How are claims and elections treated when calculating a CFC's assumed taxable total profits under section 371SF?

Under section 371SF, the CFC is automatically treated as having made whichever claims or elections would give it the maximum amount of relief available under the Corporation Tax Acts. These are assumed to have been submitted within the required time limits, so the CFC receives the full benefit of all available reliefs without needing to have actually made them.

Which claims and elections are excluded from the automatic maximum relief assumption under section 371SF?

Four specific claims or elections are excluded: the election to exempt profits or losses of foreign permanent establishments, the claim for relief for unremittable income, the election to designate a currency for a UK resident investment company, and the election to treat a lease as a long funding lease. These are not automatically assumed to have been made.

Can a designated currency election still be made for a CFC even though it is excluded from the automatic assumption?

Yes. Although the designated currency election is excluded from the automatic maximum relief assumption, it can still be made separately. A proper notice must be given to HMRC in the prescribed form and within the required time limits as set out in the CFC rules. The exclusion only prevents the election from being assumed automatically.

How does section 371SF treat intangible fixed assets rollover relief for CFCs?

Section 371SF requires the assumption that no rollover relief claim for reinvestment in intangible fixed assets has been or will be made by the CFC. This means gains on intangible fixed assets cannot be deferred through reinvestment relief when calculating the CFC's assumed taxable total profits, and the full gain must be included.

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

Claims and elections

Section 371SF sets out how claims and elections for corporation tax relief are treated when calculating a controlled foreign company's assumed taxable total profits.

When calculating a CFC's assumed profits, the CFC is treated as having made whichever claims or elections would give it the maximum amount of relief available under the Corporation Tax Acts, and as having made them within the required time limits.
This automatic assumption of maximum relief does not apply to certain specified claims or elections, including the exemption for profits or losses of foreign permanent establishments, relief for unremittable income, designation of a currency for a UK resident investment company, and elections to treat a lease as a long funding lease.
Although the designated currency election is excluded from the automatic assumption, it can still be made separately by giving a notice to HMRC in the correct form and within the required time limits.
The automatic assumption also does not extend to rollover relief claims for reinvestment in intangible fixed assets — it is assumed that no such rollover claim has been or will be made by the CFC.

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