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

Loans from foreign permanent establishments of UK resident companies

Section 371FC adjusts how certain loans from foreign permanent establishments of UK resident companies to controlled foreign companies are treated for the purposes of the CFC charge gateway on trading finance profits.

• Where a UK resident company has elected to exempt the profits of its foreign permanent establishment, and that PE has a qualifying loan relationship with a CFC as ultimate debtor, this section applies.
• The company must make a claim under the CFC qualifying loan relationship rules (Chapter 9) as applied through the PE exemption provisions, for an accounting period beginning on or after 1 January 2013.
• 75% of the outstanding principal on the loan during the CFC's accounting period is added to the CFC's free capital or free assets.
• This treatment mirrors the equivalent rule for qualifying loan relationships made directly by CFCs, ensuring consistent treatment whether the loan comes from a PE or another CFC.