What is the purpose of section 371JF of TIOPA 2010?

Section 371JF provides anti-avoidance rules that deny the exempt period exemption for a controlled foreign company where arrangements are entered into to exploit that exemption. It targets arrangements involving mobile income-generating assets or intellectual property being placed into a CFC, and manipulation of accounting period lengths to maintain exemption eligibility.

What is Condition A under section 371JF TIOPA 2010?

Condition A applies where an arrangement with a main purpose of securing a tax advantage is linked to the exempt period exemption applying. The arrangement must involve the CFC holding assets generating non-trading or trading finance profits, or holding intellectual property generating income. It prevents groups from parking mobile income-generating assets into a CFC during the exempt period.

What is Condition B under section 371JF TIOPA 2010?

Condition B applies where an arrangement results in any accounting period of the CFC being shorter than 12 months, and a main purpose is to ensure the exempt period exemption applies. This targets manipulation of accounting period lengths, such as shortening a period so that subsequent period conditions for the exemption are satisfied when they otherwise would not be.

Does section 371JF also apply to the adjusted profits provision under section 371JE?

Yes. References in section 371JF to the exempt period exemption include the adjusted profits provision in section 371JE. This means the anti-avoidance rule applies not only to the full exemption but also to the partial relief that allows a reduction in the profits passing through the CFC charge gateway during the exempt period.

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

Anti-avoidance

Section 371JF provides anti-avoidance rules that can deny the exempt period exemption for a controlled foreign company where certain arrangements are entered into to exploit or manipulate that exemption.

The exempt period exemption is denied if an arrangement is entered into with a main purpose of securing a tax advantage, where the arrangement is linked to the exemption applying and involves the CFC holding assets generating finance profits or holding intellectual property generating income (Condition A).
The exemption is also denied if an arrangement shortens any accounting period of the CFC to less than 12 months, where a main purpose is to ensure the exempt period exemption applies for one or more periods (Condition B).
Condition A is aimed at preventing groups from parking mobile, income-generating assets — such as loans or intellectual property — into a CFC specifically to take advantage of the exempt period exemption window.
Condition B targets manipulation of accounting period lengths, for example shortening a subsequent period so that conditions for the exemption continue to be met.

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