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HMRC internal manual

Banking Manual

Banking surcharge: calculation of surcharge profits: is banking company liable to a CFC charge?

TIOPA10/Part 9A

The  CFC rules at TIOPA10/Part 9A are used to determine if a company resident outside the UK but controlled from the UK, has profits which are linked to UK activity or capital and not excluded because the profits arise from genuine commercial activity or from third countries.  If, following application of these rules, the CFC has chargeable profits, it calculates its profits chargeable to tax under an assumption of UK residence but with a few modifications (for example it is not treated as part of a group for group relief purposes). 

In order for  a UK company to be a ‘chargeable company’, and so subject to the CFC charge, the percentage of chargeable profits apportioned to it and its associates together must be at least 25%; there are also certain exemptions for managers of offshore funds and companies which are participants in offshore funds.

The chargeable profits are apportioned to each chargeable company according to its share-holding in the CFC and a CFC charge is made based on the UK main rate of tax (step 5 in TIOPA10/S371BC(1)).