INTM200800 - Controlled Foreign Companies: »Ê¹ÚÌåÓýapp CFC Charge Gateway Chapter 4 - Profits attributable to UK activities: Exclusions - Trading profits: contents
TIOPA10/S371DF
»Ê¹ÚÌåÓýapp calculation of the Chapter 4 profit at Step 8 excludes amounts from the provisional Chapter 4 profits as determined by Step 7 where one of three exclusions applies (see INTM200500). »Ê¹ÚÌåÓýapp third of these excludes trading profits wholly from the Chapter 4 charge if all of a number of conditions are met.
»Ê¹ÚÌåÓýappse conditions allow groups to consider a series of mechanical tests as an alternative to the Significant People Function (SPF) approach taken by the first part of Chapter 4. If a CFC meets all of the necessary conditions, then all of its trading profits will be excluded from the provisional Chapter 4 profits. »Ê¹ÚÌåÓýappy will be exempt from a CFC charge and no further consideration of assets, risks and SPFs is required.
»Ê¹ÚÌåÓýapp conditions for exclusion generally operate on an entity basis, so that a CFC as a whole will either meet or fail them in relation to its trading profits in any particular accounting period.
However, the management expenditure condition, can also be considered on an asset by asset or risk by risk basis. This is dealt with in more detail at INTM200830.
Trading profits basic rule
»Ê¹ÚÌåÓýappre are five conditions that all need to be satisfied in order for the exclusion to apply. Those conditions are outlined in the links below.
If all of the conditions are met in an accounting period, all the trading profits of the CFC in that period are excluded from a Chapter 4 charge.
»Ê¹ÚÌåÓýapp conditions for exclusion are subject to an anti-avoidance rule. (See INTM200860)