TTM07100 - The Ring Fence: Controlled foreign companies: Outline


Paragraph 146 provides that ‘controlled foreign company’ has the same meaning for Tonnage Tax as in Chapter IV of Part XVII of the Taxes Act 1988 (tax avoidance: controlled foreign companies).

Where a UK tonnage tax company has as an overseas subsidiary which is a controlled foreign company (CFC), there are three possible ways of dealing with the profits of the CFC:

  1. CFC is an overseas shipping company within paragraph 49
There will be no liability under the CFC legislation if any distributions from the overseas subsidiary (whether or not actually paid) would have been ‘relevant shipping profits, (see TTM07110).
  1. CFC operates qualifying ships, but paragraph 49 does not apply
There may be liability to tax under the CFC legislation if any distributions from an overseas shipping company (whether or not paid) would not have been ‘relevant shipping profits’ (see TTM06400). But if the overseas subsidiary would have been a tonnage tax company if it were within the charge to corporation tax, then the profits for CFC purposes are calculated as if it were a singleton UK tonnage tax company, (see TTM07120).
  1. CFC is not an overseas shipping company 
If the overseas subsidiary would not be a tonnage tax company if it were within the charge to corporation tax (and in particular if it does not operate qualifying ships) then the normal CFC rules apply. See CT8200 onwards.

Reliefs and deductions

The exclusion of reliefs or set-offs against tax also applies to the tax attributable to any ‘tonnage tax profits’ of a CFC which are included in the amounts apportioned to a company under ICTA88/S737(3), (see TTM07230).

References

FA00/SCH22/PARA49 (overseas shipping companies)

TTM17286

FA00/SCH22/PARA54 (profits of controlled foreign companies)

TTM17311

FA00/SCH22/PARA146 (meaning of ‘controlled foreign company’)

TTM17806