Controlled foreign companies (CFCs)

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

The controlled foreign company (CFC) rules apply to companies that are not tax resident in the UK but which are controlled by UK residents. They also apply to foreign branches in respect of which an exemption election has been made. See the Foreign branch exemption ― overview guidance note for more details.

The CFC rules aim to prevent UK resident companies setting up subsidiaries abroad in order to divert and keep profits outside the UK tax net. Where an overseas company is a CFC, generally speaking, its chargeable profits will be attributed to its UK corporate shareholders so that they are charged to corporation tax on those attributed profits (the CFC charge).

The rules are complex and this guidance note outlines the main provisions only. More detailed commentary can be found in Simon’s Taxes D4.401.

HMRC guidance on the CFC regime is available at INTM190000 onwards.

CFCs ― basic principles

A CFC is any company which is resident outside the UK, but ‘controlled’ by a UK resident person or persons (which can be both companies and

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