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

How to determine the territory in which the CFC is resident

Section 371TB sets out the rules for determining in which territory a controlled foreign company (CFC) is treated as resident for the purposes of the CFC regime.

• A CFC is resident in the territory whose tax laws make it liable to tax throughout the accounting period by reason of domicile, residence or place of management.
• Where two or more territories qualify, a series of tie-breaker tests is applied in strict order of priority: prior election or designation, place of effective management, location of over 50% of assets by market value, fresh election, or HMRC designation.
• Asset location is determined by reference to market value immediately before the end of the relevant accounting period, and a territory qualifies only if over 50% of total asset value is situated there.
• If no other tie-breaker resolves the position, the UK company can elect a territory, or failing that, an HMRC officer can designate one on a just and reasonable basis.