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

Exclusion: UK activities a minority of total activities

Section 371DC provides an exclusion from the CFC charge gateway where the UK-related activities connected to an asset or risk represent less than half of the total activities connected to that asset or risk.

• An asset or risk held by a CFC can be excluded from the CFC charge gateway if the income and expenses attributable to UK activities (Amount A) are no more than 50% of the total income and expenses connected to holding that asset or risk overall (Amount B).
• Amount A measures the gross income that would not have been received, and the additional expenses that would have been incurred, if the CFC had not held the asset or borne the risk — but only to the extent attributable to the hypothetical UK permanent establishment.
• Amount B measures the same types of gross income and additional expenses, but on the basis that the CFC had not held the asset or borne the risk to any extent at all — capturing the full worldwide impact.
• Where it is not reasonably practicable to assess individual assets or risks separately, they may be bundled together and treated as a single asset or risk for the purposes of applying this test.