Corporation Tax Act 2009 section 18IC

The low profit margin exemption

Section 18IC explains how the low profit margin exemption from the controlled foreign company rules is adapted when applied to the worldwide debt cap anti-diversion rule.

• The low profit margin exemption (from the CFC regime) can apply to the worldwide debt cap anti-diversion test, but with modifications
• The normal rule comparing a CFC's accounting profits to its relevant trading expenditure is adjusted for worldwide debt cap purposes
• References to the CFC's accounting profits are replaced with references to the adjusted relevant profits amount, calculated before any deduction for interest
• A specific subsection of the original CFC exemption rule is disapplied in this context