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Changes to HMRC guidance on CFCs

Changes to HMRC guidance on CFCs

Recent updates to HMRC’s International Manual concerning Controlled Foreign Companies.

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HMRC are updating the Controlled Foreign Companies (CFCs) section of their International Manual. The changes relate to the finance company exemptions, which exclude from the CFC regime certain profits of a CFC from its ‘qualifying loan relationships’. The changes update the examples and guidance relating to a number of different areas of this guidance.

The UK CFC regime includes a finance company exemption which provides for a partial or complete exemption of profits from qualifying loan relationships.

Changes made to HMRC guidance include additional guidance on the following:

  • A CFC which accumulates profits from qualifying lending and re-lends the cash to the same borrower or another group company in the same territory as the borrower (INTM218775);
  • Whether a CFC’s funds are ‘qualifying resources’ for the full finance company exemption when a group makes an acquisition by way of a share for share exchange (INTM218810) or a rights issue happens at the same time that UK debt is taken on (INTM218815);
  • How to apportion funds between qualifying and non-qualifying resources when the source of a loan is not clear (INTM218850);
  • How to calculate double taxation relief where there is more than one company in the chain of lending (INTM219750); and
  • Transfer pricing adjustments in the context of the CFC finance company exemption (INTM219500).

Some of the changes are to update the format to make this easier to read. It is not yet clear whether changes of substance are being made.

For further information please contact:

Rob Norris

Mark Eaton 

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