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HMRC internal manual

International Manual

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

It is not uncommon for multinational groups to centralise their financing function in large and complex group finance companies. The operations of such companies may have characteristics sufficient for part or all of their activity to constitute a financial trade, so that their profit from the trade would fall to be considered under Chapters 3 or 4 and 6 rather than Chapters 3, 5 or 9. Such a company will effectively be operating in a similar manner to a retail bank with a high volume of transactions, a large number of incomings and outgoings, hedging activity, with any structural lending activity funded from group deposits, and, overall, realising a profit made from margins from lending and deposit taking.

Where the company is a group treasury company within the definition of TIOPA10/S316, TIOPA10/S371CE(2) allows a group treasury company to give notice that all of its trading finance profits are to be treated as if they were non-trading finance profits (see INTM198100). Once a notice has been given, the deemed non-trading finance profits only become chargeable profits of a CFC if they fall within one or more of TIOPA10/S371EB to 371EE of Chapter 5. It is likely however that a group treasury company that has no structural lending activity would choose to retain its trading status and have its profits considered under Chapters 3 or 4 and 6 as this may result in its profits being exempt provided its assets and risks are not mainly managed from the UK and the CFC is not overcapitalised as a result of UK funding (see INTM207000).