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

UK residence etc

Section 371SD establishes the key fiction underlying the CFC regime: that a controlled foreign company is treated as if it were UK resident and within the charge to corporation tax, so that its profits can be calculated on a UK tax basis.

• When calculating a CFC's taxable profits, you must assume the CFC is UK resident and subject to corporation tax throughout all its accounting periods from the point it first became a CFC.
• The assumption of UK residence does not mean you assume the CFC has physically relocated its business activities to the UK — it stays where it actually operates.
• If the CFC happens to be genuinely UK resident just before it becomes a CFC, you treat its deemed UK residence under these rules as a fresh, separate period of residence — not a continuation of the real one.
• For any accounting period after the first, you must assume that the CFC's taxable profits have already been calculated for every earlier period since it became a CFC, ensuring reliefs that span multiple periods work correctly.