Corporation Tax Act 2009 section 931CA

Further exemption where distribution received from CFC

Section 931CA provides a corporation tax exemption for dividends and other distributions received by a small company from a controlled foreign company (CFC) where a CFC charge has already been imposed on the CFC's profits.

• Where a CFC charge has been levied on a CFC's accounting period and a small company receives a dividend or distribution from that CFC, the distribution (or the relevant part) is exempt from corporation tax, provided certain conditions are met.
• The exemption applies only to the portion of the distribution paid out of the CFC's chargeable profits — that is, profits that have been apportioned to chargeable companies under the CFC charging mechanism. Any portion not paid out of chargeable profits is treated as a separate distribution and does not qualify for this exemption.
• Additional conditions must be satisfied: the distribution must not be of certain non-dividend types (such as those in paragraphs E or F of section 1000(1) of CTA 2010), no overseas tax deduction must be available to a non-UK resident in respect of the distribution, and the distribution must not form part of a tax advantage scheme.
• This exemption prevents double taxation by ensuring that profits already subject to the CFC charge are not taxed again when distributed to a small company recipient.