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

Charging the CFC charge

Section 371BC sets out the step-by-step process for determining whether a controlled foreign company (CFC) charge arises in respect of a CFC's accounting period, and if so, how the charge is calculated and which UK resident companies must pay it.

• A five-step process is used to identify whether any UK resident companies have relevant interests in the CFC, to determine the CFC's creditable tax, to apportion chargeable profits and creditable tax, to identify which companies are chargeable, and to calculate the charge
• The CFC charge only arises if at least one person with a relevant interest in the CFC is a UK resident company, and that company holds a sufficient level of interest to be a "chargeable company"
• The charge on each chargeable company equals corporation tax at the appropriate rate on its share of the CFC's chargeable profits, reduced by its share of the CFC's creditable tax (i.e. tax already paid overseas by the CFC)
• The appropriate rate of corporation tax is always the main UK rate, even if the chargeable company would otherwise qualify for the Northern Ireland rate on some of its profits