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HMRC internal manual

International Manual

Controlled Foreign Companies: The CFC Charge Gateway Chapter 3 - Determining which (if any) of Chapters 4 to 8 apply: What is excluded from non-trading finance profits?: Example 1

During AP1 CFC X has exempt trading profits (i.e. profits that have not passed through the CFC charge gateway) before interest and tax of 1000.

CFC X also receives exempt distribution income from its wholly owned subsidiary Y of 1000. Y has no non-trading finance profits arising in the AP.

During the AP CFC X accrues non-trading finance profits of 80.

CFC X has both exempt trading profits and exempt distribution income and so the relevant amount is 2000.

5% of 2000 is 100 and so all of CFC X’s non trading finance profits of 80 will be exempt. CFC X will not need to consider Chapter 5 further.