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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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ACT: FID: foreign profits: matching FID with distributable foreign profit (DFP): meaning of 51% subsidiary

ICTA88/S246L (1), (2) & (5), ICTA88/S246K (12)

If a parent was to be able to match an FID with eligible profits deriving from a subsidiary, that subsidiary had to be a 51% subsidiary of the parent throughout the relevant period’.

51% subsidiary

In finding whether one company was a 51% subsidiary of another company, that other company was treated as not being the owner of any share capital:

  • which it owned directly in a body corporate if a profit on the sale of the shares would have been treated as a trading receipt, or
  • which it owned indirectly, and which was owned directly by a body corporate for which a profit on the sale of the shares would have been a trading receipt.

The relevant period

The ‘relevant period’ was that unbroken period which included the whole of:

  • the accounting period of the parent in which it paid the FID which it was seeking to match with the eligible profit (the ‘payment period’), and
  • any accounting period of the subsidiary giving rise to an eligible profit that the parent sought to match with the FID paid (a ‘relevant accounting period’).

The relevant period and the payment period were identical if the election to match the FID involved only eligible profits deriving from an accounting period of the subsidiary coinciding with the payment period.