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

The basic rule

Section 371LB sets out the conditions under which a controlled foreign company (CFC) qualifies for a low profits exemption from the CFC charge for an accounting period.

• A CFC is exempt if its accounting profits or assumed taxable total profits for the period are no more than £50,000.
• A CFC is also exempt if its accounting profits or assumed taxable total profits are no more than £500,000, provided that the non-trading income element of those profits does not exceed £50,000.
• Either the accounting profits test or the assumed taxable total profits test can be used — the CFC does not need to satisfy both.
• Where the accounting period is shorter than 12 months, all of the monetary thresholds are reduced proportionately.