INTM197360 - Controlled Foreign Companies: »Ê¹ÚÌåÓýapp CFC Charge Gateway Chapter 3 - Determining which (if any) of Chapters 4 to 8 apply: Does Chapter 4 apply?: Conditions A to D: Example 1
UK headed group holds intellectual property (IP) in two different companies, one resident in the UK (Company Y) and the other in a zero tax territory (Company Z). Company Y holds patents and related IP for products manufactured and marketed by the group around the world. Company Z holds software which is used by one of the group’s businesses across Latin America and which is also licensed to third parties in Spanish and Portuguese speaking countries.
»Ê¹ÚÌåÓýapp group considers whether Chapter 4 will apply to company Z by first considering the conditions at TIOPA10/S371CA. Company Z is staffed adequately to manage its assets and risks and its people have developed a high level of experience and expertise in their field. It is a stand-alone operation and had no UK managed assets and did not bear any UK managed risks at any time during the accounting period. Condition B is met and there is no need to consider the application of Chapter 4 further. Company Z’s profits (assuming it has no non-trading finance profits (see Chapter 5 guidance at INTM203000)) do not pass through the gateway and are outside the scope of the CFC charge.