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

Exclusion: independent companies' arrangements

Section 371DE provides an exclusion from CFC charge gateway profits where the arrangements between a CFC and connected UK companies would have been replicated with independent third parties on the same terms.

• Where UK significant people functions (SPFs) give rise to profits attributed to a CFC, those profits may be excluded if independent companies would have provided the same functions under equivalent arrangements
• The exclusion applies when it is reasonable to suppose the CFC would have entered into identically structured arrangements with unconnected companies, achieving the same commercial effect
• The test requires both that the hypothetical third-party arrangements would be structured in the same way and that they would have the same commercial outcome for the CFC's business
• Where it is not reasonably practicable to separate multiple assets or risks to identify the relevant SPFs individually, they may be treated as a single bundle for the purposes of applying this exclusion

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