CFM93055 - Debt cap: interaction with other rules: controlled foreign companies - CFC accounting periods beginning on or after 1 January 2013

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Exemption of financing income amounts of controlled foreign companies (CFCs) 바카라 사이트� CFC accounting periods beginning on or after 1 January 2013 {#}

Under the 바카라 사이트榥ew바카라 사이트� CFC rules, applicable to CFC accounting periods beginning on or after 1 January 2013, the risk of adjustment arising under both the debt cap and the CFC rules is eliminated by TIOPA10/S314A. This operates to permit certain financing income amounts of CFCs to be exempted. It is supplemented by 바카라 사이트榤achinery바카라 사이트� provisions inserted into TIOPA10/PT7 by SI 2012/3045.

Conditions

The CFC accounting period in which an exemption may arise is the one that ends in the period of account of the worldwide group.

The starting point for an adjustment is that there would be a CFC charge for the accounting period of the CFC and the chargeable profits would include 바카라 사이트渞elevant finance profits바카라 사이트�.

Relevant finance profits are amounts that:

  • falls within Chapter 5 (non-trading finance profits gateway) or Chapter 6 (trading finance profits gateway), or profits from 바카라 사이트榪ualifying loan relationships바카라 사이트� falling within Chapter 9 of the CFC rules;
  • are loan relationships profits; and
  • must not be 바카라 사이트榚xcluded credits바카라 사이트� (in essence because they are not interest or similar to interest 바카라 사이트� see CFM91230).
  • The amount taken into account as a financing income amount is not reduced by any exemption, as described below, arising from the operation of the debt cap 바카라 사이트� S314A(3A).

Effect

Where there are CFC profits within the description above, 바카라 사이트楶%바카라 사이트� of these 바카라 사이트榬elevant finance profits바카라 사이트� of the CFC may be treated as financing income amounts. P% is the percentage of the CFC바카라 사이트檚 chargeable profits that are apportioned to a chargeable company in the worldwide group - see TIOPA10/S371BC(3).

There are specific procedural requirements for allocation of an exemption to a CFC which are set out at S292(5), (5A) and (5C) 바카라 사이트� the mechanics described at CFM91300+ only apply to amounts apportioned to companies directly with the charge to Corporation Tax. The exemption is applied in re-computing the CFC charge, at step 5 in S371BC, by reducing the relevant finance profits of the CFC and, to a just and reasonable extent, any creditable tax 바카라 사이트� S298A(2) and (3).