreign Company

A United Kingdom resident company with a relevant interest in a controlled foreign company does not need to make a return in respect of a controlled foreign company if:

• the controlled foreign company satisfies the Excluded Countries Regulations, or
• the relevant interest, together with the interests of connected or associated persons, is less than 25%.

Interests in all other controlled foreign companies should be included on the supplementary pages. This relaxation does not apply to disclosure reference numbers under FA04/S313 (Disclosure of Tax Avoidance Schemes) which must be included on the supplementary return CT600J.

The following should be consulted in deciding whether a return is necessary:

A company may also, if it wishes, include on the supplementary pages its interest in any companies which may not fall within the definition of a controlled foreign company because they may not be subject to a lower level of taxation, but which the company considers would satisfy one or more of the ICTA/S748(1) exemptions. This avoids the need to ascertain whether the overseas company is subject to a lower level of taxation when it is clear that one of the exemptions applies. Any such entry would be without prejudice to whether or not the lower level of tax test was failed. Additionally, the United Kingdom interest holder may (without prejudice) include on the supplementary pages any company in which it is unsure if it has an assessable interest or for which it is unsure if it falls within the definition of a controlled foreign company. For example it is possible that some United Kingdom companies with an investment in an open ended investment company may not always be certain if they have an assessable interest (i.e. more than 25%) in a controlled foreign company, or indeed whether that investment company is controlled from the United Kingdom, because the investment company’s share capital expands and contracts as investment changes. If none of the exemptions applies, and the company is unsure if it has an assessable interest, Business International, Outward Investment Team will advise on whether and how the company should complete the controlled foreign company supplementary pages.


It is recognised that, in determining whether a Controlled Foreign Company satisfies all of the conditions of the objective exemptions, there may be occasions where information about the Controlled Foreign Company may not be readily available or the time it would take to verify beyond any doubt that the Controlled Foreign Company satisfies all relevant conditions would be disproportionate.


In such circumstances, it would be reasonable for the self assessment to be based on a realistic interpretation of the available information. It remains a question of fact whether a Controlled Foreign Company qualifies for one or more of the exemptions and companies remain responsible for ensuring that their returns are correct and complete. Whilst HM Revenue and Customs will continue to enquire into returns as appropriate according to established risk assessment processes, so long as the self assessment is reasonable in the circumstances, there will be no question of any penalty even if the interpretation turns out to have been incorrect. Customer Relationship Managers and other local inspectors responsible for a group’s tax affairs are available to advise on the best way of reducing the risk of an enquiry.