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

Exclusion: trading profits (anti-avoidance)

Section 371DL provides an anti-avoidance rule that can deny the trading profits exclusion from the CFC charge where the exclusion would only be available because of a contrived arrangement.

• This section targets situations where a CFC group organises or reorganises a significant part of its business primarily to meet the conditions for the trading profits exclusion.
• If it is reasonable to suppose that the relevant conditions (the basic trading profits conditions or the 50% management expenditure condition relating to assets or risks) would not have been met without the arrangement, the anti-avoidance rule is triggered.
• Where the rule applies, the conditions are treated as not being met, meaning the trading profits exclusion is denied and the relevant profits may fall within the CFC charge.
• An arrangement is caught where one of the main purposes of the organisation or reorganisation is to secure that one or more of the trading profits exclusion conditions are satisfied.