Corporation Tax Act 2009 section 18HE

Modification of Chapter 9 of Part 9A of TIOPA 2010

Section 18HE explains how the controlled foreign companies (CFC) rules on exemptions for profits from qualifying loan relationships are adapted when determining diverted profits of a foreign permanent establishment.

• When applying the CFC qualifying loan relationship exemption rules to diverted profits, references to a chargeable company or "company C" are replaced with references to "company X" (the UK resident company with the foreign permanent establishment).
• The exemption percentage is set at a flat 75% of the profits of each qualifying loan relationship, replacing the standard CFC calculation method, and the detailed provisions on loans funded out of qualifying resources and matched interest (sections 371IB to 371IE) are removed entirely.
• The solo consolidation route under Chapter 8 of the CFC rules is excluded from the analysis, and the modification made by section 18HC(b) is disregarded when reading the exclusions from the definition of a qualifying loan relationship.
• References to the relevant corporation tax accounting period are read as references to "period X" (the accounting period of the foreign permanent establishment being examined), and the claims subsection (6) of section 371IJ is omitted.