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

How to determine "the corresponding UK tax"

Section 371NE explains how to calculate the amount of UK corporation tax that would hypothetically apply to a controlled foreign company's profits, which is needed for step 3 of the CFC charge exemption calculation.

• The corresponding UK tax is the corporation tax that would be charged on the CFC's assumed taxable total profits for the accounting period, applying the corporation tax assumptions.
• When calculating this figure, you must ignore any double taxation relief that would otherwise reduce the UK tax bill in respect of foreign tax already paid (the "local tax amount").
• You must then reduce the hypothetical corporation tax figure by any income tax already deducted at source from payments the CFC received, and by any income tax or corporation tax actually charged on income included in the CFC's assumed taxable total profits.
• Any amounts of tax that have been or will be repaid to the CFC do not count as deductions — only tax that has genuinely been borne by the CFC can reduce the corresponding UK tax figure.

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