Taxation (International and Other Provisions) Act 2010 section 371BA

Introduction to the CFC charge

Section 371BA introduces the controlled foreign company (CFC) charge and explains how a CFC's chargeable profits are determined for the purpose of imposing that charge on UK resident companies.

• The CFC charge applies to accounting periods of a CFC only where the CFC has chargeable profits and no entity-level exemption (Chapters 10 to 14) applies for that period.
• A CFC's chargeable profits are its assumed taxable total profits, but limited to only those profits that pass through the CFC charge gateway.
• Reliefs and deductions may only be set against those gateway profits to the extent that is just and reasonable, given the restriction of profits to those passing through the gateway.
• Special rules apply where settlement income is included in a CFC's chargeable profits.