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HMRC internal manual

International Manual

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Controlled Foreign Companies: The CFC Charge Gateway Chapter 5 - Non-trading finance profits: What are non-trading finance profits: Definition

TIOPA10/S371VG

Non-trading finance profits are defined in TIOPA10/Ss371VG(1) to (3) and include any non-trading profits that fall to be dealt with under Part 5 of CTA 2009, including profits dealt with under Part 5 by virtue of Parts 6 and 7. The definition also includes non-trading finance profits arising on relevant finance leases and any amounts that would be chargeable to corporation tax under Part 9A of CTA 2009 (company distributions).

Example

In several territories mandatorily redeemable preference shares are regarded as debt for tax purposes such that distributions are taxable as a result of the operation of CTA 2009/S931D(c). Such distributions, as non- exempt distributions within Part 9A of CTA 2009, therefore fall within the definition of non-trading finance profits for Chapter 5 purposes.

Example

A CFC makes loans to a number of overseas group companies at fixed rates of interest, and enters into various interest rate swaps in the accounting period which have the effect of swapping the fixed rate to a variable rate. The profits/losses from the loans and any profits/losses from the swaps fall within Part 7 of CTA 2009 and so are within the definition of non-trading finance profits for Chapter 5 purposes.