Income Tax Act 2007 section 725

Reduction in amount charged where controlled foreign company involved

Section 725 prevents double taxation where income is caught both by the transfer of assets abroad rules and by the controlled foreign company (CFC) charge, by reducing the amount taxed on the individual.

• Where a CFC charge has been levied and income is also treated as arising to an individual under the transfer of assets abroad rules, the individual's taxable amount is reduced to avoid being taxed twice on the same profits.
• The reduction is calculated using the formula S × CA / CP, which scales down the taxable amount in proportion to how much of the CFC's chargeable profits have already been apportioned to UK companies subject to the CFC charge.
• Where only part of the income is taxable on the individual because a benefit has been provided out of income of a person abroad, the figure used in the formula is further adjusted to reflect the proportion actually chargeable on that individual.
• All specialist terms used in this section carry the same meaning as defined in the CFC legislation in Part 9A of the Taxation (International and Other Provisions) Act 2010.